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Tuesday, May 20, 2008, the Florida Legislature sent to Governor Charlie Crist a bill affecting the motor vehicle industry. Both houses unanimously passed the bill and Governor Crist is expected to sign it into law.

Once passed into law, the statutory changes will have a wide-ranging impact on manufacturers. We expect that some parts of the new law will be challenged on Constitutional grounds. What follows is a synopsis of the many changes in the new law:

Mandating that Florida Dealers Receive the Same Incentives & Benefits Offered to Dealers in Other Areas of the United States

• A manufacturer cannot refuse to offer the same program, bonus, incentive, or other benefit, in whole or in part, to a Florida dealer that is offered nationally to dealers of the same line-make.

Mandating that All Florida Dealers of the Same Line-Make Be Offered the Same Benefits

• A manufacturer cannot discriminate against a Florida dealer with respect to any program, bonus, incentive, or other benefit. And a manufacturer is prohibited from establishing the State of Florida as a single zone, region, or territory by any other designation.

Voiding Conditions that Mandate Facility Upgrades Before Dealer Entitled to Payment of Bonuses or Benefits

• If any portion of a bonus, incentive or other benefit is based upon or aimed at inducing a dealer to relocate, expand, improve, remodel, renovate or alter its sales or service facility, any conditioning of the benefit on such facility changes is void and all other Florida dealers who otherwise are eligible are entitled to the full bonus, incentive or benefit upon compliance with other eligibility provisions in the program.

Regulating Number of Allowable Warranty Audits and Reducing Basis for Charge-Back

• A manufacturer is prohibited from conducting or threatening to conduct a warranty audit more than once per calendar year. In addition, a manufacturer is prohibited from basing a charge-back on a dealership's failure to adhere to requirements relating to the description or processing of a warranty claim.

Burden of Proof Required on Facility Changes

• A manufacturer cannot require a motor vehicle dealer, by agreement, program, policy, standard, or otherwise, to relocate, to make substantial changes, alterations, or remodeling to, or to replace a motor vehicle dealer's sales or service facilities unless the requirements are reasonable and justifiable in light of current and reasonably foreseeable projections of economic conditions, financial expectations, and the motor vehicle dealer's market.
• A manufacturer may set and uniformly apply reasonable standards related to the upkeep, repair and cleanliness of a dealer's sales and service facilities.

Providing Favorable Allocation or Financial Treatment to a Dealer Under Limited Circumstance

• A manufacturer may increase a dealer's vehicle allocation or loan/grant a dealer money as an inducement for the dealer to relocate, expand, improve, remodel, alter or renovate its facilities if the manufacturer assures the dealer in writing a sufficient quantity of new motor vehicles to justify the dealer's action, and if the same provisions are made available on equal or substantially similar terms to any other Florida dealers with whom the manufacturer offers to enter into such an agreement.
• A manufacturer cannot withhold a bonus, incentive or other benefit, or take or threaten to take any action that is unfair or adverse to a dealer who does not enter into such an agreement.

Expanding on What Constitutes an "Unfair" Allocation or Distribution of New Motor Vehicles

• Florida law currently prohibits a manufacturer from establishing or implementing an allocation or distribution system that is "unfair" to dealers. "Unfair" now includes the refusal or failure to offer to any dealer an equitable supply of new vehicles under its franchise by model, mix, or colors that are offered to other Florida dealers of the same line-make.

Requiring a Higher Burden of Proof as to Action Taken Against a Dealer for Exporting

• A manufacturer is prohibited from taking any adverse action against a dealer because the dealer sold or leased a motor vehicle to a customer who exported the vehicle, unless the manufacturer proves that the dealer had actual knowledge of the customer's intent to export.
• A conclusive presumption exists that the dealer had no actual knowledge if, before export, the vehicle is titled or registered in any state of this country.

Requiring a Higher Burden of Proof to Take Action Against a Dealership Based on Fraud or Misrepresentation

• No adverse action can be taken against a dealership based on misrepresentation, fraud or the filing of a false or fraudulent statement or claim unless the manufacturer proves by a preponderance of evidence that either the majority owner or dealer-principal knew of such acts at the time they were committed or failed within a reasonable time after receipt of written notice detailing the alleged acts to prevent such acts from continuing.

Establishing New Warranty Reimbursement Amounts for Parts and Labor

• A manufacturer and dealer may agree in writing on a percentage markup over dealer cost, provided the agreement is reached within 30 days of a dealer's written request for an increase in warranty reimbursement.
• Without a timely, prior written agreement with a dealer, a manufacturer is required to compensate a dealer on parts based on the greater of: (a) the dealer's mean percentage markup charged for all parts in 50 consecutive retail customer repairs within the prior three-month period, or all customer repair orders over the three-month period if there are fewer than 50 retail customer repair orders in that period, or (b) the manufacturer's highest suggested retail or list price for the parts, or (c) the dealer's markup over cost that results in the same gross profit margin for parts the dealer used in customer retail repairs as evidenced by the dealer's financial statements for the preceding two months.
• Parts used by a dealer in government, fleet, group, insurance, or other third-party payer service work as well as parts used in special events or promotional discounts shall be excluded in determining the percentage markup over dealer cost.
• If a manufacturer furnishes any part or component at no cost to a dealer in performing repairs under a recall, campaign service action, or warranty repair, the manufacturer shall compensate the dealer in the same manner as provided by the new law governing warranty reimbursement, less the dealer cost for such a part or accessory that the dealer did not have to pay.
• If a manufacturer reduces the suggested retail or list price for any replacement part or accessory, it shall also reduce, by at least the same percentage, the dealer's cost for such part or accessory.
• A manufacturer is prohibited from establishing or implementing a special part or component number for parts used in predelivery, dealer preparation, warranty, extended warranty, certified pre-owned warranty, recall, campaign service, authorized goodwill, or maintenance-only applications if that results in lower compensation to the dealer than is calculated by the new law.
• A manufacturer and dealer may agree in writing on an agreed hourly labor rate, provided the agreement is reached within 30 days of a dealer's written request for an increase in the labor rate.
• Without a timely, prior written agreement with a dealer, the dealer may choose to be paid the greater of: (a) the dealer's hourly labor rate for retail customer repairs, as determined by dividing the amount of the dealer's total labor sales by the total labor hours for the preceding month, or (b) the dealer's markup over dealer cost that results in the same gross profit percentage for labor hours on non-warranty work, as evidenced by the dealer's financial statements for the preceding two months.
• Reduced labor charges for internal vehicle repairs, reconditioning, government, fleet, group, insurance, or other third-party payer service work as well as special events or promotional discounts shall be excluded in determining the hourly labor rate.
• A manufacturer is prohibited from paying an hourly labor rate that is less than the hourly rate it was paying to the dealer for warranty work on January 2, 2008.
• A manufacturer is prohibited from eliminating flat-rate time in its warranty repair manual, warranty time guide, or any other similarly named document.
• A manufacturer is required to establish reasonable flat-rate labor times in its manuals and guides for newly introduced models.
• Semi-annually, a dealer may request changes in compensation. Any increase in compensation shall apply retroactively to claims filed within 15 days of the date of the dealer's written request.
• A manufacturer is prohibited from recovering or attempting to recover, by direct or indirect means, any of its compensation costs from a dealer or group of dealers.

We hope you find this information useful. A copy of SB 2582 can be found online. If you have any questions, please feel free to contact the Distribution & Franchise Team for additional guidance.

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