Creates changes to warranties and sales incentives

Summary of provisions

The bill makes amendments to the warranty reimbursement provisions of section 465 of the Franchise Law whereby dealers are reimbursed for providing warranty services free of charge to consumers. Under the construct provided in law, dealers provide the warranty services to consumers and are reimbursed for costs of those services at the retail rate. The method by which the retail rate is established is detailed in current law.

This bill would provide clarity for those sections which have been some- times ignored and sometimes interpreted in varying ways by franchisors in order to advantage the franchisors. The bill provides a standard for the submission the dealer makes to establish that retail rate while also listing the parts that may be included in the submission. Further, the bill also provides clarity to the rejection of the submission by the dealer. Other provisions of the bill provide a penalty for failure to abide by the reimbursement provisions of the law, prohibit a rate that is arbitrary, prohibits retaliation for the submission for a higher reimbursement rate and provides for a time frame within which the rate submission must be approved.

Justification

The Franchise Law was updated in 2009 following almost 20 years of the same law regulating a quickly changing industry. However, when the new provisions of the Franchise Law became effective, namely the warranty procedures, many franchisors disregarded the law in one way or another. Some simply ignored its provisions, daring its franchisee to enforce its own rights at the risk of a sour relationship with the company that provides the dealer with its products. Other franchisors established an interpretation of many of the provisions that contradicted the purpose and intent of the Franchise Law amendments that became effective in 2009.

The bill, in order to solve some issues confronting dealers and franchi- sors in regard to the warranty reimbursement is the dealer submission. A large collection of documents must be gathered and submitted in order for a dealer to apply to a franchisor for a reimbursement rate. It is in the interest of a dealer to submit all evidence of a rate in order to justify the application. Franchisors have demonstrated different ideas of what is necessary to do so. This bill would provide a uniform stand- ard for submission of materials that would demonstrate the reimburse-

ment. Uniformity in the information submitted to apply for a rate is important to making the warranty reimbursement process more efficient, fair and clear.

There have also been issues with what services and parts are covered by the warranty reimbursement rate calculation. The ambiguous language in the current bill allows interpretation by either party to decide. This bill would provide clarity for the coverage of warranty reimbursement so each dealer and their franchisor have a standard set of parts and services that will be reimbursed, ensuring consistent warranty coverage for consumers and good service for consumers.

This bill would also provide clarity to the amendments of section four hundred sixty five in order to ensure fairness in the provision of free services provided by dealers on behalf of the franchisors. Dealers, as the point of contact for consumers, are important to the service of consumers by the franchisors, yet some franchisors have been unwilling to appropriately reimburse the dealers for those services provided to consumers on behalf of franchisors. This bill would ensure fair and appropriate reimbursement for those necessary services important to consumers done on behalf of franchisors.

Legislative history

New Bill.

Fiscal implications

None to the State.

Effective date

Immediate.