Citations Affected:
IC 9-13-2
;
IC 9-23-3
.
Synopsis: Unfair practices concerning motor vehicles. Expands what
are considered to be unfair practices by motor vehicle manufacturers,
dealers, and franchisees.
Effective: July 1, 2002.
January 10, 2002, read first time and referred to Committee on Commerce and Consumer
Affairs.
A BILL FOR AN ACT to amend the Indiana Code concerning
motor vehicles.
SECTION 1.
IC 9-13-2-38.5
IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2002]: Sec. 38.5. "Costs", for purposes of
IC 9-23-3
, has the
meaning set forth in
IC 9-23-3-0.2.
SECTION 2.
IC 9-13-2-97
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 97. (a) "Manufacturer"
means, except as provided in subsection subsections (b) and (c), a
person engaged in the business of constructing or assembling vehicles,
of a type required to be registered under IC 9-18, at an established
place of business in Indiana. The term does not include a converter
manufacturer.
(b) "Manufacturer", except as provided in subsection (c), for
purposes of IC 9-23, means a person who is engaged in the business of
manufacturing or assembling motor vehicles or major component parts
of motor vehicles, or both, and sells motor vehicles to dealers,
wholesale dealers, distributors, or the general public. The term includes
the following:
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2002]: Sec. 0.2. As used in this chapter, "costs" means the
remainder between the uniform parts reimbursement rate set forth
in a contract entered into under section 25 of this chapter and the
prevailing retail price charged by the dealer received by a
franchisee of the same trade name.
SECTION 8.
IC 9-23-3-0.3
IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2002]: S ec. 0.3. As used in this chapter, "prevailing retail price
charged by the dealer for the same parts" means the amount
determined under STEP FOUR of the following formula:
STEP ONE: Add the price paid by the franchisee for parts, all
shipping charges for parts, and other charges for parts.
STEP TWO: Determine the average percentage markup over
the price paid by the franchisee for parts purchased by the
franchisee from the manufacturer and sold at retail and express
this percentage as a number rounded to the nearest one
hundredth (0.01).
STEP THREE: Add one (1) plus the number determined under
STEP TWO.
STEP FOUR: Multiply the STEP ONE amount by the STEP
THREE amount.
SECTION 9.
IC 9-23-3-0.4
IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2002]: Sec. 0.4. As used in this chapter, "reasonable
compensation", for purposes of
IC 9-23-3-14
, means the prevailing
wage rates paid by the dealer in the market area in which the
dealer does business.
SECTION 10.
IC 9-23-3-0.5
IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2002]: Sec. 0.5. As used in this chapter, "uniform time standard
manual", for purposes of
IC 9-23-3-25
(b), means a schedule
established by a manufacturer setting forth the time allowances for
the diagnosis and performance of warranty work and service.
SECTION 11.
IC 9-23-3-3
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 3. (a) It is an unfair
practice for a dealer to willfully fail to perform the obligations placed
on the dealer in connection with the manufacturer's or distributor's
warranty agreement, including obligations relating to labor and
parts, applicable to any motor vehicle sold by that dealer.
(b) It is an unfair practice for a manufacturer to willfully fail to
reimburse the dealer for parts provided in satisfaction of a
warranty at the prevailing retail price charged by the dealer for
the same parts when not provided in satisfaction of a warranty,
provided that the dealer's prevailing retail price is not
unreasonable when compared with that of other dealers from the
same manufacturer for identical merchandise in the geographic
area where the dealer is engaged in business.
SECTION 12.
IC 9-23-3-14
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 14. It is an unfair
practice for a manufacturer or distributor to fail to reasonably
compensate to a dealer the posted hourly labor rate for the diagnostic
work and repair services the dealer is required to perform in
connection with the dealer's delivery and preparation obligations under
any franchise or fail to compensate to a dealer the posted hourly labor
rate for labor and other expenses incurred by the dealer under the
manufacturer's warranty agreements as long as the posted rate is
reasonable. Judgment of the reasonableness includes consideration of
charges for similar repairs by comparable repair facilities in the local
area as well as mechanic's wages and fringe benefits. The
compensation paid to the dealer by the manufacturer for warranty
service may not be less than the rates charged by the dealer for
similar service to retail customers not covered under warranty.
SECTION 13.
IC 9-23-3-15
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 15. It is an unfair
practice for a manufacturer or distributor to:
(1) fail to pay all claims made by dealers for compensation for
delivery and preparation work and warranty work, including
parts, within thirty (30) days after approval;
(2) fail to approve or disapprove the claims within thirty (30) days
after receipt; or
(3) disapprove a claim without notice to the dealer in writing of
the grounds for disapproval within thirty (30) days after
submission or the claim will be considered an approval with
payment to follow in not less than sixty (60) days after
submission; or
(4) fail to permit a dealer to correct and resubmit a
disapproved claim within thirty (30) days after receipt of the
disapproval.
The manufacturer or distributor may require documentation for
claims and to audit the claims within a one (1) year period from the
date the claim was paid, or credit issued by the manufacturer or
distributor, and to charge back a false or unsubstantiated claim.
SECTION 14.
IC 9-23-3-15.5
IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2002]: Sec. 15.5. It is an unfair practice for
a franchisee to fail to allow a manufacturer to:
(1) audit claims for incentive and reimbursement programs
for a period of less than eighteen (18) months after the date of
the transaction that is subject to audit by the manufacturer;
or
(2) charge back any claims considered to be false or
unsubstantiated by the manufacturer.
SECTION 15.
IC 9-23-3-15.7
IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2002]: Sec. 15.7. It is an unfair practice for
a manufacturer:
(1) by agreement;
(2) by restrictions upon reimbursement; or
(3) otherwise;
to restrict the nature and extent of services to be rendered or parts
to be provided so that the restriction prevents the franchisee from
satisfying the warranty by rendering services in a workmanlike
manner and by providing parts that are required in accordance
with generally accepted standards.
SECTION 16.
IC 9-23-3-15.8
IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2002]: Sec. 15.8. (a) For purposes of this
chapter, average percentage markup is determined under STEP
TWO or STEP THREE of the following formula:
STEP ONE: Determine the number of customer paid service
repair orders made during any ninety (90) days in the one
hundred eighty (180) day period preceding the date the
average percentage markup is submitted to the manufacturer.
STEP TWO: This STEP applies only if the number
determined under STEP ONE is at least one hundred (100).
Determine the result under clause (C) of the following
formula:
(A) Select one hundred (100) sequential customer paid
service repair orders paid during the one hundred eighty
(180) day period preceding the date the average percentage
markup is submitted to the manufacturer.
(B) Determine the sum of the percentages for each of the
one hundred (100) orders selected under clause (A).
(C) Divide the amount determined under clause (B) by one
hundred (100).
STEP THREE: This STEP applies only if the number
determined under STEP ONE is less than one hundred (100).
Determine the result under clause (B) of the following
formula:
(A) Determine the sum of the markup percentages for each
of the customer paid service repair orders made during the
ninety (90) days described in STEP ONE.
(B) Divide the amount determined under clause (A) by the
number of customer paid service repair orders determined
under STEP ONE.
(b) The following are the only items to be considered in
determining average percentage markup:
(1) Retail sales not involving warranty repairs.
(2) Parts required in accordance with generally accepted
standards.
(3) Parts supplied for routine vehicle maintenance.
(c) After determination of the average percentage markup, the
franchisee shall submit the average percentage markup to the
manufacturer.
(d) The average percentage markup shall take effect thirty (30)
days following the submission of the figure to the manufacturer,
subject to:
(1) audit of the submitted repair orders by the manufacturer;
and
(2) adjustment of the average percentage markup based on
the audit.
SECTION 17.
IC 9-23-3-15.9
IS ADDED TO THE INDIANA
CODE AS A NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2002]: Sec. 15.9. (a) Except as provided in
subsection (b), if a manufacturer supplies a part for use in a repair
rendered under a warranty other than by sale of that part to the
franchisee, the franchisee is entitled to compensation equivalent to
the franchisee's average percentage markup in the parts as if the
part had been sold to the franchisee by the franchisee.
(b) The manufacturer shall reimburse the franchisee for entire:
(1) engine assemblies; and
(2) transmission assemblies;
at the rate of thirty percent (30%) of what the franchisee would
have paid the manufacturer for the assembly if the assembly had
not been supplied by the manufacturer other than by the sale of the
assembly to the franchisee.
(c) It is an unfair practice for a manufacturer to require a
franchisee to establish average percentage markup by a
methodology or by requiring information that is unduly
burdensome or time consuming to provide, including:
(1) part by part; or
(2) transaction by transaction;
calculations.
(d) It is an unfair practice for a franchisee to request a change
in the average percentage markup more than two (2) times in a
calendar year.
SECTION 18.
IC 9-23-3-25
IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2002]: Sec. 25. (a) This section does not authorize a
manufacturer and its franchisees in Indiana to establish an hourly
labor reimbursement rate effective for the entire state.
(b) A manufacturer and a majority of franchisees in Indiana of
the same trade name may agree in an express written contract to
a uniform warranty reimbursement policy to be used by
franchisees for the performance of warranty repairs. The contract
must include the following:
(1) The reimbursement for parts used in warranty repairs.
(2) The use of a uniform time standard manual.
Reimbursement for parts under the contract shall be used instead
of the franchisees' prevailing retail price charged by the dealer for
the same parts. The allowance for diagnosis within the uniform
time standard manual must be reasonable and adequate for the
work and service to be performed. The manufacturer shall have a
reasonable and fair procedure for a franchisee to request a
modification of a standard included in the uniform time standard
manual.
(c) The contract must do the following:
(1) Establish a uniform parts reimbursement rate that must
be greater than the manufacturer's nationally established
parts reimbursement rate in effect at the time the contract
becomes effective. A subsequent contract must include a
uniform reimbursement rate that is equal to or greater than
the rate in the immediate prior contract.
(2) Apply to all warranty repair orders written during the
period that the agreement is in effect.
(3) Be available during the period it is in effect to any
franchisee of the same trade name at any time and on the
same terms as other franchisees.
(4) Be for a term not to exceed three (3) years.
(5) Allow any party to the policy to terminate the policy with
thirty (30) days prior written notice to all parties upon the
annual anniversary of the policy, if the policy is for at least
one (1) year.
(6) Remain in effect for the entire life of the original period if
the manufacturer and at least one (1) franchisee remain
parties to the policy.
(d) A manufacturer that enters into a contract with its
franchisees under subsection (b) may only seek to recover its costs
from a franchisee that receives the prevailing retail price charged
by the dealer subject to the following:
(1) Costs may be recovered only by increasing invoice prices
on new vehicles received by the franchisee.
(2) A manufacturer may make an exception for vehicles that
are titled in the name of a purchaser in another state.
However, price increases imposed for the purpose of
recovering costs imposed by this section may vary from time
to time and from model to model and must apply uniformly to
all franchisees of the same trade name that have requested
reimbursement for warranty repairs at the prevailing retail
price charged by the dealer.
(e) A manufacturer that enters into a contract with its
franchisees under subsection (b) shall do the following:
(1) Certify to the bureau at the time of the contract under
oath signed by the president, vice president, or secretary of
the corporation that a majority of the franchisees of the trade
name were parties to the contract.
(2) File a copy of the contract with the bureau at the time of
the certification.
(3) Certify to the bureau each year under oath signed by the
president, vice president, or secretary of the corporation that
the reimbursement costs the corporation recovers under
subsection (d) are received from a franchisee at the price
provided for under subsection (d).
(4) Maintain a file that contains the information upon which
the certification required under subdivision (3) is based for a
period of three (3) years after the certification is made.