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.--

1(1) Each new vehicle manufacturer or distributor shall
2specify in writing to each of its new vehicle dealers
3licensed in this Commonwealth the dealer's obligations for
4predelivery preparation and warranty service on its products,
5shall compensate the new vehicle dealer for service required
6of the dealer by the manufacturer or distributor and shall
7provide the dealer with a schedule of compensation to be paid
8the dealer for parts, work and service, and the time
9allowance for the performance of such work and service.

10(2) Compensation for parts, including major assemblies
11used in warranty service, shall be at the dealer's retail
12rate. The following shall apply:

13(i) The dealer's retail rate for parts shall be
14established by the dealer's submitting to the
15manufacturer or distributor a declaration of the average
16percentage markup which shall be the lesser of the
17following orders which cover repairs made no more than
18180 days before the submission:

19(A) One hundred sequential nonwarranty customer-
20paid service repair orders which contain parts that
21are used in warranty-like service or repair.

22(B) Ninety consecutive days of nonwarranty
23customer-paid service repair orders which contain
24parts that are used in warranty-like service or
25repair.

26(ii) The declaration under subparagraph (i) shall be
27presumed to be reasonable, except that a manufacturer or
28distributor may, not later than 60 days after submission,
29rebut the presumption by substantiating that the
30declaration is unreasonable <-or materially inaccurate.

1(iii) The retail rate shall go into effect 60 days
2following the declaration under subparagraph (i), unless
3the franchisor audits the submitted repair orders and a
4rebuttal under subparagraph (ii) occurs.

5(iv) If the declared retail rate is rebutted, the
6manufacturer or distributor shall propose an adjustment
7of the markup based on the rebuttal no later than 60 days
8after submission.

9(v) A manufacturer shall provide written support to
10the dealer for the rebuttal retail rate that is proposed.
11If the dealer does not agree with the proposed markup,
12the dealer may file a protest after receipt of the
13proposal by the manufacturer or distributor. If a protest
14is filed, the board shall inform the manufacturer or
15distributor that a protest has been filed and that a
16hearing will be held on the protest. In a hearing held
17under this subparagraph, the manufacturer or distributor
18shall have the burden of proving that:

19(A) the retail rate declared by the dealer was 
<-20unreasonable or materially inaccurate; and

21(B) the manufacturer's or distributor's proposed
22adjustment of the markup is reasonable.

23(3) Compensation for labor used in warranty service
24shall be at the dealer's retail rate. The following shall
25apply:

26(i) The dealer's hourly retail rate for labor shall
27be established by submitting the following to the
28manufacturer or distributor:

29(A) A declaration of the average labor rate
30calculated by dividing the amount of the dealer's

1total labor sales by the number of total labor hours
2that generated the sales.

3(B) The lesser of the following orders which
4cover repairs made no more than 180 days before the
5submission:

6(I) One hundred sequential nonwarranty
7customer-paid service repair orders.

8(II) Ninety consecutive days of nonwarranty
9customer-paid service repair orders.

10(ii) The declaration under subparagraph (i)(A) shall
11be presumed to be reasonable, except that a manufacturer
12or distributor may, no later than 60 days after
13submission, rebut the presumption by substantiating that
14the rate is unreasonable <-or materially inaccurate.

15(iii) The average labor rate shall go into effect 60
16days following the declaration under subparagraph (i)(A),
17unless the franchisor audits the submitted repair orders
18and a rebuttal under subparagraph (ii) occurs.

19(iv) If the declared rate is rebutted, the
20manufacturer or distributor shall propose an adjustment
21of the labor rate based on the rebuttal not later than 60
22days after submission.

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

1under this subparagraph, the manufacturer or distributor
2shall have the burden of proving that:

3(A) the retail rate declared by the dealer was 
<-4unreasonable or materially inaccurate; and

5(B) the manufacturer's or distributor's proposed
6adjustment of the retail rate is reasonable.

7(4) This subsection shall not apply to manufacturers
8or distributors of manufactured housing or recreational
9vehicles.

10[(b) Schedule of compensation to include reasonable
11compensation.--In no event shall the schedule of compensation
12fail to include reasonable compensation for diagnostic work,
13repair service, original equipment manufacturer parts and labor.
14Time allowances for the diagnosis and performance of warranty
15work and service shall be reasonable and adequate for the work
16to be performed. In the determination of what constitutes
17reasonable compensation, the principal factors to be given
18consideration shall be the prevailing wage rates being paid by
19the dealers in the community in which the dealer is doing
20business. The hourly labor rate paid to a dealer for warranty
21services shall not be less than the rate charged by the dealer
22for like service to nonwarranty customers for nonwarranty
23service and repairs at a reasonable rate. This subsection shall
24not apply to manufacturers or distributors of manufactured
25housing or recreational vehicles.]

26(b.1) Exceptions.--When calculating the retail rate
27customarily charged by the dealer for parts and labor under this
28section, the following work shall not be included:

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

1repairs.

2(2) Parts sold at wholesale.

3(3) Routine maintenance not covered under a retail
4customer warranty, such as fluids, filters and belts not
5provided in the course of repairs.

6(4) Nuts, bolts, fasteners and similar items that do not
7have an individual part number.

8(5) Tires.

9(6) Vehicle reconditioning.

10(b.2) Compensation.--If a manufacturer or distributor
11furnishes a part or component to a dealer, at no cost, to use in
12performing repairs under a recall, campaign service or warranty
13repair, the manufacturer or distributor shall compensate the
14dealer for the part or component in the same manner as warranty
15parts compensation under this section by compensating the dealer
16the average markup on the cost for the part or component as
17listed in the manufacturer's or distributor's price schedule,
18minus the cost for the part or component.

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

20(1) A manufacturer or distributor may not require a
21dealer to establish the retail rate customarily charged by
22the dealer for parts and labor by:

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

24(ii) Requiring information that is unduly burdensome
25or time consuming to provide, including part-by-part or
26transaction-by-transaction calculations.

27(2) A dealer may not declare an average percentage
28markup or average labor rate more than once in one calendar
29year.

30(3) A manufacturer or distributor may perform annual

1audits to verify that a dealer's effective rates have not
2decreased. If a dealer's effective rates have decreased, a
3manufacturer or distributor may reduce the warranty
4reimbursement rate prospectively.

5(b.4) Recovery.--

6(1) (i) A manufacturer or distributor may not recover
7its costs from a dealer within this Commonwealth that
8does not apply to the manufacturer or distributor for
9retail rate reimbursement for parts and labor, including
10an increase in the wholesale price of a vehicle or
11surcharge imposed on a dealer intended to recover the
12cost of reimbursing a dealer for parts and labor under
13this section.

14(ii) A manufacturer or distributor may increase the
15price for a vehicle or part in the normal course of
16business.

17(2) A dealer may elect to revert to the nonretail rate
18reimbursement for parts and labor once in a calendar year to
19avoid a manufacturer or distributor surcharge.

20* * *

21(e) Warranty reimbursement and incentive or reimbursement
22program approval and audits.--

23* * *

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

1any fraudulent claim, subject to the limitations period under
242 Pa.C.S. (relating to judiciary and judicial procedure).

3* * *

4Section 2. Section 12(a) of the act is amended by adding a
5paragraph to read:

6Section 12. Unlawful acts by manufacturers or distributors.

7(a) Unlawful coercive acts.--It shall be a violation for any
8manufacturer, factory branch, distributor, field representative,
9officer, agent or any representative whatsoever of such
10manufacturer, factory branch or distributor licensed under this
11act to require, attempt to require, coerce or attempt to coerce
12any new vehicle dealer in this Commonwealth to:

13* * *

14(8.2) (i) Purchase a good or service from a vendor
15selected, identified or designated by a manufacturer,
16factory branch, distributor, distributor branch or an
17affiliate of a manufacturer, factory branch, distributor,
18distributor branch by agreement, program, incentive
19provision or other method if expanding, constructing or
20significantly modifying a facility without allowing the
21dealer the option to obtain a good or service of
22substantially similar quality from a vendor chosen by the
23dealer <-and approved by the manufacturer, which approval 
24may not be unreasonably withheld.

25(ii) Nothing under this paragraph shall be construed
26to:

27(A) Allow a dealer or vendor to eliminate or
28impair a manufacturer's intellectual property rights,
29including a manufacturer's intellectual property
30rights in a trademark.

1(B) Permit a dealer to erect or maintain signs
2that do not conform to the intellectual property
3usage guidelines of the manufacturer.

4* * *

5Section 3. This act shall take effect in 60 days.