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| 4 | 4 | | |
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| 5 | 5 | | 2025 -- S 0885 |
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| 6 | 6 | | ======== |
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| 7 | 7 | | LC002602 |
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| 8 | 8 | | ======== |
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| 9 | 9 | | S T A T E O F R H O D E I S L A N D |
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| 10 | 10 | | IN GENERAL ASSEMBLY |
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| 11 | 11 | | JANUARY SESSION, A.D. 2025 |
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| 12 | 12 | | ____________ |
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| 13 | 13 | | |
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| 14 | 14 | | A N A C T |
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| 15 | 15 | | RELATING TO MOTOR AN D OTHER VEHICLES -- REGULATION OF BUSINESS |
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| 16 | 16 | | PRACTICES AMONG MOTO R VEHICLE MANUFACTUR ERS, DISTRIBUTORS, AND |
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| 17 | 17 | | DEALERS |
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| 18 | 18 | | Introduced By: Senators Britto, Bissaillon, Zurier, Urso, Acosta, Burke, and Appollonio |
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| 19 | 19 | | Date Introduced: March 27, 2025 |
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| 20 | 20 | | Referred To: Senate Commerce |
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| 21 | 21 | | |
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| 22 | 22 | | |
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| 23 | 23 | | It is enacted by the General Assembly as follows: |
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| 24 | 24 | | SECTION 1. Sections 31-5.1-4.1, 31-5.1-4.2, 31-5.1-5, 31-5.1-6, 31-5.1-6.1, 31-5.1-8, 31-1 |
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| 25 | 25 | | 5.1-11, 31-5.1-18, 31-5.1-19 and 31-5.1-21 of the General Laws in Chapter 31-5.1 entitled 2 |
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| 26 | 26 | | "Regulation of Business Practices Among Motor Vehicle Manufacturers, Distributors, and 3 |
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| 27 | 27 | | Dealers" are hereby amended to read as follows: 4 |
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| 28 | 28 | | 31-5.1-4.1. Dealership — Survivorship. 5 |
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| 29 | 29 | | (a)(1) Right of designated family member to succeed in dealership ownership. Any owner 6 |
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| 30 | 30 | | of a new motor vehicle dealership may appoint by will or any other written instrument a designated 7 |
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| 31 | 31 | | family member to succeed in the ownership interest of that owner in the new motor vehicle 8 |
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| 32 | 32 | | dealership. 9 |
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| 33 | 33 | | (2) Unless there exists good cause for refusal to honor that succession on the part of the 10 |
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| 34 | 34 | | manufacturer, or distributor, or factory branch, any designated family member of a deceased or 11 |
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| 35 | 35 | | incapacitated owner of a new motor vehicle dealer may succeed to the ownership of the new motor 12 |
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| 36 | 36 | | vehicle dealer under the existing franchise provided that: 13 |
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| 37 | 37 | | (i) The designated family member gives the manufacturer, or distributor, or factory branch 14 |
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| 38 | 38 | | written notice of his or her intention to succeed to the ownership of the new motor vehicle dealer 15 |
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| 39 | 39 | | within one hundred twenty (120) days of the owner’s death or incapacity; 16 |
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| 40 | 40 | | (ii) The designated family member agrees to be bound by all the terms and conditions of 17 |
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| 41 | 41 | | the franchise; and 18 |
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| 42 | 42 | | |
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| 43 | 43 | | |
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| 44 | 44 | | LC002602 - Page 2 of 14 |
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| 45 | 45 | | (iii) The designated family member shall not operate the dealership unless he or she meets 1 |
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| 46 | 46 | | the then-current criteria generally applied by the manufacturer, or distributor, or factory branch in 2 |
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| 47 | 47 | | qualifying dealer-operators. 3 |
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| 48 | 48 | | (3) The manufacturer, or distributor, or factory branch may request, and the designated 4 |
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| 49 | 49 | | family member shall provide, promptly upon the request, personal and financial data that is 5 |
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| 50 | 50 | | reasonably necessary to determine whether the succession should be honored. 6 |
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| 51 | 51 | | (b) Refusal to honor succession to ownership — Notice required. 7 |
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| 52 | 52 | | (1) If a manufacturer, or distributor, or factory branch believes that good cause exists for 8 |
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| 53 | 53 | | refusing to honor the succession to the ownership of a new motor vehicle dealer by a family member 9 |
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| 54 | 54 | | of a deceased or incapacitated owner of a new motor vehicle dealer under the existing franchise 10 |
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| 55 | 55 | | agreement, the manufacturer, or distributor, or factory branch may, not more than sixty (60) days 11 |
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| 56 | 56 | | following receipt of: 12 |
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| 57 | 57 | | (i) Notice of the designated family member’s intent to succeed to the ownership of the new 13 |
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| 58 | 58 | | motor vehicle dealer; or 14 |
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| 59 | 59 | | (ii) Any personal or financial data which it has requested, serve upon the designated family 15 |
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| 60 | 60 | | member and the department of revenue notice of its refusal to honor the succession and of its intent 16 |
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| 61 | 61 | | to discontinue the existing franchise with the dealer no sooner than ninety (90) days from the date 17 |
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| 62 | 62 | | the notice is served. 18 |
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| 63 | 63 | | (2) The notice must state the specific grounds for the refusal to honor the succession and 19 |
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| 64 | 64 | | of the manufacturer's, or distributor's, or factory branch's intent to discontinue the existing franchise 20 |
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| 65 | 65 | | with the new motor vehicle dealer no sooner than ninety (90) days from the date the notice is served. 21 |
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| 66 | 66 | | (3) If notice of refusal and discontinuance is not timely served upon the family member, 22 |
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| 67 | 67 | | the franchise shall continue in effect subject to termination only as otherwise permitted by this 23 |
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| 68 | 68 | | chapter. 24 |
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| 69 | 69 | | (c) Written designation of succession unaffected. This chapter does not preclude the owner 25 |
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| 70 | 70 | | of a new motor vehicle dealership from designating any person as the owner’s successor by written 26 |
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| 71 | 71 | | instrument filed with the manufacturer, or distributor, or factory branch and, in the event there is a 27 |
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| 72 | 72 | | conflict between that written instrument and the provisions of this section, the written instrument 28 |
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| 73 | 73 | | shall govern. 29 |
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| 74 | 74 | | 31-5.1-4.2. Establishing new dealerships and relocating existing dealerships. 30 |
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| 75 | 75 | | (a) In the event that a manufacturer, distributor or factory branch seeks to enter into a 31 |
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| 76 | 76 | | franchise establishing an additional new motor vehicle dealership, adding an additional location for 32 |
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| 77 | 77 | | an existing new motor vehicle dealership, or relocating an existing new motor vehicle dealership 33 |
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| 78 | 78 | | within or into a relevant market area where the same line or make is then represented, except when 34 |
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| 79 | 79 | | |
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| 80 | 80 | | |
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| 81 | 81 | | LC002602 - Page 3 of 14 |
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| 82 | 82 | | the corporation operating the new motor vehicle dealership contains one or more officers who were 1 |
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| 83 | 83 | | also officers of a dealership operating at the same location as the new motor vehicle dealership 2 |
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| 84 | 84 | | immediately prior to the establishment of the new motor vehicle dealership, the manufacturer, 3 |
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| 85 | 85 | | distributor or factory branch shall in writing by certified mail first notify the department and each 4 |
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| 86 | 86 | | new motor vehicle dealer in the same line or make in the relevant market area of the intention to 5 |
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| 87 | 87 | | establish an additional dealership to add an additional location for an existing new motor vehicle 6 |
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| 88 | 88 | | dealership, or to relocate an existing dealership within or into that market area. Within thirty (30) 7 |
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| 89 | 89 | | days of receiving notice or within thirty (30) days after the end of any appeal procedure provided 8 |
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| 90 | 90 | | by the manufacturer, distributor or factory branch, any affected new motor vehicle dealership may 9 |
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| 91 | 91 | | file with the department a protest to the establishing or relocating of the new motor vehicle 10 |
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| 92 | 92 | | dealership or adding an additional location for an existing new motor vehicle dealership. When a 11 |
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| 93 | 93 | | protest is filed, the department shall inform the manufacturer, distributor or factory branch that a 12 |
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| 94 | 94 | | timely protest has been filed, and that the manufacturer, distributor or factory branch shall not 13 |
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| 95 | 95 | | establish or relocate the proposed new motor vehicle dealership or add the proposed additional 14 |
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| 96 | 96 | | location for an existing new motor vehicle dealership until the department has held a hearing, nor 15 |
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| 97 | 97 | | until the department has determined that there is good cause for not permitting the new motor 16 |
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| 98 | 98 | | vehicle dealership. For the purposes of this section, the reopening in a relevant market area of a 17 |
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| 99 | 99 | | new motor vehicle dealership shall be deemed the establishment of an additional new motor vehicle 18 |
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| 100 | 100 | | dealership. 19 |
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| 101 | 101 | | (b) In determining whether good cause has been established for entering into or relocating 20 |
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| 102 | 102 | | an additional franchise for the same line or make, or adding an additional location for an existing 21 |
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| 103 | 103 | | new motor vehicle dealership, the department shall take into consideration the existing 22 |
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| 104 | 104 | | circumstances, including, but not limited to: 23 |
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| 105 | 105 | | (1) Permanence of the investment of the existing new motor vehicle dealer(s) in the 24 |
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| 106 | 106 | | community; 25 |
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| 107 | 107 | | (2) Whether the new motor vehicle dealers of the same line or make in that relevant market 26 |
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| 108 | 108 | | area are providing adequate consumer care for the motor vehicles of the line or make in the market 27 |
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| 109 | 109 | | area which shall include the adequacy of motor vehicle sales and service facilities, equipment, 28 |
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| 110 | 110 | | supply of motor vehicle parts, and qualified service personnel; 29 |
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| 111 | 111 | | (3) Whether there is reasonable evidence that after the granting of the new motor vehicle 30 |
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| 112 | 112 | | dealership, that the market would support all of the dealerships of that line or make in the relevant 31 |
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| 113 | 113 | | market area; 32 |
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| 114 | 114 | | (4) Whether it is injurious to the public welfare for an additional new motor vehicle 33 |
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| 115 | 115 | | dealership to be established; 34 |
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| 116 | 116 | | |
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| 117 | 117 | | |
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| 118 | 118 | | LC002602 - Page 4 of 14 |
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| 119 | 119 | | (5) The growth or decline in population and new motor vehicle registrations during the past 1 |
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| 120 | 120 | | five (5) years in the relevant market area; 2 |
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| 121 | 121 | | (6) Whether the manufacturer, distributor or factory branch is motivated principally by 3 |
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| 122 | 122 | | good faith to establish an additional or new motor vehicle dealer and not by non-economic 4 |
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| 123 | 123 | | considerations; 5 |
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| 124 | 124 | | (7) Whether the manufacturer, distributor or factory branch has denied its existing new 6 |
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| 125 | 125 | | motor vehicle dealers of the same line or make the opportunity for reasonable growth, market 7 |
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| 126 | 126 | | expansion, or relocation; 8 |
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| 127 | 127 | | (8) The reasonably expected or anticipated vehicle market for the relevant market area, 9 |
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| 128 | 128 | | including demographic factors such as age of population, income, size class preference, product 10 |
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| 129 | 129 | | popularity, retail lease transactions, or other factors affecting sales to consumers in the relevant 11 |
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| 130 | 130 | | market area; 12 |
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| 131 | 131 | | (9) Growth or decline in population, density of population, and new car registrations in the 13 |
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| 132 | 132 | | relevant market area; 14 |
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| 133 | 133 | | (10) Distance, travel time, traffic patterns, and accessibility between the existing new 15 |
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| 134 | 134 | | dealership of the same new line make and the location of the proposed new or relocated dealership; 16 |
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| 135 | 135 | | (11) The amount of business transacted by existing new motor vehicle dealers of the line 17 |
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| 136 | 136 | | or make when compared with the amount of business available to them; 18 |
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| 137 | 137 | | (12) Whether the existing new motor vehicle dealers of the line or make are receiving 19 |
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| 138 | 138 | | vehicles and parts in quantities promised by the manufacturer, factory branch or distributor and on 20 |
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| 139 | 139 | | which promised quantities existing new motor vehicle dealers based their investment and scope of 21 |
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| 140 | 140 | | operations. 22 |
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| 141 | 141 | | (c) Any parties to a hearing by the department concerning the establishing or relocating of 23 |
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| 142 | 142 | | a new motor vehicle dealership or adding an additional location for an existing new motor vehicle 24 |
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| 143 | 143 | | dealership shall have a right to a review of the decision in a court of competent jurisdiction. 25 |
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| 144 | 144 | | (d) At any hearing conducted by the department under this section, the manufacturer or 26 |
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| 145 | 145 | | dealer seeking to establish an additional new motor vehicle dealership, relocate an existing new 27 |
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| 146 | 146 | | motor vehicle dealership, or add an additional location for an existing new motor vehicle dealership 28 |
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| 147 | 147 | | shall bear the burden of proof in establishing that good cause exists for it. 29 |
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| 148 | 148 | | (e) Every person, firm or corporation who prior to the retail sale of a motor vehicle, 30 |
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| 149 | 149 | | converts or otherwise assembles, installs or affixes a body, cab or special equipment to a chassis or 31 |
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| 150 | 150 | | who adds to, subtracts from or modifies a previously assembled or manufactured motor vehicle 32 |
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| 151 | 151 | | shall be required to comply with the requirements of this section. 33 |
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| 152 | 152 | | 31-5.1-5. Delivery obligations. 34 |
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| 153 | 153 | | |
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| 154 | 154 | | |
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| 155 | 155 | | LC002602 - Page 5 of 14 |
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| 156 | 156 | | Every manufacturer, distributor or factory branch shall specify to the dealer the delivery 1 |
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| 157 | 157 | | and preparation obligations of its motor vehicle dealers prior to delivery of new motor vehicles to 2 |
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| 158 | 158 | | retail buyers. A copy of the delivery and preparation obligations of its motor vehicle dealers, and a 3 |
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| 159 | 159 | | schedule of the compensation to be paid to its motor vehicle dealers for the work and services they 4 |
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| 160 | 160 | | shall be required to perform in connection with the delivery and preparation obligations, shall be 5 |
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| 161 | 161 | | filed with the department by every motor vehicle manufacturer, distributor or factory branch, and 6 |
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| 162 | 162 | | shall constitute the dealer’s only responsibility for product liability as between the dealer and the 7 |
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| 163 | 163 | | manufacturer. The compensation as set forth on the schedule shall be in accordance with §§ 6A-2-8 |
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| 164 | 164 | | 329 and 31-5.1-6. 9 |
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| 165 | 165 | | 31-5.1-6. Warranty agreement. 10 |
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| 166 | 166 | | (a) Every manufacturer, distributor or factory branch shall properly fulfill any warranty 11 |
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| 167 | 167 | | agreement and adequately and fairly compensate each of its motor vehicle dealers for labor and 12 |
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| 168 | 168 | | parts. In no event shall that compensation fail to include reasonable compensation for diagnostic 13 |
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| 169 | 169 | | work, as well as repair service and labor. All claims made by motor vehicle dealers for labor and 14 |
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| 170 | 170 | | parts shall be paid in accord with the provisions of this section. Every manufacturer, distributor or 15 |
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| 171 | 171 | | factory branch shall allow not less than one hundred eighty (180) days for its new motor vehicle 16 |
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| 172 | 172 | | dealers to submit claims for reimbursement for such service required of the dealers by the 17 |
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| 173 | 173 | | manufacturer, distributor or factory branch. Any delay in payment after approval or disapproval 18 |
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| 174 | 174 | | that is caused by conditions beyond the reasonable control of the manufacturer, distributor or 19 |
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| 175 | 175 | | factory branch shall not constitute a violation of this section. Reimbursement for warranty repairs, 20 |
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| 176 | 176 | | or diagnostic, campaign service, authorized goodwill, directive or bulletin repairs, or manufacturer 21 |
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| 177 | 177 | | or distributor required repairs pursuant to a maintenance plan, extended warranty, certified pre-22 |
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| 178 | 178 | | owned warranty, recall, parts exchange program, or a service contract that is issued by the 23 |
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| 179 | 179 | | manufacturer, distributor, factory branch, common entity, or agent of the manufacturer, distributor 24 |
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| 180 | 180 | | or factory branch work shall be at the dealer retail rate in effect at the time the warranty repair or 25 |
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| 181 | 181 | | diagnostic work is performed. Compensation for parts used in warranty service shall be fair and 26 |
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| 182 | 182 | | reasonable, as determined by methods described in subsection (b). Compensation for labor used in 27 |
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| 183 | 183 | | warranty service shall be fair and reasonable, as determined by methods described in subsection 28 |
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| 184 | 184 | | (c). 29 |
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| 185 | 185 | | (b) The retail rate customarily charged by the dealer for parts shall be established by the 30 |
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| 186 | 186 | | dealer submitting to the manufacturer, or distributor, or factory branch one hundred (100) 31 |
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| 187 | 187 | | sequential non-warranty customer-paid service repair orders that contain warranty-like parts, or 32 |
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| 188 | 188 | | sixty (60) consecutive days of non-warranty customer-paid service repair orders that contain 33 |
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| 189 | 189 | | warranty-like parts, whichever is less, covering repairs made no more than one hundred eighty 34 |
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| 190 | 190 | | |
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| 191 | 191 | | |
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| 192 | 192 | | LC002602 - Page 6 of 14 |
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| 193 | 193 | | (180) days before the submission and declaring the average percentage markup. The average of the 1 |
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| 194 | 194 | | markup rates shall be presumed to be fair and reasonable, however, a manufacturer, or distributor, 2 |
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| 195 | 195 | | or factory branch may, not later than thirty (30) days after submission, rebut that presumption by 3 |
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| 196 | 196 | | reasonably substantiating that the rate is unfair and unreasonable in light of the practices of 4 |
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| 197 | 197 | | advertised retail rates charged to retail customers for warranty-like repairs by all other franchised 5 |
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| 198 | 198 | | motor vehicle dealers in the vicinity relevant market area offering the same line-make vehicles. The 6 |
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| 199 | 199 | | retail rate shall go into effect thirty (30) days following the declaration, subject to audit of the 7 |
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| 200 | 200 | | submitted repair orders by the franchisor and a rebuttal of the declared rate as described above. If 8 |
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| 201 | 201 | | the declared rate is rebutted, the manufacturer, or distributor, or factory branch shall propose an 9 |
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| 202 | 202 | | adjustment of the average percentage markup based on that rebuttal not later than thirty (30) days 10 |
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| 203 | 203 | | after submission. If the dealer does not agree with the proposed average percentage markup, the 11 |
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| 204 | 204 | | dealer may file a protest with the department not later than thirty (30) days after receipt of that 12 |
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| 205 | 205 | | proposal by the manufacturer, or distributor, or factory branch. If the protest is filed, the department 13 |
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| 206 | 206 | | shall inform the manufacturer, or distributor, or factory branch that a timely protest has been filed 14 |
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| 207 | 207 | | and that a hearing will be held on the protest. In any hearing held pursuant to this subsection, the 15 |
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| 208 | 208 | | manufacturer, or distributor, or factory branch shall have the burden of proving that the rate 16 |
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| 209 | 209 | | declared by the dealer was unfair and unreasonable as described in this subsection and that the 17 |
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| 210 | 210 | | proposed adjustment of the average percentage markup is fair and reasonable pursuant to the 18 |
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| 211 | 211 | | provisions of this subsection. 19 |
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| 212 | 212 | | (c) The retail rate customarily charged by the dealer for non-warranty labor may be 20 |
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| 213 | 213 | | established by submitting to the manufacturer, or distributor, or factory branch all non-warranty 21 |
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| 214 | 214 | | customer-paid service repair orders covering repairs made during the month prior to the submission 22 |
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| 215 | 215 | | and dividing the amount of the dealer’s total labor sales by the number of total labor hours that 23 |
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| 216 | 216 | | generated those sales. Compensation for warranty labor shall equal the dealer’s effective non-24 |
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| 217 | 217 | | warranty labor rate multiplied by the time guide used by the dealer for non-warranty customer-paid 25 |
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| 218 | 218 | | service repair orders. If no time guide exists for a warranty repair, compensation for warranty labor 26 |
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| 219 | 219 | | shall equal the dealer’s effective non-warranty labor rate multiplied by the time actually spent to 27 |
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| 220 | 220 | | complete the repair order and shall not be less than the time charged to retail customers for the 28 |
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| 221 | 221 | | same or similar work performed. The average labor rate shall be presumed to be fair and reasonable, 29 |
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| 222 | 222 | | provided a manufacturer, or distributor, or factory branch may, not later than thirty (30) days after 30 |
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| 223 | 223 | | submission, rebut the presumption by reasonably substantiating that the rate is unfair and 31 |
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| 224 | 224 | | unreasonable in light of the practices of all other franchised motor vehicle dealers in the vicinity 32 |
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| 225 | 225 | | offering the same line-make vehicles. The average labor rate shall go into effect thirty (30) days 33 |
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| 226 | 226 | | following the declaration, subject to audit of the submitted repair orders by the franchisor and a 34 |
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| 227 | 227 | | |
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| 228 | 228 | | |
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| 229 | 229 | | LC002602 - Page 7 of 14 |
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| 230 | 230 | | rebuttal of the declared rate. If the declared rate is rebutted, the manufacturer, or distributor, or 1 |
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| 231 | 231 | | factory branch shall propose an adjustment of the average labor rate based on the rebuttal not later 2 |
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| 232 | 232 | | than thirty (30) days after submission. If the dealer does not agree with the proposed average labor 3 |
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| 233 | 233 | | rate, the dealer may file a protest with the department not later than thirty (30) days after receipt of 4 |
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| 234 | 234 | | that proposal by the manufacturer, or distributor, or factory branch. If a protest is filed, the 5 |
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| 235 | 235 | | department shall inform the manufacturer, or distributor, or factory branch that a timely protest has 6 |
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| 236 | 236 | | been filed and that a hearing will be held on the protest. In any hearing held pursuant to this 7 |
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| 237 | 237 | | subsection, the manufacturer, or distributor, or factory branch shall have the burden of proving that 8 |
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| 238 | 238 | | the rate declared by the dealer was unfair and unreasonable as described in this subsection and that 9 |
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| 239 | 239 | | the proposed adjustment of the average labor rate is fair and reasonable pursuant to the provisions 10 |
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| 240 | 240 | | of this subsection. 11 |
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| 241 | 241 | | (d) In calculating the retail rate customarily charged by the dealer for parts and labor, the 12 |
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| 242 | 242 | | following work shall not be included in the calculation: 13 |
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| 243 | 243 | | (1) Repairs for manufacturer, or distributor, or factory branch special events, specials, or 14 |
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| 244 | 244 | | promotional discounts for retail customer repairs; 15 |
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| 245 | 245 | | (2) Parts sold at wholesale; 16 |
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| 246 | 246 | | (3) Engine assemblies and transmission assemblies; 17 |
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| 247 | 247 | | (4) Routine maintenance not covered under any retail customer warranty, such as fluids, 18 |
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| 248 | 248 | | filters, and belts not provided in the course of repairs; 19 |
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| 249 | 249 | | (5) Nuts, bolts, fasteners, and similar items that do not have an individual part number; 20 |
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| 250 | 250 | | (6) Tires; and 21 |
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| 251 | 251 | | (7) Vehicle reconditioning. 22 |
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| 252 | 252 | | (e) If a manufacturer, or distributor, or factory branch furnishes a part or component to a 23 |
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| 253 | 253 | | dealer at no cost, to use in performing repairs under a recall, campaign service action, or warranty 24 |
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| 254 | 254 | | repair, the manufacturer, or distributor, or factory branch shall compensate the dealer for the part 25 |
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| 255 | 255 | | or component in the same manner as warranty parts compensation under this section by 26 |
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| 256 | 256 | | compensating the dealer the average markup on the cost for the part or component as listed in the 27 |
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| 257 | 257 | | manufacturer's, or distributor's, or factory branch's price schedule less the cost for the part or 28 |
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| 258 | 258 | | component. 29 |
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| 259 | 259 | | (f) A manufacturer, or distributor, or factory branch may not require a dealer to establish 30 |
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| 260 | 260 | | the retail rate customarily charged by the dealer for parts and labor by an unduly burdensome or 31 |
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| 261 | 261 | | time-consuming method or by requiring information that is unduly burdensome or time consuming 32 |
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| 262 | 262 | | to provide, including, but not limited to, part-by-part or transaction-by-transaction calculations. A 33 |
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| 263 | 263 | | dealer may not declare an average percentage markup or average labor rate more than twice in one 34 |
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| 264 | 264 | | |
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| 265 | 265 | | |
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| 266 | 266 | | LC002602 - Page 8 of 14 |
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| 267 | 267 | | calendar year. 1 |
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| 268 | 268 | | (g) A manufacturer, or distributor, or factory branch may not otherwise recover its costs 2 |
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| 269 | 269 | | from dealers within this state, including an increase in the wholesale price of a vehicle or surcharge 3 |
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| 270 | 270 | | imposed on a dealer solely intended to recover the cost of reimbursing a dealer for parts and labor 4 |
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| 271 | 271 | | pursuant to this section, provided a manufacturer, or distributor, or factory branch shall not be 5 |
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| 272 | 272 | | prohibited from increasing prices for vehicles or parts in the normal course of business. 6 |
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| 273 | 273 | | (h) Each manufacturer or distributor shall perform all warranty obligations, include in 7 |
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| 274 | 274 | | written notices of factory recalls to owners and dealers the expected date by which necessary parts 8 |
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| 275 | 275 | | and equipment will be available to dealers for the correction of the defects, and compensate dealers 9 |
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| 276 | 276 | | for repairs necessitated by such recall. 10 |
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| 277 | 277 | | (i) A claim filed under this section or § 31-5.1-6.1 by a dealer with a manufacturer, or 11 |
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| 278 | 278 | | distributor, or factory branch shall be: 12 |
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| 279 | 279 | | (1) In the manner and form prescribed by the manufacturer, or distributor, or factory 13 |
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| 280 | 280 | | branch; and 14 |
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| 281 | 281 | | (2)(i) Approved or disapproved within (30) days of receipt. 15 |
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| 282 | 282 | | (ii) A claim not approved or disapproved within thirty (30) days of receipt shall be deemed 16 |
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| 283 | 283 | | approved. 17 |
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| 284 | 284 | | (iii) Payment of, or credit issued on, a claim filed under this section shall be made within 18 |
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| 285 | 285 | | thirty (30) days of approval. 19 |
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| 286 | 286 | | (3)(i) If a claim filed under this section is shown by the manufacturer, or distributor, or 20 |
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| 287 | 287 | | factory branch to be false or unsubstantiated, the manufacturer, or distributor, or factory branch 21 |
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| 288 | 288 | | may charge back the claim within twelve (12) months from the date the claim was paid or credit 22 |
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| 289 | 289 | | issued. 23 |
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| 290 | 290 | | (ii) A manufacturer, or distributor, or factory branch shall not charge back a claim based 24 |
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| 291 | 291 | | solely on a motor vehicle dealer’s incidental failure to comply with a specific claim processing 25 |
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| 292 | 292 | | requirement, such as a clerical error or other administrative technicality that does not put into 26 |
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| 293 | 293 | | question the legitimacy of the claim after the motor vehicle dealer properly resubmits the claim in 27 |
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| 294 | 294 | | accordance with the manufacturer's, or distributor's, or factory branch's submission guidelines. 28 |
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| 295 | 295 | | (iii) A dealer shall have no less than sixty (60) days from the date of written notification 29 |
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| 296 | 296 | | by a manufacturer, or distributor, or factory branch of a proposed charge back to the by certified 30 |
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| 297 | 297 | | United States mail, return receipt requested, identifying the specific claim documentation procedure 31 |
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| 298 | 298 | | or procedures violated by the dealer to resubmit a claim for payment or compensation if the claim 32 |
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| 299 | 299 | | was denied for a dealer’s incidental failure as set forth in subsection (i)(3)(ii) of this section, 33 |
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| 300 | 300 | | whether the chargeback was a direct or an indirect transaction. 34 |
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| 301 | 301 | | |
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| 302 | 302 | | |
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| 303 | 303 | | LC002602 - Page 9 of 14 |
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| 304 | 304 | | (iv) This subdivision does not limit the right of a manufacturer, or distributor, or factory 1 |
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| 305 | 305 | | branch to charge back for any claim that is proven to be fraudulent. 2 |
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| 306 | 306 | | 31-5.1-6.1. Obligations during recalls. 3 |
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| 307 | 307 | | (a) A manufacturer, distributor, or factory branch shall compensate its new motor vehicle 4 |
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| 308 | 308 | | dealers for all labor and parts required by the manufacturer, distributor, or factory branch to perform 5 |
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| 309 | 309 | | recall repairs. Compensation for recall repairs shall be at the dealer retail rate in effect at the time 6 |
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| 310 | 310 | | the recall repair work is performed. The dealer retail rate for parts and labor shall be at the same 7 |
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| 311 | 311 | | rates as those provided for under § 31-5.1-6. If parts or a remedy are not reasonably available to 8 |
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| 312 | 312 | | perform a recall service or repair on a used vehicle held for sale by the dealer authorized to sell 9 |
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| 313 | 313 | | new vehicles of the same line-make within thirty (30) days of the manufacturer, distributor, or 10 |
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| 314 | 314 | | factory branch issuing the initial notice of recall and the manufacturer, distributor, or factory branch 11 |
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| 315 | 315 | | has issued a “Stop-Sale,” or “Do-Not-Drive,” order on the vehicle, the manufacturer, distributor, 12 |
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| 316 | 316 | | or factory branch shall compensate the dealer at a rate of at least one and one-half percent (1.5%) 13 |
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| 317 | 317 | | of the value of the vehicle per month, or portion of a month, while the recall or remedy parts are 14 |
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| 318 | 318 | | unavailable and the “Stop-Sale,” or “Do-Not-Drive,” order remains in effect. A “Stop-Sale” shall 15 |
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| 319 | 319 | | be defined as a notification issued by a vehicle manufacturer, distributor, or factory branch to its 16 |
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| 320 | 320 | | franchised dealerships stating that certain used vehicles in inventory shall not be sold or leased, at 17 |
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| 321 | 321 | | retail and/or wholesale, due to a federal safety recall for a defect or a noncompliance, or a federal 18 |
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| 322 | 322 | | or California emissions recall. 19 |
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| 323 | 323 | | (b) The value of a used vehicle shall be the average trade-in value for used vehicles as 20 |
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| 324 | 324 | | indicated in an independent, third-party guide for the year, make, model, and mileage of the recalled 21 |
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| 325 | 325 | | vehicle on the later of: 22 |
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| 326 | 326 | | (1) The date the “Stop-Sale” or “Do-Not-Drive” order was issued; or 23 |
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| 327 | 327 | | (2) The date the vehicle is taken in the used motor vehicle inventory. 24 |
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| 328 | 328 | | (c) This section shall apply only to used vehicles subject to safety or emissions recalls 25 |
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| 329 | 329 | | pursuant to and recalled in accordance with federal law and regulations adopted thereunder and 26 |
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| 330 | 330 | | where a “Stop-Sale,” or “Do-Not-Drive,” order has been issued; provided, further, that this section 27 |
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| 331 | 331 | | shall apply only to new motor vehicle dealers holding used vehicles for sale that are a line-make 28 |
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| 332 | 332 | | that the dealer is franchised to sell or on which the dealer is authorized to perform recall repairs. 29 |
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| 333 | 333 | | This section further shall apply only to new motor vehicle dealers holding an affected used motor 30 |
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| 334 | 334 | | vehicle for sale that was: 31 |
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| 335 | 335 | | (1) In inventory at the time the “Stop-Sale” or “Do-Not-Drive” order was issued; 32 |
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| 336 | 336 | | (2) Taken in the used motor vehicle inventory of the new motor vehicle dealer as a 33 |
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| 337 | 337 | | consumer trade-in incident to the purchase of a new motor vehicle before or after the “Stop-Sale” 34 |
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| 338 | 338 | | |
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| 339 | 339 | | |
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| 340 | 340 | | LC002602 - Page 10 of 14 |
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| 341 | 341 | | or “Do-Not-Drive” order was issued; or 1 |
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| 342 | 342 | | (3) Properly taken in the used motor vehicle inventory of the new motor vehicle dealer as 2 |
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| 343 | 343 | | a lease return vehicle returned to the new motor vehicle dealer before or after the “Stop-Sale” or 3 |
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| 344 | 344 | | “Do-Not-Drive” order was issued in accordance with the terms of the applicable contract. 4 |
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| 345 | 345 | | (d) It shall be a violation of this section for a manufacturer, distributor, or factory branch 5 |
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| 346 | 346 | | to reduce the amount of compensation otherwise owed to a new motor vehicle dealer, whether 6 |
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| 347 | 347 | | through a chargeback; removal from an incentive program; reduction in amount owed under an 7 |
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| 348 | 348 | | incentive program; or any other means, because the new motor vehicle dealer has submitted a claim 8 |
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| 349 | 349 | | for reimbursement under this section, or was otherwise compensated for a vehicle subject to a recall 9 |
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| 350 | 350 | | where a “Stop-Sale,” or “Do-Not-Drive,” order has been issued. 10 |
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| 351 | 351 | | (e) All reimbursement claims made by new motor vehicle dealers pursuant to this section 11 |
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| 352 | 352 | | for recall remedies or repairs, or for compensation where no part or repair is reasonably available 12 |
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| 353 | 353 | | and the vehicle is subject to a “Stop-Sale” or “Do-Not-Drive” order, shall be subject to the same 13 |
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| 354 | 354 | | limitations and requirements as a warranty reimbursement claim made under § 31-5.1-6. Claims 14 |
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| 355 | 355 | | shall be either approved or disapproved within thirty (30) days after they are submitted to the 15 |
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| 356 | 356 | | manufacturer in the manner and on the forms the manufacturer reasonably prescribes. All claims 16 |
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| 357 | 357 | | shall be paid within thirty (30) days of approval of the claim by the manufacturer. Any claim not 17 |
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| 358 | 358 | | specifically disapproved in writing within thirty (30) days after the manufacturer receives a 18 |
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| 359 | 359 | | properly submitted claim shall be deemed to be approved. In the alternative, a manufacturer may 19 |
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| 360 | 360 | | compensate its franchised dealers under a national recall compensation program provided the 20 |
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| 361 | 361 | | compensation under the program is equal to or greater than that provided under subsection (a) of 21 |
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| 362 | 362 | | this section or the manufacturer and dealer otherwise agree. 22 |
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| 363 | 363 | | (f) Nothing in this section shall require a manufacturer, distributor, or factory branch to 23 |
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| 364 | 364 | | provide total compensation to a new motor vehicle dealer that would exceed the total average trade-24 |
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| 365 | 365 | | in value of the affected used motor vehicle as determined under subsection (b) of this section. 25 |
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| 366 | 366 | | (g) Any remedy provided to a dealer under this section is exclusive and may not be 26 |
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| 367 | 367 | | combined with any other state recall compensation remedy. 27 |
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| 368 | 368 | | 31-5.1-8. Agreements. 28 |
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| 369 | 369 | | The provisions of this chapter shall apply to all written or oral agreements between a 29 |
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| 370 | 370 | | manufacturer, distributor, or factory branch and a motor vehicle dealer including, but not limited 30 |
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| 371 | 371 | | to, the franchise offering; the franchise agreement; sales of goods, services, or advertising; leases 31 |
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| 372 | 372 | | of mortgages of real or personal property; promises to pay; security interests; pledges; insurance 32 |
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| 373 | 373 | | contracts; advertising contracts; construction or installation contracts; servicing contracts; and all 33 |
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| 374 | 374 | | other agreements in which the manufacturer, wholesaler, or distributor, or factory branch, 34 |
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| 375 | 375 | | |
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| 376 | 376 | | |
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| 377 | 377 | | LC002602 - Page 11 of 14 |
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| 378 | 378 | | wholesaler, or distributor has any direct or indirect interest. 1 |
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| 379 | 379 | | 31-5.1-11. Sales to the state. 2 |
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| 380 | 380 | | In connection with a sale of a motor vehicle or vehicles to the state or to any political 3 |
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| 381 | 381 | | subdivision, no manufacturer, distributor, factory branch or wholesaler shall offer any discounts, 4 |
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| 382 | 382 | | refunds, or any other similar type of inducement to any dealer without making the same offer or 5 |
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| 383 | 383 | | offers to all other of its dealers within the relevant market area, and if any inducements are made, 6 |
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| 384 | 384 | | the manufacturer, distributor, factory branch, or wholesaler shall give simultaneous notice to all of 7 |
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| 385 | 385 | | its dealers within the relevant market area. 8 |
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| 386 | 386 | | 31-5.1-18. Transportation damages. 9 |
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| 387 | 387 | | (a) Notwithstanding the terms, provisions, or conditions of any agreement or franchise, the 10 |
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| 388 | 388 | | new motor vehicle dealer is solely liable for damages to new motor vehicles after acceptance from 11 |
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| 389 | 389 | | the carrier and before delivery to the ultimate purchaser. 12 |
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| 390 | 390 | | (b) Notwithstanding the terms, provisions, or conditions of any agreement or franchise, the 13 |
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| 391 | 391 | | manufacturer, distributor, or factory branch is liable for all damages to motor vehicles before 14 |
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| 392 | 392 | | delivery to a carrier or transporter. 15 |
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| 393 | 393 | | (c) The new motor vehicle dealer is liable for damages to new motor vehicles after delivery 16 |
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| 394 | 394 | | to the carrier only if the dealer selects the method of transportation, mode of transportation, and the 17 |
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| 395 | 395 | | carrier. In all other instances, the manufacturer, distributor, or factory branch is liable for carrier-18 |
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| 396 | 396 | | related new motor vehicle damage. 19 |
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| 397 | 397 | | (d) On any new motor vehicle, any uncorrected damage or any corrected damage exceeding 20 |
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| 398 | 398 | | six percent (6%) of the manufacturer's, distributor's, or factory branch's suggested retail price, as 21 |
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| 399 | 399 | | defined in 26 U.S.C. § 4216 and measured by retail repair costs, must be disclosed in writing prior 22 |
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| 400 | 400 | | to delivery. Damage to glass, tires, and bumpers is excluded from the six percent (6%) rule when 23 |
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| 401 | 401 | | replaced by identical manufacturer's, distributor's, or factory branch's original equipment. 24 |
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| 402 | 402 | | (e) Repaired damage to a customer ordered new motor vehicle, not exceeding the six 25 |
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| 403 | 403 | | percent (6%) rule, shall not constitute grounds for revocation of the customer order. The customer’s 26 |
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| 404 | 404 | | right of revocation ceases upon his or her acceptance of delivery of the vehicle. 27 |
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| 405 | 405 | | (f) If damage to a vehicle exceeds the six percent (6%) rule at either the time the new motor 28 |
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| 406 | 406 | | vehicle is accepted by the new motor vehicle dealer, or whenever the risk of loss is shifted to the 29 |
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| 407 | 407 | | dealer (as defined in subsection (c)), whichever occurs first, then the dealer may reject the vehicle 30 |
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| 408 | 408 | | within a reasonable time. Should the dealer elect to repair any damage exceeding the six percent 31 |
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| 409 | 409 | | (6%) rule, full disclosure shall be made by the dealer in writing to the customer and an 32 |
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| 410 | 410 | | acknowledgment by the customer is required. If there is less than six percent (6%) damage as 33 |
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| 411 | 411 | | described in subsection (d) of this section, no disclosure is required. Pre-delivery mechanical work 34 |
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| 412 | 412 | | |
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| 413 | 413 | | |
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| 414 | 414 | | LC002602 - Page 12 of 14 |
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| 415 | 415 | | shall not require a disclosure. 1 |
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| 416 | 416 | | 31-5.1-19. Risk of loss. 2 |
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| 417 | 417 | | (a) If a new motor vehicle dealer determines the method of transportation, as defined in § 3 |
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| 418 | 418 | | 31-5.1-18(c), then the risk of loss passes to the dealer upon delivery of the vehicle to the carrier. 4 |
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| 419 | 419 | | (b) In every other instance, the risk of loss remains with the manufacturer, distributor, or 5 |
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| 420 | 420 | | factory branch until such time as the new motor vehicle dealer accepts the vehicle from the carrier. 6 |
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| 421 | 421 | | 31-5.1-21. Promotional activities. 7 |
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| 422 | 422 | | (a) Upon filing of a claim, manufacturer, or distributor, or factory branch shall compensate 8 |
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| 423 | 423 | | a dealer for any incentive or reimbursement program sponsored by the manufacturer, or distributor, 9 |
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| 424 | 424 | | or factory branch, under the terms of which the dealer is eligible for compensation. 10 |
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| 425 | 425 | | (b)(1) A claim filed under this section shall be: 11 |
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| 426 | 426 | | (i) In the manner and form prescribed by the manufacturer, or distributor, or factory branch; 12 |
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| 427 | 427 | | and 13 |
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| 428 | 428 | | (ii) Approved or disapproved within thirty (30) days of receipt. 14 |
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| 429 | 429 | | (2) A claim not approved or disapproved within thirty (30) days of receipt shall be deemed 15 |
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| 430 | 430 | | approved. 16 |
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| 431 | 431 | | (3) Payment of a claim filed under this section shall be made within thirty (30) days of 17 |
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| 432 | 432 | | approval. 18 |
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| 433 | 433 | | (c)(1) If a claim filed under this section is shown by the manufacturer, or distributor, or 19 |
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| 434 | 434 | | factory branch to be false or unsubstantiated, the manufacturer, or distributor, or factory branch 20 |
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| 435 | 435 | | may charge back the claim within one year from the date the claim was paid or credit issued or one 21 |
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| 436 | 436 | | year from the end of a manufacturer, distributor or factory branch program that does not exceed 22 |
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| 437 | 437 | | one year in length, whichever is later. 23 |
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| 438 | 438 | | (i) A manufacturer, or distributor, or factory branch shall not charge back a claim based 24 |
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| 439 | 439 | | solely on a motor vehicle dealer’s incidental failure to comply with a specific claim processing 25 |
|---|
| 440 | 440 | | requirement, such as a clerical error or other administrative technicality that does not put into 26 |
|---|
| 441 | 441 | | question the legitimacy of the claim after the motor vehicle dealer properly resubmits the claim in 27 |
|---|
| 442 | 442 | | accordance with the manufacturer's, or distributor's, or factory branch's submission guidelines. 28 |
|---|
| 443 | 443 | | (ii) A dealer shall have no less than sixty (60) days from the date of notification by a 29 |
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| 444 | 444 | | manufacturer, or distributor, or factory branch of a charge back to the dealer to resubmit a claim 30 |
|---|
| 445 | 445 | | for payment or compensation if the claim was denied for a dealer’s incidental failure as set forth in 31 |
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| 446 | 446 | | subsection (c)(1)(ii) whether the chargeback was a direct or an indirect transaction. 32 |
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| 447 | 447 | | (2) This paragraph does not limit the right of a manufacturer, or distributor, or factory 33 |
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| 448 | 448 | | branch to charge back for any claim that is proven fraudulent. 34 |
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| 449 | 449 | | |
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| 450 | 450 | | |
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| 451 | 451 | | LC002602 - Page 13 of 14 |
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| 452 | 452 | | SECTION 2. This act shall take effect upon passage. 1 |
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| 453 | 453 | | ======== |
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| 454 | 454 | | LC002602 |
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| 455 | 455 | | ======== |
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| 456 | 456 | | |
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| 457 | 457 | | |
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| 458 | 458 | | LC002602 - Page 14 of 14 |
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| 459 | 459 | | EXPLANATION |
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| 460 | 460 | | BY THE LEGISLATIVE COUNCIL |
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| 461 | 461 | | OF |
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| 462 | 462 | | A N A C T |
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| 463 | 463 | | RELATING TO MOTOR AN D OTHER VEHICLES -- REGULATION OF BUSINESS |
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| 464 | 464 | | PRACTICES AMONG MOTO R VEHICLE MANUFACTURERS, DISTR IBUTORS, AND |
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| 465 | 465 | | DEALERS |
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| 466 | 466 | | *** |
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| 467 | 467 | | This act would extend certain protocols applicable to motor vehicle manufacturers to their 1 |
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| 468 | 468 | | distributors and factory branches, as well as update warranty reimbursement and recall obligation 2 |
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| 469 | 469 | | policies. 3 |
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| 470 | 470 | | This act would take effect upon passage. 4 |
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| 471 | 471 | | ======== |
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| 472 | 472 | | LC002602 |
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| 473 | 473 | | ======== |
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| 474 | 474 | | |
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