Delaware General Assembly

Senate Executive 4/24/24

Awaiting consideration in Committee

4/24/24

Poore

Rep. Longhurst

Sen. Buckson, Hocker, Hoffner, Mantzavinos, Pettyjohn, Sokola, 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: Definition Clarifications. The Act clarifies the definitions of “motor vehicle” and “new motor vehicle” to reflect technological advances and changes in industry business practices in the state. The Act also recognizes the limited circumstances issuance of a dealer license to a direct-selling electric motor vehicle manufacturer in 2023. Further, the Act defines motor vehicle selling activities that require licensing and regulation by the state. Fair Compensation for Required Repairs. Dealers are required by contract to perform warranty work for manufacturers. The Act ensures 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 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. 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. 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. Since 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 provides that a manufacturer or distributor who was licensed as a motor vehicle dealer on or before May 15, 2023 is not eligible to receive any additional licenses. The Act also makes technical corrections to conform existing law to the standards of the Delaware Legislative Drafting Manual. 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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