For over 105 years, IADA has been dedicated to serving dealers across Illinois. A major milestone in fostering a fair, competitive and profitable motor vehicle retail network was the creation of the Illinois Motor Vehicle Franchise Act in 1979. IADA played the key role in the Act’s development and has continually worked over the past 45 years to strengthen and update it in step with the evolving automotive industry.

The Act protects dealers from unfair termination, one-sided dealership sales and service agreement changes that would reduce them to delivery agents, and unreasonable interference with succession plans, among other safeguards.

IADA is fighting to prevent OEMs from establishing direct-to-consumer sales networks that compete with their franchised dealers. Senate Bill 1939 would prohibit manufacturers from creating spin-off entities to bypass established dealer networks that have contributed to their success.

IADA has spent decades enhancing the Illinois Motor Vehicle Franchise Act to support and protect dealers across the state. Yet, many remain unaware of the Act’s significant role in safeguarding their businesses and fostering a thriving retail automotive industry.

The following is a brief summary of the Motor Vehicle Franchise Act legislation that IADA has championed over the past 45 years to strengthen dealer rights. As legacy manufacturers increasingly attempt to emulate start-ups by pursuing factory-direct sales models, the fight to preserve the franchise system and uphold the protections afforded by the Act is more critical than ever.

Enactment of the Motor Vehicle Franchise Act — 1979

The Illinois Motor Vehicle Franchise Act was signed into law as Public Act 81-43, effective June 29, 1979 (introduced as Senate Bill 1002). The Act was created to address the power imbalance between automobile manufacturers and their franchised dealers and to empower dealers.

As Sen. Berman, the Senate sponsor of Senate Bill 1002, said during the debate on the Senate floor:

“The purpose of Senate Bill 1002 is to attempt to strike a fairer balance between the interests of the manufacturers of automobiles and their dealers that operate in all of our districts. At the present time, automobile dealers are, to a great extent, captives of the whims of the manufacturers. This bill attempts to strike a better bargaining position as to the exercise of their franchise rights with the dealers. This bill prohibits forcing dealers to take unordered cars or parts, prohibits manufacturers from canceling or failing to renew a franchise without good cause and without notice, and a number of other items …”

During the same Senate debate, Sen. Johns said:

“We built in our family a quarter-million-dollar dealership, brand new, worked hard to develop it. They built another dealership about six miles away. They forced us to take cars that we didn’t want. They forced us to take trucks that we ordered with different axle ratios, etc. They did everything to us that they could. Finally, we got out of the business.”

Motor vehicle manufacturers still have tremendous leverage over their dealers, but the creation of the Act gave dealers a slingshot to fight back against unreasonable manufacturer demands.

Before the Act, a manufacturer could force a dealer to invest in expensive dealership facilities and inventory and then turn around and authorize a new dealership in the existing dealership’s backyard. Now, a manufacturer cannot put a new dealership in the relevant market area of an existing dealer of the same line make without a showing of good cause to add a new dealership. The regulation of new points and the relocation of existing points is just one example of how the Act protects dealers from overreach by a heavy-handed manufacturer. The Act also prohibits arbitrary and unreasonable conduct, prohibits cancellation or nonrenewal of a sales and service agreement without good cause, prohibits unreasonable facility requirements and a host of other items.

Timeline

1990 Legislative Session

HB 776

• Agreement reached with General Motors to put a moratorium on the Delco-Tech Service Center Program.

1992 Legislative Session

HB 3246

• Allows a dealer to relocate within two miles of its existing location without protest.
• Limits warranty audits and chargebacks to 18 months.
• Provides that all warranty claims must be approved or disapproved by the manufacturer within 30 days. Provides that if a manufacturer does not act on a claim within the 30-day period, the claim is automatically approved.

SB 393

• Prevents dealers and rental agencies from going outside of their relevant market areas to conduct off-site sales.
• Requires that all vehicle sales made as a result of vehicle referral programs to be consummated only by a licensed dealer.

SB 1273

• Prohibits a manufacturer (Ford) from establishing separate facilities to sell program vehicles.
• Allows dealers to charge a $40 Doc Fee, with annual increases based on the Consumer Price Index.

1993 Legislative Session

HB 1587

• Prohibits out-of-state dealers from selling from Illinois locations.

1994 Legislative Session

HB 3522

• Requires mandatory damage disclosure for new vehicles when the damage exceeds 6% of the MSRP to protect against frivolous lawsuits for non-disclosure.

SB 1730

• Prohibits out-of-state dealers from displaying or selling vehicles in Illinois.

1995 — Fields and the Creation of the Illinois Motor Vehicle Review Board

One of the most important features of the Act is the formation of the Illinois Motor Vehicle Review Board in 1995. The Board is a quasi-judicial administrative Board comprised of seven members appointed by the Secretary of State to represent the public interest at large who have not engaged in the sale, manufacture, or distribution of vehicles at retail. The Board’s sole function is to resolve disputes arising under the Motor Vehicle Franchise Act. Although most protests that are filed with the Board are settled before they reach the Board, some protests proceed through the entire (quasi) judicial process of discovery, testimony and oral argument before the SOS’ independent hearing officer. At the conclusion of those proceedings, the hearing offer will submit a proposed decision to the Board for the Board to adopt, reject, or modify. Since 1995, the Board has heard over 350 protests.

Prior to 1995, Motor Vehicle Franchise Act disputes were heard in Illinois Circuit Court. The only way to stop a violation of the Act was by making a slow and costly slog through court, making it difficult for violations to be readdressed.

The 1994 Fields Jeep-Eagle v. Chrysler Corp. litigation involved several consolidated lawsuits to resolve dealer challenges to motor vehicle dealership relocations. In Fields, the Illinois Supreme Court held that the Act, as it was structured at the time, violated the separation of powers doctrine under the Illinois Constitution by delegating nonjudicial functions to the courts. The court held that the duty to investigate and weigh statutory and non-statutory factors for determining whether there is good cause to establish or relocate motor vehicle dealerships and whether the establishment or relocation of a dealership is in the public interest and welfare were functions for a legislative or administrative body. The Fields decision created a blueprint for the formation of the Motor Vehicle Review Board.

1995 — SB 539

• Senate Bill 539 (Public Act 89-145, effective July 14, 1995) significantly modernized the Illinois Motor Vehicle Franchise Act by establishing the Illinois Motor Vehicle Review Board. Public Act 89-145 also clarified definitions and outlined specific procedures for hearings on franchise disputes.

1999 Legislative Session

HB 520

• Requires manufacturers to reimburse dealers for warranty parts at the retail rate.
• Permits the Motor Vehicle Review Board to award expert witness fees in successful dealer protests.
• Allows dealers to obtain methodology for distribution of new vehicle inventory from manufacturers.
• Prohibits manufacturers from making unreasonable construction, remodeling or renovation of dealership facilities as a condition of receiving motor vehicle inventory or if not warranted by economic conditions.

HB 555

• Prohibits manufacturers from owning or operating dealerships.

2000 Legislative Session

HB 3037

• Illinois Motor Vehicle Franchise Act changes to strengthen existing statutes regarding dealership relocations.

HB 3420

• Electronic title and lien processing.

2001 Legislative Session

HB 2960

• Expands the Illinois Motor Vehicle Review Board from a three-member panel to a full seven-member Board. The Board has benefited dealers by streamlining the dispute resolution process.

2007 Legislative Session

HB 1657

• Beginning Jan. 1, 2008, IADA was successful in raising the base Doc Fee level to $150 per vehicle ($100 increase). Retained annual CPI increases.

2009 Legislative Session

SB 1417

• Adds Right of First Refusal protections for dealerships.
• Provides language to allow dualling of unrelated franchises at one location.
• Adds termination safeguards.
• Expands the definition of “motor vehicle” to include heavy-duty truck engines, transmissions and rear axles.
• Defines dealer audit periods for incentive audits and warranty audits at 12 months.

HB 4628

• Provides that a manufacturer that used the bankruptcy process to terminate a dealer cannot reopen the location without first offering the point to the terminated dealer unless (i) as a result of a former franchisee’s cancellation, termination, non-continuance, or nonrenewal of the franchise, the bankrupted manufacturer had consolidated the line make with another of its line makes with a franchisee who operates a facility located within that relevant market area; (ii) the successor manufacturer paid the former franchisee the fair market value of the former franchisee’s franchise; or (iii) the successor manufacturer proves that the former franchisee is unfit to own or manage the dealership.
• Prohibits manufacturers from compelling dealers to enter into Site-Control Agreement, which could limit dealers’ autonomy over their real property.

2010 Nissan Case

Warranty surcharges, but no uniform agreement. IADA LDF participated.

2017 Legislative Session

SB 1687

• Limits the ability of a manufacturer to penalize a dealer if a customer resells or exports a vehicle.
• Prohibits a manufacturer from requiring dealer improvements more than once every 10 years unless the manufacturer pays for the improvements.
• Prohibits a manufacturer from requiring that dealers use specific vendors for improvements unless the manufacturer pays for the increased expense of its vendor over the dealer’s.
• Requires manufacturers to reimburse proposed buyers and sellers if the manufacturer exercises a right of first refusal to block a dealership transfer.
• Includes a legislative finding that the regulation of motor vehicle manufacturers creates a system for servicing vehicles and complying with warranties.

2019 Legislative Session

SB 690

• Beginning Jan. 1, 2020, IADA was successful in raising the base Doc Fee to $300 per vehicle ($150 increase). Retained annual CPI increase.

2021 Legislative Session

HB 3940

• Requires vehicle manufacturers to compensate franchised dealers fairly and adequately for warranty work on vehicles.
• Adjusts manufacturer calculations for time allowances, labor rates and parts prices for warranty work.
• Extends warranty reimbursement provisions to recall repairs.
• Ensures that vehicle technicians at Illinois’ dealerships earn equal pay for equal work. It generated a positive economic impact in Illinois.

HB 2435

• Prohibits a manufacturer from prohibiting or requiring a dealer to offer a specific secondary product, including service contracts, maintenance agreements, extended warranties, protection product guarantees, gap waivers, insurance, replacement parts, vehicle accessories, oil or supplies.
• Permits a manufacturer to offer an incentive program to encourage dealers to offer manufacturer-approved or endorsed secondary products.
• Prevents manufacturers from dictating to dealers to use only their products and extended service contracts.

2023: Mercedes-Benz v. JP Motors Reaffirms Importance of Motor Vehicle Review Board

A 2023 federal district court decision, Mercedes-Benz USA LLC. V. JP Motors Inc., 2023 U.S. Dist. Lexis 211132, reinforced the importance of the Motor Vehicle Review Board as the proper venue to resolve disputes arising under the Act. In JP Motors, a dealer who owned a combined Mercedes-Benz, Chevrolet and Nissan dealership notified each of his OEMs of his intent to sell the dealership. Chevrolet and Nissan approved the sale, but Mercedes-Benz exercised a right of first refusal to block the sale. Mercedes insisted on an apportionment of the selling price that could be attributed to the Mercedes-Benz franchise before deciding whether to approve the sale.

After JP Motors responded to Mercedes-Benz that the Act did not entitle Mercedes-Benz to an apportionment, Mercedes-Benz filed suit in federal court alleging that JP’s refusal to provide the apportionment violated the Mercedes-Benz dealer agreement. The federal judge in JP Motors dismissed Mercedes-Benz’s lawsuit, holding that the federal court must abstain from deciding a matter that should properly be heard by the Motor Vehicle Review Board. The judge stated that the state had a significantly greater interest in regulating the sale and distribution of motor vehicles, which “vitally affect the general economy of the State and the public interest, welfare and safety” of Illinoisans.

The case was dismissed from federal court and remanded to the Motor Vehicle Review Board. The Board denied Mercedes-Benz’s right of first refusal request and the parties were then able to complete the buy/sell agreement.

Direct Sales, Overreaching Factory Programs and Spin-Off “Dealerships”

Recently, IADA was involved in a pair of legal actions in which important dealer rights under the Illinois Motor Vehicle Franchise Act were being challenged.

IADA supported a group of 29 Ford dealers who filed a protest in December 2022, challenging Ford’s “Model e” electric vehicle allocation program. Ford’s Model e Program would have interfered with price negotiation, trade-in valuations and vehicle allocation. The successful Board protest preserved Ford dealers’ (and all dealers’) right to continue operating as independent dealers. In November 2023, the Motor Vehicle Review Board held that the Ford Model e program violated the Act, which was a huge victory for the entire dealer body in Illinois as well as the rest of the county. The Illinois Motor Vehicle Review Board decision was a catalyst for Ford to discontinue the program nationwide.

IADA was also heavily involved in litigation to challenge the direct sale of motor vehicles by certain manufacturers. In March of 2021, IADA, along with the Peoria Metro New Car Dealers Association, the Illinois Motorcycle Dealers Association, CATA and over 300 dealers sued motor vehicle manufacturers Rivian Automotive and Lucid Motors to challenge the issuance of dealer’s licenses to those manufacturers to sell directly to the public. Unfortunately, after litigating the direct sale issue all the way to the Illinois Supreme Court, the dealer challenge to direct sales was dismissed.

Currently, IADA is trying to stop the spread of direct sales to additional manufacturers. IADA-promoted legislation, Senate Bill 1939, would prevent legacy manufacturers from using affiliates or spinning off new companies to sell directly to the public in competition with their dealer networks.

As motor vehicle recalls continue at an astounding pace, a franchised dealer network advocating for customers is the best assurance that recalled vehicles are repaired as soon as possible. Direct sales by vertically integrated manufacturers also lead to higher vehicle and service costs for consumers.

For more than a century, IADA has proudly stood as a strong advocate for Illinois dealers, and that success has only been possible because of unwavering grassroots support from you, our valued members. Thank you for being the driving force behind our efforts. We ask for your continued support of all our vital IADA partnerships with CVR and programs like Ethos, Champ Titles and others highlighted on www.illinoisdealers.com. Together, we can keep championing the interests of Illinois dealers for years to come.