Delaware General Assembly

Passed 6/20/24

Ready for Governor for action

SB 278 -SA 1

6/11/24

Poore

Rep. Longhurst

Sen. Buckson, Hocker, Hoffner, Huxtable, Lockman, Mantzavinos, Pettyjohn, Pinkney, Sokola, Sturgeon, Townsend, Wilson
Reps. Griffith, Osienski, Ramone, Schwartzkopf, D. Short, Michael Smith, K. Williams

AN ACT TO AMEND TITLES 6 AND 21 OF THE DELAWARE CODE RELATING TO COMMERCE AND TRADE.

This Act clarifies portions of Chapter 49 of Title 6 and Chapter 63 of Title 21 of the Delaware Code pertaining to motor vehicle dealers. These additions and modifications are intended to further improve our State’s franchise laws and ensure that Delaware consumers have a stable, reliable, convenient, and competitive retail network for automobile sales and service. This Act is an effort to continue to ensure that the relationship between dealers and the manufacturers and distributors is as fair and equitable as possible and provides the highest level of consumer protection. The Act includes the following provisions: Definitions. The Act amends § 4902 of Title 6 and clarifies the definitions of “motor vehicle” and “new motor vehicle” to reflect technological advances and changes in industry business practices in the state, and adds a definition of “electric motor vehicle”. The Act defines the new terms “sell,” "selling," "sold," "exchange," "retail sales," and "leases". Warranty and Predelivery Obligations to New Motor Vehicle Dealers. Dealers are required by contract to perform warranty work for manufacturers. The Act amends § 4903 of Title 6 in order to ensure that dealers are fairly paid for performing manufacturer-directed repairs related to warranty repairs, maintenance programs and recall work. Intrusive Audits. Dealers are required by existing law to wait up to 30 days for payment for motor vehicle warranty repairs in order to allow the manufacturer to review and approve payment submissions. Manufacturers are also allowed to later audit such repairs and payments. The Act affords manufacturers a full 6 months to audit warranty claims but will reasonably prevent intrusive and time-consuming audits after 180 days, unless the audit involves cases of alleged fraud. Franchise Termination Compensation. Under existing law, manufacturers must repurchase certain motor vehicles, parts and special tools in the event of the termination of the dealer’s franchise agreement. The Act amends § 4907 of Title 6 and specifies a 90-day timeframe for payment and clarifies that it is the manufacturer’s responsibility to cover the cost of returns. Return of Unnecessary Tools & Equipment. The Act allows a dealer a limited opportunity to return and be reimbursed for the cost of certain tools and equipment that were required as a part of an electric vehicle program or agreement between that dealer and the manufacturer, if the dealer determines within two years after receipt that such tools and equipment are unnecessary or that sales volume and utilization are low enough to prevent the dealer from realizing a reasonable return on those forced investments. Failure or Refusal of Manufacturer to Accept Returns. The Act amends § 4913 of Title 6 by providing that it violates Chapter 49 for a manufacturer to fail or refuse to accept the return or to fully reimburse a dealer for the cost of parts, tools, equipment, chargers and other infrastructure required under the franchise agreement, or as part of a program, policy, or other initiative related to the sale or service of electric motor vehicles. Sale & Subscription of Over-the-Air Features. The Act allows manufacturers to directly sell options, add-ons, features, improvements and upgrades by remote transmission to consumers, provided that the dealers are afforded an equal opportunity to sell the same products and services, and further provided that the manufacturer reasonably compensates the dealer for direct sales or subscriptions to the dealer’s customers for a specified period of time. Association Standing. The Act adds a new § 4920 to Title 6 on the subject of Association Standing. Franchise laws have been enacted in all 50 states to recognize compelling state interests in protecting consumers and in regulating the disparity in bargaining power between motor vehicle manufacturers and their franchised dealers. Because dealers have a single source for their new motor vehicles, parts and accessories, many are reluctant to raise a single voice to object to unlawful activity by their manufacturer. The Act grants statutory standing to a large association of dealers to bring a legal action, in very limited circumstances, to ensure compliance with applicable law. Licensing. The Act amends provisions of §§ 6301 and 6302 of Title 21 of the Delaware Code related to the Sale of Motor Vehicles. The Act adds definitions of “new motor vehicle,” “new motor vehicle dealer,” “used motor vehicle,” and “used motor vehicle dealer” to § 6301. Section 6302 is amended to provide that a manufacturer, importer, or distributor who was licensed as a motor vehicle dealer is not eligible to receive any additional licenses. The Act is supported by the Delaware Automobile and Truck Dealers’ Association, Inc.

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Takes effect upon being signed into law

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