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 
    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. 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.