Chief Sponsor: Curtis S. Bramble

House Sponsor: Steve Eliason


8     General Description:
9          This bill makes changes to the New Automobile Franchise Act.
10     Highlighted Provisions:
11          This bill:
12          ▸     requires an automobile franchisor to:
13               •      provide a franchisee with certain written disclosures that may be provided to a
14     potential buyer of the new motor vehicle; and
15               •     provide reasonable compensation to a franchisee assisting a customer whose
16     vehicle was subjected to an over the air or remote change, repair, or update;
17          ▸     amends requirements for changes to a franchisee's retail labor rate and retail parts
18     markup; and
19          ▸     defines terms.
20     Money Appropriated in this Bill:
21          None
22     Other Special Clauses:
23          None
24     Utah Code Sections Affected:
25     AMENDS:
26          13-14-201, as last amended by Laws of Utah 2018, Chapter 245
27          13-14-204, as last amended by Laws of Utah 2022, Chapter 455

29     Be it enacted by the Legislature of the state of Utah:

30          Section 1. Section 13-14-201 is amended to read:
31          13-14-201. Prohibited acts by franchisors -- Affiliates -- Disclosures.
32          (1) A franchisor may not in this state:
33          (a) except as provided in Subsection (3), require a franchisee to order or accept
34     delivery of any new motor vehicle, part, accessory, equipment, or other item not otherwise
35     required by law that is not voluntarily ordered by the franchisee;
36          (b) require a franchisee to:
37          (i) participate monetarily in any advertising campaign; or
38          (ii) contest, or purchase any promotional materials, display devices, or display
39     decorations or materials;
40          (c) require a franchisee to change the capital structure of the franchisee's dealership or
41     the means by or through which the franchisee finances the operation of the franchisee's
42     dealership, if the dealership at all times meets reasonable capital standards determined by and
43     applied in a nondiscriminatory manner by the franchisor;
44          (d) require a franchisee to refrain from participating in the management of, investment
45     in, or acquisition of any other line of new motor vehicles or related products, if the franchisee:
46          (i) maintains a reasonable line of credit for each make or line of vehicles; and
47          (ii) complies with reasonable capital and facilities requirements of the franchisor;
48          (e) require a franchisee to prospectively agree to a release, assignment, novation,
49     waiver, or estoppel that would:
50          (i) relieve a franchisor from any liability, including notice and hearing rights imposed
51     on the franchisor by this chapter; or
52          (ii) require any controversy between the franchisee and a franchisor to be referred to a
53     third party if the decision by the third party would be binding;
54          (f) require a franchisee to change the location of the principal place of business of the
55     franchisee's dealership or make any substantial alterations to the dealership premises, if the
56     change or alterations would be unreasonable or cause the franchisee to lose control of the
57     premises or impose any other unreasonable requirement related to the facilities or premises;

58          (g) coerce or attempt to coerce a franchisee to join, contribute to, or affiliate with an
59     advertising association;
60          (h) require, coerce, or attempt to coerce a franchisee to enter into an agreement with the
61     franchisor or do any other act that is unfair or prejudicial to the franchisee, by threatening to
62     cancel a franchise agreement or other contractual agreement or understanding existing between
63     the franchisor and franchisee;
64          (i) adopt, change, establish, enforce, modify, or implement a plan or system for the
65     allocation, scheduling, or delivery of new motor vehicles, parts, or accessories to the
66     franchisor's franchisees so that the plan or system is not fair, reasonable, and equitable,
67     including a plan or system that imposes a vehicle sales objective, goal, or quota on a
68     franchisee, or that evaluates a franchisee's sales effectiveness or overall sales performance,
69     without providing a reasonable opportunity for the franchisee to acquire the necessary vehicles
70     in a timely manner from the franchisor on commercially reasonable terms;
71          (j) increase the price of any new motor vehicle that the franchisee has ordered from the
72     franchisor and for which there exists at the time of the order a bona fide sale to a retail
73     purchaser if the order was made prior to the franchisee's receipt of an official written price
74     increase notification;
75          (k) fail to indemnify and hold harmless the franchisor's franchisee against any
76     judgment for damages or settlement approved in writing by the franchisor:
77          (i) including court costs and attorney fees arising out of actions, claims, or proceedings
78     including those based on:
79          (A) strict liability;
80          (B) negligence;
81          (C) misrepresentation;
82          (D) express or implied warranty;
83          (E) revocation as described in Section 70A-2-608; or
84          (F) rejection as described in Section 70A-2-602; and
85          (ii) to the extent the judgment or settlement relates to alleged defective or negligent

86     actions by the franchisor;
87          (l) threaten or coerce a franchisee to waive or forbear the franchisee's right to protest
88     the establishment or relocation of a same line-make franchisee in the relevant market area of
89     the affected franchisee;
90          (m) fail to ship monthly to a franchisee, if ordered by the franchisee, the number of
91     new motor vehicles of each make, series, and model needed by the franchisee to achieve a
92     percentage of total new vehicle sales of each make, series, and model equitably related to the
93     total new vehicle production or importation being achieved nationally at the time of the order
94     by each make, series, and model covered under the franchise agreement;
95          (n) require or otherwise coerce a franchisee to under-utilize the franchisee's existing
96     dealer facility or facilities, including by:
97          (i) requiring or otherwise coercing a franchisee to exclude or remove from the
98     franchisee's facility operations the selling or servicing of a line-make of vehicles for which the
99     franchisee has a franchise agreement to utilize the facilities; or
100          (ii) prohibiting the franchisee from locating, relocating, or occupying a franchise or
101     line-make in an existing facility owned or occupied by the franchisee that includes the selling
102     or servicing of another franchise or line-make at the facility provided that the franchisee gives
103     the franchisor written notice of the franchise co-location;
104          (o) fail to include in any franchise agreement or other agreement governing a
105     franchisee's ownership of a dealership or a franchisee's conduct of business under a franchise
106     the following language or language to the effect that: "If any provision in this agreement
107     contravenes the laws or regulations of any state or other jurisdiction where this agreement is to
108     be performed, or provided for by such laws or regulations, the provision is considered to be
109     modified to conform to such laws or regulations, and all other terms and provisions shall
110     remain in full force.";
111          (p) engage in the distribution, sale, offer for sale, or lease of a new motor vehicle to
112     purchasers who acquire the vehicle in this state except through a franchisee with whom the
113     franchisor has established a written franchise agreement, if the franchisor's trade name,

114     trademark, service mark, or related characteristic is an integral element in the distribution, sale,
115     offer for sale, or lease;
116          (q) engage in the distribution or sale of a recreational vehicle that is manufactured,
117     rented, sold, or offered for sale in this state without being constructed in accordance with the
118     standards set by the American National Standards Institute for recreational vehicles and
119     evidenced by a seal or plate attached to the vehicle;
120          (r) except as provided in Subsection (2), authorize or permit a person to perform
121     warranty service repairs on motor vehicles, except warranty service repairs:
122          (i) by a franchisee with whom the franchisor has entered into a franchise agreement for
123     the sale and service of the franchisor's motor vehicles; or
124          (ii) on owned motor vehicles by a person or government entity who has purchased new
125     motor vehicles pursuant to a franchisor's fleet discount program;
126          (s) fail to provide a franchisee with a written franchise agreement;
127          (t) (i) except as provided in Subsection (1)(t)(ii) and notwithstanding any other
128     provisions of this chapter:
129          (A) unreasonably fail or refuse to offer to its same line-make franchised dealers all
130     models manufactured for that line-make;
131          (B) unreasonably require a dealer to:
132          (I) pay any extra fee, remodel, renovate, recondition the dealer's existing facilities; or
133          (II) purchase unreasonable advertising displays or other materials as a prerequisite to
134     receiving a model or series of vehicles;
135          (ii) notwithstanding Subsection (1)(t)(i), a recreational vehicle franchisor may split a
136     line-make between motor home and travel trailer products;
137          (u) except as provided in Subsection (6), directly or indirectly:
138          (i) own an interest in a new motor vehicle dealer or dealership;
139          (ii) operate or control a new motor vehicle dealer or dealership;
140          (iii) act in the capacity of a new motor vehicle dealer, as defined in Section 13-14-102;
141     or

142          (iv) operate a motor vehicle service facility;
143          (v) fail to timely pay for all reimbursements to a franchisee for incentives and other
144     payments made by the franchisor;
145          (w) directly or indirectly influence or direct potential customers to franchisees in an
146     inequitable manner, including:
147          (i) charging a franchisee a fee for a referral regarding a potential sale or lease of any of
148     the franchisee's products or services in an amount exceeding the actual cost of the referral;
149          (ii) giving a customer referral to a franchisee on the condition that the franchisee agree
150     to sell the vehicle at a price fixed by the franchisor; or
151          (iii) advising a potential customer as to the amount that the potential customer should
152     pay for a particular product;
153          (x) fail to provide comparable delivery terms to each franchisee for a product of the
154     franchisor, including the time of delivery after the placement of an order by the franchisee;
155          (y) if a franchisor provides personnel training to the franchisor's franchisees,
156     unreasonably fail to make that training available to each franchisee on proportionally equal
157     terms;
158          (z) condition a franchisee's eligibility to participate in a sales incentive program on the
159     requirement that a franchisee use the financing services of the franchisor or a subsidiary or
160     affiliate of the franchisor for inventory financing;
161          (aa) make available for public disclosure, except with the franchisee's permission or
162     under subpoena or in any administrative or judicial proceeding in which the franchisee or the
163     franchisor is a party, any confidential financial information regarding a franchisee, including:
164          (i) monthly financial statements provided by the franchisee;
165          (ii) the profitability of a franchisee; or
166          (iii) the status of a franchisee's inventory of products;
167          (bb) use any performance standard, incentive program, or similar method to measure
168     the performance of franchisees unless the standard or program:
169          (i) is designed and administered in a fair, reasonable, and equitable manner;

170          (ii) if based upon a survey, utilizes an actuarially generally acceptable, valid sample;
171     and
172          (iii) is, upon request by a franchisee, disclosed and explained in writing to the
173     franchisee, including:
174          (A) how the standard or program is designed;
175          (B) how the standard or program will be administered; and
176          (C) the types of data that will be collected and used in the application of the standard or
177     program;
178          (cc) other than sales to the federal government, directly or indirectly, sell, lease, offer
179     to sell, or offer to lease, a new motor vehicle or any motor vehicle owned by the franchisor,
180     except through a franchised new motor vehicle dealer;
181          (dd) compel a franchisee, through a finance subsidiary, to agree to unreasonable
182     operating requirements, except that this Subsection (1)(dd) may not be construed to limit the
183     right of a financing subsidiary to engage in business practices in accordance with the usage of
184     trade in retail and wholesale motor vehicle financing;
185          (ee) condition the franchisor's participation in co-op advertising for a product category
186     on the franchisee's participation in any program related to another product category or on the
187     franchisee's achievement of any level of sales in a product category other than that which is the
188     subject of the co-op advertising;
189          (ff) except as provided in Subsections (7) through (9), discriminate against a franchisee
190     in the state in favor of another franchisee of the same line-make in the state:
191          (i) by selling or offering to sell a new motor vehicle to one franchisee at a higher actual
192     price, including the price for vehicle transportation, than the actual price at which the same
193     model similarly equipped is offered to or is made available by the franchisor to another
194     franchisee in the state during a similar time period;
195          (ii) except as provided in Subsection (8), by using a promotional program or device or
196     an incentive, payment, or other benefit, whether paid at the time of the sale of the new motor
197     vehicle to the franchisee or later, that results in the sale of or offer to sell a new motor vehicle

198     to one franchisee in the state at a higher price, including the price for vehicle transportation,
199     than the price at which the same model similarly equipped is offered or is made available by
200     the franchisor to another franchisee in the state during a similar time period;
201          (iii) except as provided in Subsection (9), by failing to provide or direct a lead in a fair,
202     equitable, and timely manner; or
203          (iv) if the franchisee complies with any reasonable requirement concerning the sale of
204     new motor vehicles, by using or considering the performance of any of its franchisees located
205     in this state relating to the sale of the franchisor's new motor vehicles in determining the:
206          (A) dealer's eligibility to purchase program, certified, or other used motor vehicles
207     from the franchisor;
208          (B) volume, type, or model of program, certified, or other used motor vehicles the
209     dealer is eligible to purchase from the franchisor;
210          (C) price of any program, certified, or other used motor vehicles that the dealer is
211     eligible to purchase from the franchisor; or
212          (D) availability or amount of any discount, credit, rebate, or sales incentive the dealer
213     is eligible to receive from the manufacturer for the purchase of any program, certified, or other
214     motor vehicle offered for sale by the franchisor;
215          (gg) (i) take control over funds owned or under the control of a franchisee based on the
216     findings of a warranty audit, sales incentive audit, or recall repair audit, unless the following
217     conditions are satisfied:
218          (A) the franchisor fully identifies in writing the basis for the franchisor's claim or
219     charge back arising from the audit, including notifying the franchisee that the franchisee has 20
220     days from the day on which the franchisee receives the franchisor's claim or charge back to
221     assert a protest in writing to the franchisor identifying the basis for the protest;
222          (B) the franchisee's protest shall inform the franchisor that the protest shall be
223     submitted to a mediator in the state who is identified by name and address in the franchisee's
224     notice to the franchisor;
225          (C) if mediation is requested under Subsection (1)(gg)(i)(B), mediation shall occur no

226     later than 30 days after the day on which the franchisor receives the franchisee's protest of a
227     claim or charge back;
228          (D) if mediation does not lead to a resolution of the protest, the protest shall be set for
229     binding arbitration in the same venue in which the mediation occurred;
230          (E) binding arbitration under Subsection (1)(gg)(i)(D) shall be conducted:
231          (I) by an arbitrator mutually agreed upon by the franchisor and the franchisee; and
232          (II) on a date mutually agreed upon by the franchisor and the franchisee, but shall be
233     held no later than 90 days after the franchisor's receipt of the franchisee's notice of protest;
234          (F) this Subsection (1)(gg)(i) applies exclusively to warranty audits, recall repair
235     audits, and sales incentive audits;
236          (G) Subsections (1)(gg)(i)(A) through (E) do not apply if the franchisor reasonably
237     believes that the amount of the claim or charge back is related to a fraudulent act by the
238     franchisee; and
239          (H) the costs of the mediator or arbitrator instituted under this Subsection (1)(gg) shall
240     be shared equally by the franchisor and the franchisee; or
241          (ii) require a franchisee to execute a written waiver of the requirements of Subsection
242     (1)(gg)(i);
243          (hh) coerce, or attempt to coerce a franchisee to purchase or sell an aftermarket product
244     manufactured by the franchisor, or obtained by the franchisor for resale from a third-party
245     supplier and the franchisor or its affiliate derives a financial benefit from the franchisee's sale
246     or purchase of the aftermarket product as a condition to obtaining preferential status from the
247     franchisor;
248          (ii) through an affiliate, take any action that would otherwise be prohibited under this
249     chapter;
250          (jj) impose any fee, surcharge, or other charge on a franchisee designed to recover the
251     cost of a warranty repair for which the franchisor pays the franchisee;
252          (kk) except as provided by the audit provisions of this chapter, take an action designed
253     to recover a cost related to a recall, including:

254          (i) imposing a fee, surcharge, or other charge on a franchisee;
255          (ii) reducing the compensation the franchisor owes to a franchisee;
256          (iii) removing the franchisee from an incentive program; or
257          (iv) reducing the amount the franchisor owes to a franchisee under an incentive
258     program;
259          (ll) directly or indirectly condition any of the following actions on the willingness of a
260     franchisee, prospective new franchisee, or owner of an interest in a dealership facility to enter
261     into a site-control agreement:
262          (i) the awarding of a franchise to a prospective new franchisee;
263          (ii) the addition of a line-make or franchise to an existing franchisee;
264          (iii) the renewal of an existing franchisee's franchise;
265          (iv) the approval of the relocation of an existing franchisee's dealership facility, unless
266     the franchisor pays, and the franchisee voluntarily accepts, additional specified cash
267     consideration to facilitate the relocation; or
268          (v) the approval of the sale or transfer of a franchise's ownership, unless the franchisor
269     pays, and the buyer voluntarily accepts, additional specified cash consideration to facilitate the
270     sale or transfer;
271          (mm) subject to Subsection (11), deny a franchisee the right to return any or all parts or
272     accessories that:
273          (i) were specified for and sold to the franchisee under an automated ordering system
274     required by the franchisor; and
275          (ii) (A) are in good, resalable condition; and
276          (B) (I) the franchisee received within the previous 12 months; or
277          (II) are listed in the current parts catalog;
278          (nn) subject to Subsection (12), obtain from a franchisee a waiver of a franchisee's
279     right, by threatening:
280          (i) to impose a detriment upon the franchisee's business; or
281          (ii) to withhold any entitlement, benefit, or service:

282          (A) to which the franchisee is entitled under a franchise agreement, contract, statute,
283     rule, regulation, or law; or
284          (B) that has been granted to more than one other franchisee of the franchisor in the
285     state;
286          (oo) coerce a franchisee to establish, or provide by agreement, program, or incentive
287     provision that a franchisee must establish, a price at which the franchisee is required to sell a
288     product or service that is:
289          (i) sold in connection with the franchisee's sale of a motor vehicle; and
290          (ii) (A) in the case of a product, not manufactured, provided, or distributed by the
291     franchisor or an affiliate; or
292          (B) in the case of a service, not provided by the franchisor or an affiliate;
293          (pp) except as necessary to comply with a health or safety law, or to comply with a
294     technology requirement compliance with which is necessary to sell or service a motor vehicle
295     that the franchisee is authorized or licensed by the franchisor to sell or service, coerce or
296     require a franchisee, through a penalty or other detriment to the franchisee's business, to:
297          (i) construct a new dealer facility or materially alter or remodel an existing dealer
298     facility before the date that is 10 years after the date the construction of the new dealer facility
299     at that location was completed, if the construction substantially complied with the franchisor's
300     brand image standards or plans that the franchisor provided or approved; or
301          (ii) materially alter or remodel an existing dealer facility before the date that is 10 years
302     after the date the previous alteration or remodeling at that location was completed, if the
303     previous alteration or remodeling substantially complied with the franchisor's brand image
304     standards or plans that the franchisor provided or approved; [or]
305          (qq) notwithstanding the terms of a franchise agreement providing otherwise and
306     subject to Subsection (14):
307          (i) coerce or require a franchisee, including by agreement, program, or incentive
308     provision, to purchase a good or service, relating to a facility construction, alteration, or
309     remodel, from a vendor that a franchisor or its affiliate selects, identifies, or designates, without

310     allowing the franchisee, after consultation with the franchisor, to obtain a like good or service
311     of substantially similar quality from a vendor that the franchisee chooses; or
312          (ii) coerce or require a franchisee, including by agreement, program, or incentive
313     provision, to lease a sign or other franchisor image element from the franchisor or an affiliate
314     without providing the franchisee the right to purchase a sign or other franchisor image element
315     of like kind and quality from a vendor that the franchisee chooses[.];
316          (rr) when providing a new motor vehicle to a franchisee for offer or sale to the public,
317     fail to provide to the franchisee a written disclosure that may be provided to a potential buyer
318     of the new motor vehicle of each accessory or function of the vehicle that may be initiated,
319     updated, changed, or maintained by the franchisor or affiliate through over the air or remote
320     means, and the charge to the customer at the time of sale for such initiation, update, change, or
321     maintenance; or
322          (ss) fail to provide reasonable compensation to a franchisee for assistance requested by
323     a customer whose vehicle was subjected to an over the air or remote change, repair, or update
324     to any part, system, accessory, or function by the franchisor or affiliate and performed at the
325     franchisee's dealership in order to satisfy the customer.
326          (2) Notwithstanding Subsection (1)(r), a franchisor may authorize or permit a person to
327     perform warranty service repairs on motor vehicles if the warranty services is for a franchisor
328     of recreational vehicles.
329          (3) Subsection (1)(a) does not prevent the franchisor from requiring that a franchisee
330     carry a reasonable inventory of:
331          (a) new motor vehicle models offered for sale by the franchisor; and
332          (b) parts to service the repair of the new motor vehicles.
333          (4) Subsection (1)(d) does not prevent a franchisor from requiring that a franchisee
334     maintain separate sales personnel or display space.
335          (5) Upon the written request of any franchisee, a franchisor shall disclose in writing to
336     the franchisee the basis on which new motor vehicles, parts, and accessories are allocated,
337     scheduled, and delivered among the franchisor's dealers of the same line-make.

338          (6) (a) A franchisor may engage in any of the activities listed in Subsection (1)(u), for a
339     period not to exceed 12 months if:
340          (i) (A) the person from whom the franchisor acquired the interest in or control of the
341     new motor vehicle dealership was a franchised new motor vehicle dealer; and
342          (B) the franchisor's interest in the new motor vehicle dealership is for sale at a
343     reasonable price and on reasonable terms and conditions; or
344          (ii) the franchisor is engaging in the activity listed in Subsection (1)(u) for the purpose
345     of broadening the diversity of its dealer body and facilitating the ownership of a new motor
346     vehicle dealership by a person who:
347          (A) is part of a group that has been historically underrepresented in the franchisor's
348     dealer body;
349          (B) would not otherwise be able to purchase a new motor vehicle dealership;
350          (C) has made a significant investment in the new motor vehicle dealership which is
351     subject to loss;
352          (D) has an ownership interest in the new motor vehicle dealership; and
353          (E) operates the new motor vehicle dealership under a plan to acquire full ownership of
354     the dealership within a reasonable period of time and under reasonable terms and conditions.
355          (b) After receipt of the advisory board's recommendation, the executive director may,
356     for good cause shown, extend the time limit set forth in Subsection (6)(a) for an additional
357     period not to exceed 12 months.
358          (c) A franchisor who was engaged in any of the activities listed in Subsection (1)(u) in
359     this state prior to May 1, 2000, may continue to engage in that activity, but may not expand that
360     activity to acquire an interest in any other new motor vehicle dealerships or motor vehicle
361     service facilities after May 1, 2000.
362          (d) Notwithstanding Subsection (1)(u), a franchisor may own, operate, or control a new
363     motor vehicle dealership trading in a line-make of motor vehicle if:
364          (i) as to that line-make of motor vehicle, there are no more than four franchised new
365     motor vehicle dealerships licensed and in operation within the state as of January 1, 2000;

366          (ii) the franchisor does not own directly or indirectly, more than a 45% interest in the
367     dealership;
368          (iii) at the time the franchisor first acquires ownership or assumes operation or control
369     of the dealership, the distance between the dealership thus owned, operated, or controlled and
370     the nearest unaffiliated new motor vehicle dealership trading in the same line-make is not less
371     than 150 miles;
372          (iv) all the franchisor's franchise agreements confer rights on the franchisee to develop
373     and operate as many dealership facilities as the franchisee and franchisor shall agree are
374     appropriate within a defined geographic territory or area; and
375          (v) as of January 1, 2000, no fewer than half of the franchisees of the line-make within
376     the state own and operate two or more dealership facilities in the geographic area covered by
377     the franchise agreement.
378          (7) Subsection (1)(ff) does not apply to recreational vehicles.
379          (8) Subsection (1)(ff)(ii) does not prohibit a promotional or incentive program that is
380     functionally available to all competing franchisees of the same line-make in the state on
381     substantially comparable terms.
382          (9) Subsection (1)(ff)(iii) may not be construed to:
383          (a) permit provision of or access to customer information that is otherwise protected
384     from disclosure by law or by contract between a franchisor and a franchisee; or
385          (b) require a franchisor to disregard the preference volunteered by a potential customer
386     in providing or directing a lead.
387          (10) Subsection (1)(ii) does not limit the right of an affiliate to engage in business
388     practices in accordance with the usage of trade in which the affiliate is engaged.
389          (11) (a) Subsection (1)(mm) does not apply to parts or accessories that the franchisee
390     ordered and purchased outside of an automated parts ordering system required by the
391     franchisor.
392          (b) In determining whether parts or accessories in a franchisee's inventory were
393     specified and sold under an automated ordering system required by the franchisor, the parts and

394     accessories in the franchisee's inventory are presumed to be the most recent parts and
395     accessories that the franchisor sold to the franchisee.
396          (12) (a) Subsection (1)(nn) does not apply to a good faith settlement of a dispute,
397     including a dispute relating to contract negotiations, in which the franchisee gives a waiver in
398     exchange for fair consideration in the form of a benefit conferred on the franchisee.
399          (b) Subsection (12)(a) may not be construed to defeat a franchisee's claim that a waiver
400     has been obtained in violation of Subsection (1)(nn).
401          (13) (a) As used in Subsection (1)(pp):
402          (i) "Materially alter":
403          (A) means to make a material architectural, structural, or aesthetic alteration; and
404          (B) does not include routine maintenance, such as interior painting, reasonably
405     necessary to keep a dealership facility in attractive condition.
406          (ii) "Penalty or other detriment" does not include a payment under an agreement,
407     incentive, or program that is offered to but declined or not accepted by a franchisee, even if a
408     similar payment is made to another franchisee in the state that chooses to participate in the
409     agreement, incentive, or program.
410          (b) Subsection (1)(pp) does not apply to:
411          (i) a program that provides a lump sum payment to assist a franchisee to make a facility
412     improvement or to pay for a sign or a franchisor image element, if the payment is not
413     dependent on the franchisee selling or purchasing a specific number of new vehicles;
414          (ii) a program that is in effect on May 8, 2012, with more than one franchisee in the
415     state or to a renewal or modification of the program;
416          (iii) a program that provides reimbursement to a franchisee on reasonable, written
417     terms for a substantial portion of the franchisee's cost of making a facility improvement or
418     installing signage or a franchisor image element; or
419          (iv) a written agreement between a franchisor and franchisee, in effect before May 8,
420     2012, under which a franchisee agrees to construct a new dealer facility.
421          (14) (a) Subsection (1)(qq)(i) does not apply to:

422          (i) signage purchased by a franchisee in which the franchisor has an intellectual
423     property right; or
424          (ii) a good used in a facility construction, alteration, or remodel that is:
425          (A) a moveable interior display that contains material subject to a franchisor's
426     intellectual property right; or
427          (B) specifically eligible for reimbursement of over one-half its cost pursuant to a
428     franchisor or distributor program or incentive granted to the franchisee on reasonable, written
429     terms.
430          (b) Subsection (1)(qq)(ii) may not be construed to allow a franchisee to:
431          (i) impair or eliminate a franchisor's intellectual property right; or
432          (ii) erect or maintain a sign that does not conform to the franchisor's reasonable
433     fabrication specifications and intellectual property usage guidelines.
434          (15) A franchisor may comply with Subsection (1)(rr) by notifying the franchisee that
435     the information in a written disclosure described in Subsection (1)(rr) is available on a website
436     or by other digital means.
437          Section 2. Section 13-14-204 is amended to read:
438          13-14-204. Franchisor's obligations related to service -- Franchisor audits -- Time
439     limits.
440          (1) Each franchisor shall specify in writing to each of the franchisor's franchisees
441     licensed as a new motor vehicle dealer in this state:
442          (a) the franchisee's obligations for new motor vehicle preparation, delivery, [and]
443     warranty service, and recalls on the franchisor's products;
444          (b) the schedule of compensation to be paid to the franchisee for parts, work, and
445     service; and
446          (c) the time allowance for the performance of work and service.
447          (2) (a) The schedule of compensation described in Subsection (1) shall include
448     reasonable compensation for diagnostic work, as well as repair service, parts, and labor.
449          (b) Time allowances described in Subsection (1) for the diagnosis and performance of

450     warranty work and service shall be reasonable and adequate for the work to be performed.
451          (3) (a) [In the determination of what constitutes reasonable compensation under this
452     section, the principal factor to be considered is the prevailing wage rates being paid by
453     franchisees in the relevant market area in which the franchisee is doing business.] As used in
454     this Subsection (3):
455          (i) "Qualified repair" means a repair to a motor vehicle that:
456          (A) would have come within the franchisor's new motor vehicle warranty but for such
457     motor vehicle having exceeded the time or mileage limits of such warranty; and
458          (B) does not otherwise constitute warranty work.
459          (ii) "Qualified repair" does not include:
460          (A) routine maintenance, including without limitation the replacement of fluids, filters,
461     non-electric vehicle batteries, bulbs, belts, brake pads, rotors, nuts, bolts, or fasteners;
462          (B) a replacement of or work on tires, wheels, or elements related to either, including
463     without limitation wheel alignments and tire or wheel rotations;
464          (C) a repair for a government agency, an insurer, or an extended warranty or service
465     contract provider;
466          (D) a repair that is the subject of a franchisor special event, promotion, or service
467     campaign, or otherwise is subject to a franchisor discount;
468          (E) a repair of a motor vehicle owned by the franchisee or an employee of the
469     franchisee;
470          (F) an installation of an accessory;
471          (G) a safety or vehicle emission inspection required by law;
472          (H) motor vehicle reconditioning;
473          (I) a part sold at wholesale;
474          (J) a repair or replacement with or to an aftermarket part;
475          (K) a franchisor-approved goodwill or policy repair or replacement; or
476          (L) a repair performed on a motor vehicle of a line-make other than that for which the
477     franchisee is franchised by the franchisor.

478          (b) (i) [Compensation] Reasonable compensation of the franchisee for parts and service
479     in warranty [service] or recall repair work may not be less than the [amount] rates charged by
480     the franchisee for like parts and service to retail [or fleet customers, if the amounts are
481     reasonable] customers.
482          (ii) In the case of a recreational vehicle franchisee, reimbursement for parts used in the
483     performance of warranty repairs, including those parts separately warranted directly to the
484     consumer by a recreational vehicle parts supplier, may not be less than the franchisee's cost
485     plus 20%.
486          (iii) For purposes of Subsection (3)(b)(ii), the term "cost" shall be that same price paid
487     by a franchisee to a franchisor or supplier for the part when the part is purchased for a
488     nonwarranty repair.
489          (c) A franchisee seeking to establish or modify the franchisee's retail labor rate, retail
490     parts markup, or both, shall submit in writing or electronically to the franchisee's franchisor at
491     the location and materially in the format theretofore specified by the franchisor in writing to the
492     franchisee whichever of the following produces the fewer number of repair orders, all of which
493     must be for repairs made no more than 180 days before such submission:
494          (i) all consecutive repair orders that include 100 sequential repair orders reflecting
495     qualified repairs; or
496          (ii) all repair orders reflecting qualified repairs closed during any period of 90
497     consecutive days.
498          (d) A franchisee shall calculate the franchisee's:
499          (i) retail labor rate by determining the total charges for labor in the qualified repairs
500     submitted and dividing that amount by the total number of hours in the qualified repairs that
501     generated such charges; and
502          (ii) retail parts markup by determining the total charges for parts in the qualified repairs
503     submitted, dividing such amount by the franchisee's total cost of the purchase of such parts,
504     subtracting one, and multiplying by 100 to produce a percentage.
505          (e) (i) A retail labor rate or retail parts markup described in Subsection (3)(c) is

506     effective 30 days after the franchisee submits the notice described in Subsection (3)(c), unless,
507     within 30 days after receiving the franchisee's submission, the franchisor delivers to the
508     franchisee:
509          (A) a written objection to the material accuracy of the retail labor rate or retail parts
510     markup; or
511          (B) a written request for supplemental repair orders pursuant to Subsection (3)(e)(ii).
512          (ii) (A) If a franchisor determines from the franchisee's set of repair orders submitted
513     pursuant to Subsections (3)(c) and (d) that the franchisee's submission for a retail labor rate or
514     retail parts markup is substantially higher than the franchisee's current warranty rate, the
515     franchisor may request, in writing, within 30 days after the franchisor's receipt of the notice
516     described in Subsection (3)(c), all repair orders closed within the period of 30 days
517     immediately preceding, or 30 days immediately following, the set of repair orders submitted by
518     the franchisee.
519          (B) All time periods under this section shall be suspended until the franchisee submits
520     the supplemental repair orders described in Subsection (3)(e)(ii)(A).
521          (iii) If a franchisor requests supplemental repair orders described in Subsection
522     (3)(e)(ii), the franchisor may, within 30 days after receiving the supplemental repair orders,
523     calculate a proposed adjusted retail labor rate or retail parts markup, as applicable, based upon
524     any set of the qualified repair orders submitted by the franchisee, if the franchisor:
525          (A) uses the same requirements applicable to the franchisee's submission described in
526     Subsection (3)(c);
527          (B) uses the formula to calculate the retail labor rate or retail parts markup described in
528     Subsection (3)(d); and
529          (C) omits all charges in the repair orders described in Subsection (3)(a)(ii).
530          (f) A franchisee may not seek to establish or modify the franchisee's:
531          (i) retail labor rate more frequently than once in a 12-month period; and
532          (ii) retail parts markup more frequently than once in a 12-month period.
533          (g) An approved adjusted retail labor rate or retail parts markup shall be effective on

534     the later of 30 days after a franchisor receives:
535          (i) a submission described in Subsection (3)(c); or
536          (ii) supplemental repair orders described in Subsection (3)(e)(ii).
537          (h) A franchisor shall begin compensating the franchisee according to the effective
538     retail labor rate and retail parts markup rate no later than 15 days after the effective date of the
539     rate or rates.
540          (4) A franchisor may not fail to:
541          (a) perform any warranty obligation;
542          (b) include in written notices of franchisor's recalls to new motor vehicle owners and
543     franchisees the expected date by which necessary parts and equipment will be available to
544     franchisees for the correction of the defects; or
545          (c) in accordance with Subsections (2) and (3), compensate a franchisee for all
546     diagnostic work, labor, and parts the franchisor requires to perform a recall repair.
547          (5) If a franchisor disallows a franchisee's claim for a defective part, alleging that the
548     part is not defective, the franchisor at the franchisor's option shall:
549          (a) return the part to the franchisee at the franchisor's expense; or
550          (b) pay the franchisee the cost of the part.
551          (6) (a) A claim made by a franchisee pursuant to this section for diagnostic work, labor,
552     or parts shall be paid within 30 days after the claim's approval.
553          (b) The franchisor shall approve or disapprove a claim within 30 days after receipt of
554     the claim on a form generally used by the franchisor and containing the generally required
555     information. Any claim not specifically disapproved of in writing within 30 days after the
556     receipt of the form is considered to be approved and payment shall be made within 30 days.
557          (7) A franchisor may conduct warranty service audits and recall repair audits of the
558     franchisor's franchisee records on a reasonable basis.
559          (8) A franchisor may deny a franchisee's claim for warranty compensation or recall
560     repair compensation only if:
561          (a) the franchisee's claim is based on a nonwarranty repair or a nonrecall repair;

562          (b) the franchisee lacks material documentation for the claim;
563          (c) the franchisee fails to comply materially with specific substantive terms and
564     conditions of the franchisor's warranty compensation program or recall repair compensation
565     program; or
566          (d) the franchisor has a bona fide belief based on competent evidence that the
567     franchisee's claim is intentionally false, fraudulent, or misrepresented.
568          (9) (a) Any charge back for a warranty part or service compensation, recall repair
569     compensation, or service incentive is only enforceable for the six-month period immediately
570     following the day on which the franchisor makes the payment compensating the franchisee for
571     the warranty part or service, recall repair, or service incentive.
572          (b) Except as provided in Subsection (9)(e), all charge backs levied by a franchisor for
573     sales compensation or sales incentives arising out of the sale or lease of a motor vehicle sold or
574     leased by a franchisee shall be compensable only if written notice of the charge back is
575     received by the franchisee within six months immediately following the sooner of:
576          (i) the day on which the franchisee reports the sale to the franchisor; or
577          (ii) the day on which the franchisor makes the payment for the sales compensation or
578     sales incentive to the franchisee.
579          (c) (i) Upon an audit, the franchisor shall provide the franchisee automated or written
580     notice explaining the amount of and reason for a charge back.
581          (ii) A franchisee may respond in writing within 30 days after the notice under
582     Subsection (9)(c)(i) to:
583          (A) explain a deficiency; or
584          (B) provide materials or information to correct and cure compliance with a provision
585     that is a basis for a charge back.
586          (d) A charge back:
587          (i) may not be based on a nonmaterial error that is clerical in nature; and
588          (ii) (A) shall be based on one or more specific instances of material noncompliance
589     with the franchisor's warranty compensation program, sales incentive program, recall repair

590     program, or recall compensation program; and
591          (B) may not be extrapolated from a sampling of warranty claims, recall repair claims,
592     or sales incentive claims.
593          (e) The time limitations of this Subsection (9) do not preclude charge backs for any
594     fraudulent claim that was previously paid.
595          (10) (a) If within 30 days after the day on which a franchisor issues an initial notice of
596     recall a part or remedy is not reasonably available to perform the recall repair on a used motor
597     vehicle, each calendar month thereafter the franchisor shall pay the franchisee an amount equal
598     to at least 1.35% of the value of the used motor vehicle, if:
599          (i) the franchisee holding the used motor vehicle for sale is authorized to sell and
600     service a new vehicle of the same line-make;
601          (ii) after May 7, 2018, the franchisor issues a stop-sale or do-not-drive order on the
602     used motor vehicle; and
603          (iii) (A) the used motor vehicle is in the franchisee's inventory at the time the
604     franchisor issued the order described in Subsection (10)(a)(ii); or
605          (B) after the franchisor issues the order described in Subsection (10)(a)(ii), the
606     franchisee takes the used motor vehicle into the franchisee's inventory at the termination of the
607     consumer lease for the vehicle, as a consumer trade-in accompanying the purchase of a new
608     vehicle from the franchisee, or for any other reason in the ordinary course of business.
609          (b) A franchisor shall pay the compensation described in Subsection (10)(a):
610          (i) beginning:
611          (A) 30 days after the day on which the franchisee receives the stop-sale or do-not-drive
612     order; or
613          (B) if a franchisee obtains the used motor vehicle more than 30 days after the day on
614     which the franchisee receives the stop-sale or do-not-drive order, the day on which the
615     franchisee obtains the used motor vehicle; and
616          (ii) ending the earlier of the day on which:
617          (A) the franchisor makes the recall part or remedy available for order and prompt

618     shipment to the franchisee; or
619          (B) the franchisee sells, trades, or otherwise disposes of the used motor vehicle.
620          (c) A franchisor shall prorate the first and last payment for a used motor vehicle to a
621     franchisee under this Subsection (10).
622          (d) A franchisor may direct the manner in which a franchisee demonstrates the
623     inventory status of an affected used motor vehicle to determine eligibility under this Subsection
624     (10), if the manner is not unduly burdensome.
625          (11) (a) A franchisee that offsets recall repair compensation received from a franchisor
626     under this section against recall repair compensation the franchisee receives under a state or
627     federal recall repair compensation remedy may pursue any other available remedy against the
628     franchisor.
629          (b) As an alternative to providing recall repair compensation under this section, a
630     franchisor may compensate a franchisee for a recall repair:
631          (i) under a national recall repair compensation program, if the compensation is equal to
632     or greater than the compensation provided under this section; or
633          (ii) as the franchisor and franchisee otherwise agree, if the compensation is equal to or
634     greater than the compensation provided under this section.
635          (c) Nothing in this section requires a franchisor to provide compensation to a
636     franchisee that exceeds the value of the used motor vehicle affected by a recall.
637          (12) During an audit under this section, a franchisor may not request a document from
638     the franchisee that originated from the franchisor or a subsidiary of the franchisor, unless the
639     document required additional information from the customer.