Public Act 102-0232
 
HB3940 EnrolledLRB102 17040 JLS 22467 b


  
    AN ACT concerning business.
  
 
    Be it enacted by the People of the State of Illinois,
 
represented in the General Assembly:
  
 
 
    Section 5. The Motor Vehicle Franchise Act is amended  by 
changing Sections 1.1 and 6 as follows:
 



    (815 ILCS 710/1.1)  (from Ch. 121 1/2, par. 751.1)



    Sec. 1.1. Declaration of purpose. The Legislature finds 
and declares that
the distribution and sale of vehicles within 
this State vitally affects
the general economy of the State 
and the public interest, welfare, and safety and
that in order 
to promote the public interest, welfare, and safety, and in 
the exercise
of its police power, it is necessary to regulate 
motor vehicle manufacturers,
distributors, wholesalers and 
factory or distributor branches or representatives,
and to 
regulate dealers of motor vehicles doing business in this 
State in
order to prevent frauds, impositions, discrimination, 
and other abuses upon its citizens,
to protect and preserve 
the investments and properties of the citizens of
this State, 
to foster healthy competition, and to provide adequate and 
sufficient service to consumers generally. The licensing and 
supervision of motor vehicle dealers is necessary for the 
protection of consumers and the sale of motor vehicles by 
unlicensed dealers shall should be prohibited prevented. 

    The Legislature further finds that the regulation of motor 
vehicle manufacturers, distributors, wholesalers, factory 
branches, distributor branches and representatives, and 
dealers promotes the distribution of motor vehicles to the 
public and provides a system for servicing vehicles and for 
complying with manufacturer warranties so that consumers can 
keep their motor vehicles properly functioning and safe.  The 
sale and distribution of motor vehicles constitutes a 
continuing obligation of manufacturers, distributors, 
wholesalers, factory branches, distributor branches and 
representatives, and dealers to consumers, and the public has 
an interest in promoting the availability of post-sale 
mechanical and operational services. 
(Source: P.A. 100-308, eff. 8-24-17.)

 



    (815 ILCS 710/6)  (from Ch. 121 1/2, par. 756)


    Sec. 6. Warranty agreements; claims; approval; payment; 
written
disapproval.
    (a) Every manufacturer, distributor, wholesaler, 
distributor branch
or division, factory branch or division, or 
wholesale branch or division
shall properly fulfill any 
warranty agreement and adequately and fairly
compensate each 
of its motor vehicle dealers for labor and parts.

    (b) Adequate and fair compensation requires the 
manufacturer to pay each dealer no less than the amount the 
retail customer pays for the same services with regard to rate 
and time.
    Any time guide previously agreed to by the manufacturer 
and the dealer for extended warranty repairs may be used in 
lieu of actual time expended. In the event that a time guide 
has not been agreed to for warranty repairs, or said time guide 
does not define time for an applicable warranty repair, the 
manufacturer's time guide shall be used, multiplied by 1.5. 
    In no event shall such compensation fail to include full 
reasonable
compensation for diagnostic work, as well as repair 
service, labor, and
parts.  Time allowances for the diagnosis 
and performance of warranty
work and service shall be no less 
than charged to retail customers
reasonable and adequate for 
the same work to be performed.
    No warranty or factory compensated repairs shall be 
excluded from this requirement, including recalls or other 
voluntary stop-sell repairs required by the manufacturer.  If a 
manufacturer is required to issue a recall, the dealer will be 
compensated for labor time as above stated.
    Furthermore, manufacturers shall pay the dealer the same 
effective labor rate (using the 100 sequential repair orders 
chosen and submitted by the dealer less simple maintenance 
repair orders) that the dealer receives for customer-pay 
repairs.  This requirement includes vehicle diagnostic times 
for all warranty repairs.  Additionally, if a technician is 
required to communicate with a Technical Assistance 
Center/Engineering/or some external manufacturer source in 
order to provide a warranty repair, the manufacturer shall  pay 
for the  time from start of communications (including hold 
time) until the communication is complete.
    The dealer may submit a request to the manufacturer for 
warranty labor rate increases a maximum of once per calendar 
year.
    A claim made by a franchised motor vehicle dealer for 
compensation under this Section shall be either approved or 
disapproved within 30 days after the claim is submitted to the 
manufacturer in the manner and on the forms the manufacturer 
reasonably prescribes. An approved claim shall be paid within 
30 days after its approval. If a claim is not specifically 
disapproved in writing or by electronic transmission within 30 
days after the date on which the manufacturer receives it, the 
claim shall be considered to be approved and payment shall 
follow within 30 days.  
    In the determination
of what constitutes reasonable 
compensation under this Section, the principal
factor to be 
given consideration shall be the prevailing wage rates being

paid by the dealer in the relevant market area in which the 
motor vehicle
dealer is doing business, and in no event shall 
such compensation to of a motor
vehicle dealer for labor times 
and labor rates warranty service be less than the rates 
charged by such
dealer for like service to retail customers 
for nonwarranty service and
repairs.  Additionally, the 
manufacturer The franchiser shall reimburse the dealer 
franchisee for any parts
provided in satisfaction of a 
warranty at the prevailing retail price charged
by that dealer 
for the same parts when sold to a retail customer not provided 
in satisfaction of a
warranty; provided that such motor 
vehicle franchisee's prevailing retail price
is not 
unreasonable when compared with that of the holders of motor 
vehicle
franchises from the same motor vehicle franchiser for 
identical merchandise
in the geographic area in which the 
motor vehicle franchisee is engaged in
business.
    There shall be no reduction in payments due to 
preestablished market norms or market averages.
Manufacturers 
are prohibited from establishing restrictions or limitations 
of customer repair frequency due to failure rate indexes or 
national failure averages.
    No debit reduction or charge back of any item on a warranty 
repair order may be made absent a finding of fraud or illegal 
actions by the dealer.
    A warranty claim timely made shall not be deemed invalid 
solely because unavailable parts cause additional use and 
mileage on the vehicle.
    If a manufacturer imposes a recall or stop sale on any new 
vehicle in a dealer's inventory that prevents the sale of the 
vehicle, the manufacturer shall compensate the dealer for any 
interest and storage until the vehicle is repaired and made 
ready for sale.
    Manufacturers are not permitted to impose any form of cost 
recovery fees or surcharges against a franchised auto 
dealership for payments made in accordance with this Section.  
    All claims, either original or resubmitted, made by motor 
vehicle
dealers hereunder and under Section 5 for such labor 
and parts shall be either
approved or disapproved within 30 
days following their submission.  All
approved claims shall be 
paid within 30 days following their approval.  The
motor 
vehicle dealer who submits a claim which is disapproved shall 
be notified
in writing of the disapproval within the same 
period, and each such notice
shall state the specific grounds 
upon which the disapproval is based.  The
motor vehicle dealer 
shall be permitted to correct and resubmit such
disapproved 
claims within 30 days of receipt of disapproval.  Any claims 
not
specifically disapproved in writing within 30 days from 
their submission shall
be deemed approved and payment shall 
follow within 30 days.  The manufacturer
or franchiser shall 
have the right to require reasonable documentation for
claims 
and to audit such claims within a one year period from the date 
the
claim was paid or credit issued by the manufacturer or 
franchiser, and to
charge back any false or unsubstantiated 
claims.  The audit and charge back
provisions of this Section 
also apply to all other incentive and reimbursement
programs 
for a period of one year after the date the claim was paid or 
credit issued by the manufacturer or franchiser.  However, the 
manufacturer retains the
right to charge back any fraudulent 
claim if the manufacturer establishes in
a court of competent 
jurisdiction in this State that the claim is fraudulent.

    (c) The motor vehicle franchiser shall not, by agreement, 
by restrictions
upon reimbursement, or otherwise, restrict the 
nature and extent of services to
be rendered or parts to be 
provided so that such restriction prevents the motor
vehicle 
franchisee from satisfying the warranty by rendering services 
in a good
and workmanlike manner and providing parts which are 
required in accordance
with generally accepted standards.  Any 
such restriction shall constitute a
prohibited practice.

    (d) For the purposes of this Section, the "prevailing 
retail price
charged by that dealer for the same parts" means 
the price paid by
the motor vehicle franchisee for parts, 
including all shipping and other
charges, multiplied by the 
sum of 1.0 and the franchisee's average percentage
markup over 
the price paid by the motor vehicle franchisee for parts 
purchased
by the motor vehicle franchisee from the motor 
vehicle franchiser and sold at
retail.  The motor vehicle 
franchisee may establish average percentage markup
under this 
Section by submitting to the motor vehicle franchiser 100 
sequential
customer paid service repair orders or 90 days of 
customer paid service repair
orders, whichever is less, 
covering repairs made no more than 180 days before
the 
submission, and declaring what the average percentage markup 
is.  The
average percentage markup so declared shall go into 
effect 30 days following
the declaration, subject to audit of 
the submitted repair orders by the motor
vehicle franchiser 
and adjustment of the average percentage markup based on
that 
audit.  Any audit must be conducted within 30 days following 
the
declaration.  Only retail sales not involving warranty 
repairs, parts covered
by subsection (e) of this Section, or 
parts supplied for routine vehicle
maintenance, shall be 
considered in calculating average percentage markup.  No
motor 
vehicle franchiser shall require a motor vehicle franchisee to 
establish
average percentage markup by a methodology, or by 
requiring information, that
is unduly burdensome or time 
consuming to provide, including, but not limited
to, part by 
part or transaction by transaction calculations.  A motor 
vehicle
franchisee shall not request a change in the average 
percentage markup more
than twice in one calendar year.

    (e) If a motor vehicle franchiser supplies a part or parts 
for use in a
repair rendered under a warranty other than by 
sale of that part or parts to
the motor vehicle franchisee, the 
motor vehicle franchisee shall be entitled to
compensation 
equivalent to the motor vehicle franchisee's average 
percentage
markup on the part or parts, as if the part or parts 
had been sold to the motor
vehicle franchisee by the motor 
vehicle franchiser.  The requirements of this
subsection (e) 
shall not apply to entire engine assemblies and entire

transmission
assemblies.  In the case of those assemblies, the 
motor vehicle franchiser
shall reimburse the motor vehicle 
franchisee in the amount of 30% of what the
motor vehicle 
franchisee would have paid the motor vehicle franchiser for 
the
assembly if the assembly had not been supplied by the 
franchiser other than by
the sale of that assembly to the motor 
vehicle franchisee.

    (f) The obligations imposed on motor vehicle franchisers 
by this Section
shall apply to any parent, subsidiary, 
affiliate, or agent of the motor vehicle
franchiser, any 
person under common ownership or control, any employee of the

motor vehicle franchiser, and any person holding 1% or more of 
the shares of
any class of securities or other ownership 
interest in the motor vehicle
franchiser, if a warranty or 
service or repair plan is issued by that person
instead of or 
in addition to one issued by the motor vehicle franchiser.

    (g) (Blank). (1) Any motor vehicle franchiser and at least 
a majority of its
Illinois franchisees of the same line make 
may agree in an express written
contract citing this Section 
upon a uniform warranty reimbursement policy used
by 
contracting franchisees to perform warranty repairs.  The 
policy shall only
involve either reimbursement for parts used 
in warranty repairs or the use
of a Uniform Time Standards 
Manual, or both.  Reimbursement for parts under the
agreement 
shall be used instead of the franchisees' "prevailing retail 
price
charged by that dealer for the same parts" as defined in 
this Section to
calculate compensation due from the franchiser 
for parts used in  warranty
repairs. This Section does not 
authorize a franchiser and its Illinois
franchisees to 
establish a uniform hourly labor reimbursement.

    Each franchiser shall only have one such agreement with 
each line make.
Any such agreement shall:


        (A) Establish a uniform parts reimbursement rate.  The 
    uniform parts
reimbursement rate shall be greater than the 
    franchiser's nationally
established
parts reimbursement 
    rate in effect at the time the first such agreement 
    becomes
effective; however, any subsequent agreement shall 
    result in a uniform
reimbursement rate that is greater or 
    equal to the rate set forth in the
immediately prior 
    agreement.


        (B) Apply to all warranty repair orders written during 
    the period that
the agreement is effective.


        (C) Be available, during the period it is effective, 
    to any motor
vehicle franchisee of the same line make at 
    any time and on the same terms.


        (D) Be for a term not to exceed 3 years so long as any 
    party to the
agreement may terminate the agreement upon 
    the annual anniversary of the
agreement and with 30 days' 
    prior written notice; however, the agreement shall
remain 
    in effect for the term of the agreement regardless of the 
    number of
dealers of the same line make that may terminate 
    the agreement.

    (2) A franchiser that enters into an agreement with its 
franchisees
pursuant to paragraph (1) of this subsection (g) 
may seek to recover its costs
from only those franchisees that 
are receiving their "prevailing retail price
charged by that 
dealer" under subsections (a) through (f) of this Section,

subject to the following requirements:


        (A) "costs" means the difference between the uniform 
    reimbursement rate
set forth in an agreement entered into 
    pursuant to paragraph (1) of this
subsection (g) and the  
    "prevailing retail price charged by that dealer"
received 
    by those franchisees of the same line make. "Costs" do not 
    include the following: legal fees or expenses; 
    administrative expenses; a profit mark-up; or any other 
    item;


        (B) the costs shall be recovered only by increasing 
    the invoice price on
new vehicles received by those 
    franchisees; and


        (C) price increases imposed for the purpose of 
    recovering costs imposed
by this Section may vary from 
    time to time and from model to model, but shall
apply 
    uniformly to all franchisees of the same line make in the 
    State of
Illinois that have requested reimbursement for  
    warranty repairs at their
"prevailing retail price charged 
    by that dealer", except that a franchiser may
make an 
    exception for vehicles that are titled in the name of a 
    consumer in
another state.

    (3) If a franchiser contracts with its Illinois dealers 
pursuant to
paragraph (1) of this subsection (g), the 
franchiser shall certify under oath
to the Motor Vehicle 
Review Board that a majority of the franchisees of that
line 
make did agree to such an agreement and file a sample copy of 
the
agreement.  On an annual basis, each franchiser shall 
certify under oath to
the Motor Vehicle Review Board that the 
reimbursement costs it recovers under
paragraph (2) of this 
subsection (g) do not exceed the amounts authorized by

paragraph (2) of this subsection (g).  The franchiser shall 
maintain for a
period of 3 years a file that contains the 
information upon which its
certification is based.
    (3.1) A franchiser subject to subdivision (g)(2) of this 
Section, upon request of a dealer subject to that subdivision,  
shall disclose to the dealer, in writing  or in person if 
requested by the dealer, the method by which the franchiser 
calculated the amount of the costs to be reimbursed by the 
dealer. The franchiser shall also provide aggregate data 
showing (i) the total  costs the franchiser incurred and (ii) 
the total number of new vehicles invoiced to  each dealer that 
received the "prevailing retail price charged by that dealer" 
during the relevant period of time.  In responding to a 
dealer's request under this subdivision (g)(3.1), a  franchiser 
may not disclose any confidential or competitive information 
regarding any other dealer.  Any dealer who receives  
information from a franchiser under this subdivision (g)(3.1) 
may not disclose that information to any third party unless 
the disclosure occurs in the course of a lawful proceeding 
before, or upon the order of,  the Motor Vehicle Review Board or 
a court of competent jurisdiction.


    (4) If a franchiser and its franchisees  do not enter into 
an agreement
pursuant to paragraph (1) of this subsection (g), 
and for any matter that is
not the subject of an agreement, 
this subsection (g) shall have no effect
whatsoever.

    (5) For purposes of this subsection (g), a Uniform Time 
Standard Manual
is a document created by a franchiser that 
establishes the time allowances for
the diagnosis and 
performance of warranty work and service.  The allowances
shall 
be reasonable and adequate for the work and service to be 
performed.
Each franchiser shall have a reasonable and fair 
process that allows a
franchisee to request a modification or 
adjustment of a standard or standards
included in such a 
manual.
    (6)  A franchiser may not take any adverse action against a 
franchisee for not having executed an agreement contemplated 
by this subsection (g) or for receiving the "prevailing retail 
price charged by that dealer".  Nothing in this subsection 
shall be construed to prevent a franchiser from making a 
determination of a franchisee's "prevailing retail price 
charged by that dealer", as provided by this Section.


(Source: P.A. 96-11, eff. 5-22-09.)