Skip to Content

General Laws

Section 9. (a) Every manufacturer or distributor shall specify to its motor vehicle dealers the delivery and preparation work, if any, to be performed by its motor vehicle dealers. The compensation provided for the services shall be reasonable.

(b)(1) A manufacturer or distributor shall specify in writing to each of its dealers the dealer’s obligations for predelivery preparation and warranty service on its products and shall compensate the dealer for such preparation and service. A manufacturer or distributor shall within a reasonable time fulfill its obligations under all express warranty agreements made by it with respect to a product manufactured, distributed or sold by it and shall adequately and fairly compensate any motor vehicle dealer who, under its franchise obligations, furnishes labor, parts and materials under the warranty or maintenance plan, extended warranty, certified preowned warranty or a service contract, issued by the manufacturer or distributor or its common entity, unless issued by a common entity that is not a manufacturer; to fulfill a manufacturer or distributor’s delivery or preparation procedures or to repair a motor vehicle as a result of a manufacturer or distributor’s or common entity’s recall, campaign service, authorized goodwill, directive or bulletin. For the purposes of motor vehicle dealers, fair and adequate compensation shall not be less than the rate and price customarily charged for retail customer repairs and computed under paragraph (2); provided, however, that fair and adequate compensation shall, for purposes of this section for powersport vehicles, be computed at the rate normally charged by the motor vehicle dealer to the public for the labor and materials and shall include a fair charge for diagnostic and test services; provided, further, that fair and adequate compensation shall, for purposes of this section for recreational vehicles, be computed at the rate normally charged by the motor vehicle dealer to the public for the labor and shall include a fair charge for diagnostic and test services and shall be computed for the materials at the rate of not less than actual wholesale cost, plus a handling charge of 30 per cent of the cost and the cost, if any, of freight to return the warranty materials to the manufacturer. For the purposes of this subsection, “labor” shall include time spent by employees for diagnosis and repair of a vehicle, “parts” shall include replacement parts and accessories and “retail customer repair” shall mean work, including parts and labor, performed by a dealer which does not come within a manufacturer’s, distributor’s or its common entity’s warranty, extended warranty, certified preowned warranty, service contract or maintenance plan and excludes parts and labor described in clause (iii) of paragraph (2).

(2)(i) In determining the rate and price customarily charged by the motor vehicle dealer to the public for parts, the compensation may be an agreed percentage markup over the dealer’s cost under a writing separate and distinct from the franchise agreement signed after the dealer’s request, but if an agreement is not reached within 30 days after a dealer’s written request to be compensated under this section, compensation for parts shall be calculated by utilizing the method described in this paragraph.

The retail rate customarily charged by the dealer for parts shall be established by the dealer submitting to the manufacturer or distributor 100 sequential nonwarranty or customer-paid service repair orders or 60 consecutive days of nonwarranty, customer-paid service repair orders, whichever is less, each of which includes parts that would normally be used in warranty repairs and covered by the manufacturer’s warranty, covering repairs made not more than 180 days before the submission and declaring the average percentage markup. The average of the markup rates shall be presumed to be fair and reasonable. The retail rate shall go into effect 30 days following the declaration, subject to audit of the submitted repair orders by the franchisor and a rebuttal of the declared rate. If the declared rate is rebutted, the manufacturer or distributor shall propose an adjustment of the average percentage markup based on the rebuttal not later than 30 days after submission. If the dealer does not agree with the proposed average percentage markup, the dealer may file an action in a court of competent jurisdiction not later than 30 days after receipt of the proposal by the manufacturer or distributor. In an action commenced under this paragraph, the manufacturer or distributor shall have the burden of proving that the rate declared by the dealer was inaccurate or unreasonable.

(ii) The retail rate customarily charged by the dealer for labor may be established by submitting to the manufacturer or distributor 100 sequential nonwarranty, customer-paid service repair orders or 60 consecutive days of nonwarranty, customer-paid service repair orders, whichever is less, covering repair orders made not more than 180 days before the submission and dividing the amount of the dealer’s total labor sales by the number of total labor hours that generated those sales. The average labor rate shall be presumed to be fair and reasonable. The average labor rate shall go into effect 30 days following the declaration, subject to audit of the submitted repair orders by the franchisor and a rebuttal of the declared rate. If the declared rate is rebutted, the manufacturer or distributor shall propose an adjustment of the average labor rate based on the rebuttal not later than 30 days after submission. If the dealer does not agree with the proposed average labor rate, the dealer may file an action in a court of competent jurisdiction not later than 30 days after receipt of the proposal by the manufacturer or distributor. In any action commenced under this paragraph, the manufacturer or distributor shall have the burden of proving that the rate declared by the dealer was inaccurate or unreasonable.

(iii) In calculating the retail rate customarily charged by the dealer for parts and labor, the following work shall not be included in the calculation: (a) routine maintenance not covered under any retail customer warranty, such as fluids, filters and belts not provided in the course of repairs; (b) items that do not have an individual part number such as some nuts, bolts, fasteners and similar items; (c) tires; and (d) vehicle reconditioning.

(iv) If a manufacturer or distributor furnishes a part or component to a dealer, at no cost, to use in performing repairs under a recall, campaign service action or warranty repair, the manufacturer or distributor shall compensate the dealer for the part or component in the same manner as warranty parts compensation under this section by compensating the dealer the average markup on the cost for the part or component as listed in the manufacturer’s or distributor’s price schedule less the cost for the part or component.

(v) A manufacturer or distributor shall not require a dealer to establish the retail rate customarily charged by the dealer for parts and labor by an unduly burdensome or time-consuming method or by requiring information that is unduly burdensome or time consuming to provide including, but not limited to, part-by-part or transaction-by-transaction calculations. A dealer shall not declare an average percentage markup or average labor rate more than once in a calendar year.

(vi) A manufacturer or distributor shall not establish or implement a special part or component number for parts used in predelivery, dealer preparation, warranty, extended warranty, certified preowned warranty, recall, campaign service, authorized goodwill or maintenance-only applications if it results in lower compensation to the dealer than as calculated in this subsection.

(vii) A manufacturer or distributor shall not require, influence or attempt to influence a motor vehicle dealer to implement or change the prices for which it sells parts or labor in retail customer repairs. A manufacturer or distributor shall not implement or continue a policy, procedure or program to any of its dealers in the commonwealth for compensation which is inconsistent with this subsection.

(3) Time allowances for the diagnosis and performance of warranty work and service shall be reasonable and adequate for the work to be performed.

(4) All claims by dealers under this subsection for labor and parts and all claims for compensation relative to any sales incentive programs shall be paid not later than 30 days after approval by the manufacturer or distributor; provided, however, that manufacturers or distributors shall retain the right to audit such claims and to chargeback the dealer for false or unsubstantiated claims under this section. Dealers shall be required to maintain defective parts for not longer than 90 days following submission of claims. All such claims shall be either approved or disapproved not later than 30 days after their receipt on forms provided by, and in the manner specified by, the manufacturer or distributor. A claim not disapproved in writing or by means of electronic transmission not later than 30 days after receipt shall be considered approved and payment shall be made within 30 days.

(c) Every manufacturer or distributor shall retain the right to audit claims submitted by a motor vehicle dealer and paid by the manufacturer or distributor for warranty service, parts recall service, and sales incentive, bonus, or other claims relating to the sale of new motor vehicles or services, for 1 year after the date on which a claim is paid or the end of any program period, whichever is later, and to charge back any amounts paid on claims identified in subsections (d) and (e). If there is evidence of fraud or if there has been fraudulent concealment, said manufacturer or distributor shall have a right to audit records for periods exceeding 1 year.

(d) A warranty service or part recall service claim submitted by a motor vehicle dealer and paid by the manufacturer or distributor may be charged back to the motor vehicle dealer only if the claim was fraudulent or false, the repairs were not properly made or were not necessary to remedy the defective condition, or the motor vehicle dealer failed to comply with the reasonable written requirements of the manufacturer or distributor in effect at the time the claim was presented for payment.

(e) A sales incentive, bonus or comparable claim relating to the sale of new motor vehicles or services submitted by a motor vehicle dealer and paid by the manufacturer or distributor may be charged back to the motor vehicle dealer only if the claim was fraudulent or false, the sales were not made, the sales were not timely, or the motor vehicle dealer failed to comply with the reasonable written requirements of the manufacturer or distributor in effect at the time that the claim was presented for payment.

A manufacturer or distributor shall not chargeback a motor vehicle dealer subsequent to the payment of a claim unless a representative of the manufacturer or distributor first meets in person or by video or teleconference with an officer or employee of the dealer or a dealer-designated representative. The unexcused failure or refusal of a dealer or dealer-designated representative to schedule, attend or participate in a meeting with the manufacturer or distributor to which the dealer or dealer-designated representative consented shall relieve the manufacturer or distributor of any further obligation under this subsection; provided, however, that for the purposes of this subsection, an excused failure or refusal of a dealer or a dealer-designated representative to schedule, attend or participate in a meeting with the manufacturer or distributor shall include, but not be limited to: (i) the illness, hospitalization or death of the dealer or the dealer’s designee; (ii) the dealer or dealer’s designee attending to an emergency or the death of a family member; (iii) the dealer or the dealer’s designee attending to an emergency regarding the dealership; (iv) absence caused by military deployment, a weather emergency, an act of God; or (v) the dealer or the dealer’s designee attending another dealership-related meeting scheduled by the manufacturer or distributor away from the dealership. At such meeting the manufacturer or distributor shall provide a detailed explanation, with supporting documentation, as to the basis for each of the claims for which the manufacturer or distributor proposed a chargeback to the dealer and a written statement containing the basis upon which the motor vehicle dealer was selected for audit or review. Thereafter, the manufacturer or distributor shall provide the dealer or the dealer’s representative with a reasonable period of time after the meeting within which to respond to the proposed chargebacks, with such period to be commensurate with the volume of claims under consideration, but in no case less than 30 days after the meeting. The manufacturer or distributor shall be prohibited from changing or altering the basis for each of the proposed chargebacks as presented to the dealer or the dealer’s representative following the conclusion of the audit unless the manufacturer or distributor receives new information affecting the basis for any of the chargebacks. If the manufacturer or distributor claims the existence of new information, the dealer shall have the same right to a meeting and right to respond as when the chargeback was originally presented.

(f) The persons conducting an audit shall use their best efforts while present at the dealership facility not to unreasonably interfere with the ongoing business of the dealer. All audits shall be completed within a reasonable period of time.

(g) In conducting an audit or examination, the amount of a discrepancy for any period shall not be determined in whole or in part by extrapolating audit or examination results from a prior or subsequent period without the consent of the dealer.

(h) The results of each audit or examination shall be compiled in writing and a copy shall be timely provided to the motor vehicle dealer not later than the time that any charge back occurs. The motor vehicle dealer may protest the results of the audit, including the manner in which it was conducted.

(i) It shall be a violation of subsection (a) of section 3 for any manufacturer or distributor to audit or examine any sales or service account or activity of a motor vehicle dealer as retribution because the motor vehicle dealer exercised any right or remedy under this chapter or exercised any right pursuant to its franchise agreement.

(j) If a motor vehicle dealer is required to file an incentive payment claim with the manufacturer or distributor, then the motor vehicle dealer may submit any such incentive claim at anytime within 6 months after the date of the retail sale or the end of the program period, whichever is later; but if the incentive program does not require the motor vehicle dealer to file any claim form or take any action other than to report retail sales to the manufacturer or distributor, then the manufacturer or distributor may base the incentive payment upon the sales which the motor vehicle dealer timely and accurately reports, as determined by the reasonable written requirements of the manufacturer or distributor in effect at the time that the sales were made, during the period of the incentive program.

Error