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2013 SESSION
Be it enacted by the General Assembly of Virginia:
1. That § 46.2-1571 of the Code of Virginia is amended and reenacted as follows:
§ 46.2-1571. Warranty and sales incentive obligations.
A. Each motor vehicle manufacturer, factory branch, distributor, or distributor branch shall (i) specify in writing to each of its motor vehicle dealers licensed in the Commonwealth the dealer's obligations for preparation, delivery, and warranty service on its products and (ii) compensate the dealer for warranty parts, service and diagnostic work required of the dealer by the manufacturer or distributor as follows:
1. Compensation of a dealer for warranty parts, service and
diagnostic work shall not be less than the amounts charged by the dealer for
the manufacturer's or distributor's original parts, service and diagnostic work
to retail customers for nonwarranty service, parts and diagnostic work
installed or performed in the dealer's service department unless the amounts
are not reasonable. Warranty parts compensation shall be stated as a percentage
of markup, which shall be an agreed reasonable approximation of retail markup
and which shall be uniformly applied to all of the manufacturer's or distributor's
parts unless otherwise provided for in this section. If the dealer and
manufacturer or distributor cannot agree on the warranty parts compensation
markup to be paid to the dealer, the markup shall be determined by an average
of the dealer's retail markup on all of the manufacturer's or distributor's
parts as described in subdivisions 2 and 3 of this subsection.
2. For purposes of determining warranty parts and service compensation paid to a dealer by the manufacturer or distributor, menu-priced parts or services, group discounts, special event discounts, and special event promotions shall not be considered in determining amounts charged by the dealer to retail customers. For purposes of determining labor compensation for warranty body shop repairs paid to a dealer by the manufacturer or distributor, internal and insurance-paid repairs shall not be considered in determining amounts charged by the dealer to retail customers.
3. Increases in dealer warranty parts and service compensation
and diagnostic work compensation, pursuant to this section, shall be requested
by the dealer in writing, shall be based on 100 consecutive repair orders or
all repair orders over a ninety-day 90-day period, whichever
occurs first and, in the case of parts, shall be stated as a percentage of
markup which that shall be uniformly applied to all the
manufacturer's or distributor's parts.
4. In the case of warranty parts compensation, the provisions of this subsection shall be effective only for model year 1992 and succeeding model years.
5. If a manufacturer or distributor furnishes a part to a
dealer at no cost for use by the dealer in performing work for which the
manufacturer or distributor is required to compensate the dealer under this
section, the manufacturer or distributor shall compensate the dealer for the
part in the same manner as warranty parts compensation, less the wholesale
costs, for such part as listed in the manufacturer's current price schedules. A
manufacturer or distributor may pay the dealer a reasonable handling fee
instead of the compensation otherwise required by this subsection for special
high-performance complete engine assemblies in limited production motor
vehicles which that constitute less than five percent of model
production furnished to the dealer at no cost, if the manufacturer or
distributor excludes such special high-performance complete engine assemblies
in determining whether the amounts requested by the dealer for warranty
compensation are consistent with the amounts that the dealer charges its other
retail service customers for parts used by the dealer to perform similar work.
6. In the case of service work, manufacturer original parts or parts otherwise specified by the manufacturer or distributor, and parts provided by a dealer either pursuant to an adjustment program as defined in § 59.1-207.34 or as otherwise requested by the manufacturer or distributor, the dealer shall be compensated in the same manner as for warranty service or parts.
This section does not apply to compensation for parts such as
components, systems, fixtures, appliances, furnishings, accessories, and
features that are designed, used, and maintained primarily for nonvehicular,
residential purposes. Warranty and sales incentive audits of dealer records may
be conducted by the manufacturer, factory branch, distributor, or distributor
branch on a reasonable basis, and dealer claims for warranty or sales incentive
compensation shall not be denied except for good cause, such as performance of
nonwarranty repairs, lack of material documentation, fraud, or
misrepresentation. A dealer's failure to comply with the specific requirements
of the manufacturer or distributor for processing the claim shall not
constitute grounds for the denial of the claim or reduction of the amount of
compensation to the dealer as long as reasonable documentation or other
evidence has been presented to substantiate the claim. The manufacturer,
factory branch, distributor, or distributor branch shall not deny a claim or
reduce the amount of compensation to the dealer for warranty repairs to resolve
a condition discovered by the dealer during the course of a separate repair
requested by the customer. Claims for dealer compensation shall be paid within
thirty 30 days of dealer submission or within thirty 30
days of the end of an incentive program or rejected in writing for stated
reasons. The manufacturer, factory branch, distributor, or distributor branch
shall reserve the right to reasonable periodic audits to determine the validity
of all such paid claims for dealer compensation. Any chargebacks for warranty
parts or service compensation and service incentives shall only be for the
six-month period immediately following the date of the claim and, in the case
of chargebacks for sales compensation only, for the six-month period
immediately following the date of claim. However, such limitations shall not be
effective if a manufacturer, factory branch, distributor, or distributor branch
has reasonable cause to believe that a claim submitted by a dealer is
intentionally false or fraudulent. For purposes of this section,
"reasonable cause" means a bona fide belief based upon evidence that
the material issues of fact are such that a person of ordinary caution,
prudence, and judgment could believe that a claim was intentionally false or
fraudulent. A dealer shall not be charged back or otherwise liable for sales
incentives or charges related to a motor vehicle sold by the dealer to a
purchaser other than a licensed, franchised motor vehicle dealer and subsequently
exported or resold, unless the manufacturer, factory branch, distributor, or
distributor branch can demonstrate by a preponderance of the evidence that the
dealer should have known of and did not exercise due diligence in discovering
the purchaser's intention to export or resell the motor vehicle.
B. It shall be unlawful for any motor vehicle manufacturer, factory branch, distributor, or distributor branch to:
1. Fail to perform any of its warranty obligations, including tires, with respect to a motor vehicle;
2. Fail to assume all responsibility for any liability resulting from structural or production defects;
3. Fail to include in written notices of factory recalls to vehicle owners and dealers the expected date by which necessary parts and equipment will be available to dealers for the correction of defects;
4. Fail to compensate any of the motor vehicle dealers licensed in the Commonwealth for repairs effected by the dealer of merchandise damaged in manufacture or transit to the dealer where the carrier is designated by the manufacturer, factory branch, distributor, or distributor branch;
5. Fail to fully compensate its motor vehicle dealers licensed in the Commonwealth for warranty parts, work, and service pursuant to subsection A either by reduction in the amount due to the dealer or by separate charge, surcharge, or other imposition by which the motor vehicle manufacturer, factory branch, distributor, or distributor branch seeks to recover its costs of complying with subsection A, or for legal costs and expenses incurred by such dealers in connection with warranty obligations for which the manufacturer, factory branch, distributor, or distributor branch is legally responsible or which the manufacturer, factory branch, distributor, or distributor branch imposes upon the dealer;
6. Misrepresent in any way to purchasers of motor vehicles that warranties with respect to the manufacture, performance, or design of the vehicle are made by the dealer, either as warrantor or co-warrantor;
7. Require the dealer to make warranties to customers in any manner related to the manufacture, performance, or design of the vehicle;
8. Shift or attempt to shift to the motor vehicle dealer, directly or indirectly, any liabilities of the manufacturer, factory branch, distributor or distributor branch under the Virginia Motor Vehicle Warranty Enforcement Act (§ 59.1-207.9 et seq.), unless such liability results from the act or omission by the dealer; or
9. Deny any dealer the right to return any part or accessory that the dealer has not sold within 12 months where the part or accessory was not obtained through a specific order initiated by the dealer but instead was specified for, sold to and shipped to the dealer pursuant to an automated ordering system, provided that such part or accessory is in the condition required for return to the manufacturer, factory branch, distributor, or distributor branch, and the dealer returns the part within 30 days of it becoming eligible under this subdivision. For purposes of this subdivision, an "automated ordering system" shall be a computerized system that automatically specifies parts and accessories for sale and shipment to the dealer without specific order thereof initiated by the dealer. The manufacturer, factory branch, distributor, or distributor branch shall not charge a restocking or handling fee for any part or accessory being returned under this subdivision. This subdivision shall not apply if the manufacturer, factory branch, distributor, or distributor branch has available to the dealer an alternate system for ordering parts and accessories that provides for shipment of ordered parts and accessories to the dealer within the same time frame as the dealer would receive them when ordered through the automated ordering system.
C. Notwithstanding the terms of any franchise, it shall be
unlawful for any motor vehicle manufacturer, factory branch, distributor, or
distributor branch to fail to indemnify and hold harmless its motor vehicle
dealers against any losses or damages arising out of complaints, claims, or
suits relating to the manufacture, assembly, or design of motor vehicles,
parts, or accessories, or other functions by the manufacturer, factory branch,
distributor, or distributor branch beyond the control of the dealer, including,
without limitation, the selection by the manufacturer, factory branch,
distributor, or distributor branch of parts or components for the vehicle or
any damages to merchandise occurring in transit to the dealer where the carrier
is designated by the manufacturer, factory branch, distributor, or distributor
branch. The dealer shall notify the manufacturer of pending suits in which
allegations are made which that come within this subsection
whenever reasonably practicable to do so. Every motor vehicle dealer franchise
issued to, amended, or renewed for motor vehicle dealers in Virginia shall be
construed to incorporate provisions consistent with the requirements of this
subsection.
D. On any new motor vehicle, any uncorrected damage or any corrected damage exceeding three percent of the manufacturer's or distributor's suggested retail price as defined in 15 U.S.C. §§ 1231-1233, as measured by retail repair costs, must be disclosed to the dealer in writing prior to delivery. Factory mechanical repair and damage to glass, tires, and bumpers are excluded from the three percent rule when properly replaced by identical manufacturer's or distributor's original equipment or parts. Whenever a new motor vehicle is damaged in transit, when the carrier or means of transportation is determined by the manufacturer or distributor, or whenever a motor vehicle is otherwise damaged prior to delivery to the new motor vehicle dealer, the new motor vehicle dealer shall:
1. Notify the manufacturer or distributor of the damage within three business days from the date of delivery of the new motor vehicle to the new motor vehicle dealership or within the additional time specified in the franchise; and
2. Request from the manufacturer or distributor authorization to replace the components, parts, and accessories damaged or otherwise correct the damage, unless the damage to the vehicle exceeds the three percent rule, in which case the dealer may reject the vehicle within three business days.
E. If the manufacturer or distributor refuses or fails to
authorize correction of such damage within ten 10 days after
receipt of notification, or if the dealer rejects the vehicle because damage
exceeds the three percent rule, ownership of the new motor vehicle shall revert
to the manufacturer or distributor, and the new motor vehicle dealer shall have
no obligation, financial or otherwise, with respect to such motor vehicle.
Should either the manufacturer, distributor, or the dealer elect to correct the
damage or any other damage exceeding the three percent rule, full disclosure
shall be made by the dealer in writing to the buyer and an acknowledgement by
the buyer is required. If there is less than three percent damage, no
disclosure is required, provided the damage has been corrected. Predelivery
mechanical work shall not require a disclosure. Failure to disclose any
corrected damage within the knowledge of the selling dealer to a new motor
vehicle in excess of the three percent rule shall constitute grounds for
revocation of the buyer order, provided that, within thirty 30
days of purchase, the motor vehicle is returned to the dealer with an
accompanying written notice of the grounds for revocation. In case of
revocation pursuant to this section, the dealer shall accept the vehicle and
refund any payments made to the dealer in connection with the transaction, less
a reasonable allowance for the consumer's use of the vehicle as defined in §
59.1-207.11. Nothing in this section shall be construed to exempt from the
provisions of this section damage to a new motor vehicle that occurs following
delivery of the vehicle to the dealer.
F. If there is a dispute between the manufacturer, factory
branch, distributor, or distributor branch and the dealer with respect to any
matter referred to in subsection A, B, or C of this section, either
party may petition the Commissioner in writing, within thirty 30
days after either party has given written notice of the dispute to the other,
for a hearing. The decision of the Commissioner shall be binding on the
parties, subject to rights of judicial review and appeal as provided in Chapter
40 (§ 2.2-4000 et seq.) of Title 2.2. However, nothing contained in this
section shall give the Commissioner any authority as to the content or
interpretation of any manufacturer's or distributor's warranty. A manufacturer,
factory branch, distributor, or distributor branch may not collect chargebacks,
fully or in part, either through direct payment or by charge to the dealer's
account, for warranty parts or service compensation (including service
incentives) or for, including service incentives, sales incentives
or, other sales compensation, surcharges, fees, penalties, or any
financial imposition of any type arising from an alleged failure of the dealer
to comply with a policy of, directive from, or agreement with the manufacturer,
factory branch, distributor, or distributor branch until 40 days following
final notice of the amount charged to the dealer following all internal
processes of the manufacturer, factory, factory branch, distributor, or
distributor branch. Within 30 days following receipt of such final notice, the
dealer may petition the Commissioner, in writing, for a hearing. If a dealer
requests such a hearing, the manufacturer, factory branch, distributor, or
distributor branch may not collect the chargeback, fully or in part, either
through direct payment or by charge to the dealer's account, until the
completion of the hearing and a final decision of the Commissioner concerning
the validity of the chargeback.