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Public Act 92-0498
SB113 Enrolled LRB9202571DHmg
AN ACT in relation to vehicles.
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;
(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
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.
(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.
(Source: P.A. 91-485, eff. 1-1-00.)
Section 99. Effective date. This Act takes effect upon
becoming law.
Passed in the General Assembly November 28, 2001.
Approved December 12, 2001.
Effective December 12, 2001.
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