1Amending the act of December 22, 1983 (P.L.306, No.84), entitled
2"An act providing for the State Board of Vehicle
3Manufacturers, Dealers and Salespersons; and providing
4penalties," further providing for reimbursement for parts and
5service and for unlawful acts by manufacturers or
6distributors.

7The General Assembly of the Commonwealth of Pennsylvania
8hereby enacts as follows:

9Section 1. Section 9(a), (b) and (e)(2) of the act of
10December 22, 1983 (P.L.306, No.84), known as the Board of
11Vehicles Act, amended October 18, 2000 (P.L.577, No.75), are
12amended and the section is amended by adding subsections to
13read:

14Section 9. Reimbursement for all parts and service required by
15the manufacturer or distributor; reimbursement
16audits.

17(a) Manufacturers or distributors to notify dealers of their
18obligations.--

19(1) Each new vehicle manufacturer or distributor shall

1specify in writing to each of its new vehicle dealers
2licensed in this Commonwealth the dealer's obligations for
3predelivery preparation and warranty service on its products,
4shall compensate the new vehicle dealer for service required
5of the dealer by the manufacturer or distributor and shall
6provide the dealer with a schedule of compensation to be paid
7the dealer for parts, work and service, and the time
8allowance for the performance of such work and service.

9(2) Compensation for parts, including major assemblies
10used in warranty service, shall be at the dealer's retail
11rate. The following shall apply:

12(i) The dealer's retail rate for parts shall be
13established by the dealer's submitting to the
14manufacturer or distributor a declaration of the average
15percentage markup which shall be the lesser of the
16following orders which cover repairs made no more than
17180 days before the submission:

18(A) One hundred sequential nonwarranty customer-
19paid service repair orders which contain parts that
20are used in warranty-like service or repair.

21(B) Ninety consecutive days of nonwarranty
22customer-paid service repair orders which contain
23parts that are used in warranty-like service or
24repair.

25(ii) The declaration under subparagraph (i) shall be
26presumed to be reasonable, except that a manufacturer or
27distributor may, not later than 60 days after submission,
28rebut the presumption by substantiating that the
29declaration is unreasonable.

30(iii) The retail rate shall go into effect 60 days

1following the declaration under subparagraph (i), unless
2the franchisor audits the submitted repair orders and a
3rebuttal under subparagraph (ii) occurs.

4(iv) If the declared retail rate is rebutted, the
5manufacturer or distributor shall propose an adjustment
6of the markup based on the rebuttal no later than 60 days
7after submission.

8(v) A manufacturer shall provide written support to
9the dealer for the rebuttal retail rate that is proposed.
10If the dealer does not agree with the proposed markup,
11the dealer may file a protest after receipt of the
12proposal by the manufacturer or distributor. If a protest
13is filed, the board shall inform the manufacturer or
14distributor that a protest has been filed and that a
15hearing will be held on the protest. In a hearing held
16under this subparagraph, the manufacturer or distributor
17shall have the burden of proving that:

18(A) the retail rate declared by the dealer was
19materially inaccurate; and

20(B) the manufacturer's or distributor's proposed
21adjustment of the markup is reasonable.

22(3) Compensation for labor used in warranty service
23shall be at the dealer's retail rate. The following shall
24apply:

25(i) The dealer's hourly retail rate for labor shall
26be established by submitting the following to the
27manufacturer or distributor:

28(A) A declaration of the average labor rate
29calculated by dividing the amount of the dealer's
30total labor sales by the number of total labor hours

1that generated the sales.

2(B) The lesser of the following orders which
3cover repairs made no more than 180 days before the
4submission:

5(I) One hundred sequential nonwarranty
6customer-paid service repair orders.

7(II) Ninety consecutive days of nonwarranty
8customer-paid service repair orders.

9(ii) The declaration under subparagraph (i)(A) shall
10be presumed to be reasonable, except that a manufacturer
11or distributor may, no later than 60 days after
12submission, rebut the presumption by substantiating that
13the rate is unreasonable.

14(iii) The average labor rate shall go into effect 60
15days following the declaration under subparagraph (i)(A),
16unless the franchisor audits the submitted repair orders
17and a rebuttal under subparagraph (ii) occurs.

18(iv) If the declared rate is rebutted, the
19manufacturer or distributor shall propose an adjustment
20of the labor rate based on the rebuttal not later than 60
21days after submission.

22(v) A manufacturer shall provide written support to
23the dealer for the rebuttal rate that is proposed. If the
24dealer does not agree with the proposed labor rate, the
25dealer may file a protest after receipt of the proposal
26by the manufacturer or distributor. If a protest is
27filed, the board shall inform the manufacturer or
28distributor that a protest has been filed and that a
29hearing will be held on the protest. In a hearing held
30under this subparagraph, the manufacturer or distributor

1shall have the burden of proving that:

2(A) the retail rate declared by the dealer was
3materially inaccurate; and

4(B) the manufacturer's or distributor's proposed
5adjustment of the retail rate is reasonable.

6(4) This subsection shall not apply to manufacturers
7or distributors of manufactured housing or recreational
8vehicles.

9[(b) Schedule of compensation to include reasonable
10compensation.--In no event shall the schedule of compensation
11fail to include reasonable compensation for diagnostic work,
12repair service, original equipment manufacturer parts and labor.
13Time allowances for the diagnosis and performance of warranty
14work and service shall be reasonable and adequate for the work
15to be performed. In the determination of what constitutes
16reasonable compensation, the principal factors to be given
17consideration shall be the prevailing wage rates being paid by
18the dealers in the community in which the dealer is doing
19business. The hourly labor rate paid to a dealer for warranty
20services shall not be less than the rate charged by the dealer
21for like service to nonwarranty customers for nonwarranty
22service and repairs at a reasonable rate. This subsection shall
23not apply to manufacturers or distributors of manufactured
24housing or recreational vehicles.]

25(b.1) Exceptions.--When calculating the retail rate
26customarily charged by the dealer for parts and labor under this
27section, the following work shall not be included:

28(1) Repairs for manufacturer or distributor special
29events, specials or promotional discounts for retail customer
30repairs.

1(2) Parts sold at wholesale.

2(3) Routine maintenance not covered under a retail
3customer warranty, such as fluids, filters and belts not
4provided in the course of repairs.

5(4) Nuts, bolts, fasteners and similar items that do not
6have an individual part number.

7(5) Tires.

8(6) Vehicle reconditioning.

9(b.2) Compensation.--If a manufacturer or distributor
10furnishes a part or component to a dealer, at no cost, to use in
11performing repairs under a recall, campaign service or warranty
12repair, the manufacturer or distributor shall compensate the
13dealer for the part or component in the same manner as warranty
14parts compensation under this section by compensating the dealer
15the average markup on the cost for the part or component as
16listed in the manufacturer's or distributor's price schedule,
17minus the cost for the part or component.

18(b.3) Prohibitions and audit.--

19(1) A manufacturer or distributor may not require a
20dealer to establish the retail rate customarily charged by
21the dealer for parts and labor by:

22(i) An unduly burdensome or time consuming method.

23(ii) Requiring information that is unduly burdensome
24or time consuming to provide, including part-by-part or
25transaction-by-transaction calculations.

26(2) A dealer may not declare an average percentage
27markup or average labor rate more than once in one calendar
28year.

29(3) A manufacturer or distributor may perform annual
30audits to verify that a dealer's effective rates have not

1decreased. If a dealer's effective rates have decreased, a
2manufacturer or distributor may reduce the warranty
3reimbursement rate prospectively.

4(b.4) Recovery.--

5(1) (i) A manufacturer or distributor may not recover
6its costs from a dealer within this Commonwealth that
7does not apply to the manufacturer or distributor for
8retail rate reimbursement for parts and labor, including
9an increase in the wholesale price of a vehicle or
10surcharge imposed on a dealer intended to recover the
11cost of reimbursing a dealer for parts and labor under
12this section.

13(ii) A manufacturer or distributor may increase the
14price for a vehicle or part in the normal course of
15business.

16(2) A dealer may elect to revert to the nonretail rate
17reimbursement for parts and labor once in a calendar year to
18avoid a manufacturer or distributor surcharge.

19* * *

20(e) Warranty reimbursement and incentive or reimbursement
21program approval and audits.--

22* * *

23(2) The manufacturer or distributor shall be permitted
24to audit claims within a [two-year] nine-month period from
25the date the claim was paid or credit issued by the
26manufacturer or distributor and to charge back any false or
27unsubstantiated claims. If there is evidence of fraud, this
28subsection does not limit the right of the manufacturer or
29distributor to audit for longer periods and charge back for
30any fraudulent claim, subject to the limitations period under

142 Pa.C.S. (relating to judiciary and judicial procedure).

2* * *

3Section 2. Section 12(a) of the act is amended by adding a
4paragraph to read:

5Section 12. Unlawful acts by manufacturers or distributors.

6(a) Unlawful coercive acts.--It shall be a violation for any
7manufacturer, factory branch, distributor, field representative,
8officer, agent or any representative whatsoever of such
9manufacturer, factory branch or distributor licensed under this
10act to require, attempt to require, coerce or attempt to coerce
11any new vehicle dealer in this Commonwealth to:

12* * *

13(8.2) (i) Purchase a good or service from a vendor
14selected, identified or designated by a manufacturer,
15factory branch, distributor, distributor branch or an
16affiliate of a manufacturer, factory branch, distributor,
17distributor branch by agreement, program, incentive
18provision or other method if expanding, constructing or
19significantly modifying a facility without allowing the
20dealer the option to obtain a good or service of
21substantially similar quality from a vendor chosen by the
22dealer.

23(ii) Nothing under this paragraph shall be construed
24to:

25(A) Allow a dealer or vendor to eliminate or
26impair a manufacturer's intellectual property rights,
27including a manufacturer's intellectual property
28rights in a trademark.

29(B) Permit a dealer to erect or maintain signs
30that do not conform to the intellectual property

1usage guidelines of the manufacturer.

2* * *

3Section 3. This act shall take effect in 60 days.