Amends TCA Section 55-17-121.

ON APRIL 5, 2021, THE SENATE ADOPTED AMENDMENT #1 AND PASSED SENATE BILL 1615, AS AMENDED. AMENDMENT #1 rewrites this bill and adds to the present law provisions governing labor rates charged by motor vehicle dealers. Under present law: (1) All licensed motor vehicle dealers must provide to the motor vehicle commission information regarding the labor rate charged to retail customers and the labor rate charged to the manufacturers or distributors for warranty repairs or servicing; (2) A manufacturer or distributor is prohibited from paying to its dealers a labor rate per hour for warranty repairs or servicing less than the dealer's retail labor rate for similar repairs, unless the manufacturer or distributor can show to the commission that the dealer's retail labor rate is improper in light of all economic circumstances; and (3) A motor vehicle dealer is prohibited from charging the manufacturer or distributor a labor rate per hour for warranty work in excess of its posted retail labor rate. This amendment adds that a manufacturer or distributor must: (1) Specify in writing to each of the manufacturer or distributor's franchise motor vehicle dealers (dealers) operating in this state the dealer's obligations for preparation, delivery, and warranty services related to the manufacturer or distributor's products. The manufacturer or distributor must compensate the dealer for the warranty services the manufacturer or distributor requires the dealer to provide, including warranty and recall obligations related to repairing and servicing motor vehicles of the manufacturer or distributor and all parts and components authorized by the manufacturer or distributor to be installed in, or manufactured for installation in, such motor vehicles; and (2) Provide to the dealer a schedule of compensation that specifies reasonable compensation the manufacturer or distributor will pay to the dealer for such recalls and warranty services, including for parts and diagnostics. In determining the schedule of compensation for parts, the manufacturer or distributor may multiply the price paid by the dealer for parts, including all shipping costs and other charges, by the sum of one and the dealer's average percentage markup. The dealer's average percentage markup is calculated by subtracting one from the result of dividing the total amounts charged by the dealer for parts used in warranty-like repairs by the total cost to the dealer for the parts in the retail service orders submitted pursuant to the following: (A) The dealer may establish its average percentage markup for parts by submitting to the manufacturer or distributor copies of 100 sequential retail service orders paid by the dealer's customers, or all of the dealer's retail service orders paid by the dealer's customers in a 90-day period, whichever is less, for services provided within the previous 180-day period. The manufacturer or distributor may not consider retail service orders or portions of retail service orders attributable to routine maintenance such as tire service or oil service; (B) If the manufacturer or distributor determines, from any set of repair orders submitted under item (B) above that the retail markup rate for parts calculated is substantially higher or lower than the rate currently on record with the manufacturer or distributor, then the manufacturer or distributor may request additional documentation for a period of either 30 days prior to, or 30 days following, the time period for which the repair orders were submitted for purposes of an adjustment. Within 30 days of receiving the dealer's submission and additional documentation, if applicable, the manufacturer or distributor must then approve or deny the establishment of the dealer's average percentage markup. If the manufacturer or distributor approves the establishment of the dealer's average percentage markup, then the markup or rate calculated becomes effective 45 days after the date of the manufacturer or distributor's approval. If the manufacturer or distributor denies the establishment of the dealer's average percentage markup, then the dealer may file an appeal to the commission. The manufacturer or distributor has the burden of proof to establish that the manufacturer or distributor's denial was reasonable. If the commission finds the denial was not reasonable, then the denial is a violation and the commission must determine the dealer's average percentage markup for purposes of calculating a reasonable schedule of compensation. In making such a determination, the commission must not consider retail service orders or portions of retail service orders attributable to routine maintenance such as tire service or oil service; (C) A manufacturer or distributor must not require the dealer to establish an average percentage markup by a methodology, or by requiring the submission of information, that is unduly burdensome or time-consuming to the franchise motor vehicle dealer, including, but not limited to, requiring part-by-part or transaction-by-transaction calculations; and (D) A dealer must not request a change in the dealer's average percentage markup more than once in any one-year period.