Public Act 094-0882
HB4425 Enrolled LRB094 15346 DRH 50537 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 Section 6 as follows:
    (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) In no event shall such compensation fail to include
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
reasonable and adequate for the work to be performed. 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 of a motor vehicle dealer for warranty service be
less than the rates charged by such dealer for like service to
retail customers for nonwarranty service and repairs. The
franchiser shall reimburse the franchisee for any parts
provided in satisfaction of a warranty at the prevailing retail
price charged by that dealer for the same parts when 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. 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 18 months
after the date of the transactions that are subject to audit by
the 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) (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
        (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
    (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. 91-485, eff. 1-1-00; 92-498, eff. 12-12-01;
92-651, eff. 7-11-02.)
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 6/20/2006