Legislative Lowdown - BodyShop Business

Legislative Lowdown

Federal – Aaron Lowe, vice president of government affairs for the Automotive Aftermarket Industry Association (AAIA), briefed legislators in the House Small Business Committee on the Motor Vehicle Owners’ Right to Repair Act (H.R. 2694) on Sept. 25. Introduced last year, H.R. 2694 (Rep. Edolphus Towns, D-NY) would require car companies to make the same service information and tools capabilities available to independent repair shops that they provide to their franchised dealer networks. The legislation further provides car companies with protections for trade secrets unless that information is provided to the franchised new car dealers.

Lowe claimed that changes in market dynamics are placing independent shops at a competitive disadvantage because they don’t have equal access to information about increasingly complex new vehicles that dealer network shops do.

The Automotive Service Association (ASA) and the National Automobile Dealers Association (NADA) oppose the legislation and similar legislation proposed in several states. The two groups contend that independent repairers do have equal access to vehicle information.

In a letter to Congress sent last year, ASA said, “The service information, diagnostic tools and training needed are already available in the marketplace. Therefore, legislation forcing the disclosure of proprietary data would be unnecessary and counterproductive. NADA and ASA assert that the information necessary to diagnose, service and repair vehicles is already being made available to all parties in the automobile repair industry through third-party private sector companies and automobile manufacturers.”
Lowe pointed out that Congress has already acknowledged the role technology would play in the repair market when it passed the Clean Air Act. The act requires that car companies equip their vehicles with on-board diagnostic (OBD) systems that monitor emissions systems. In 1990, provisions were added to ensure that on-board computers be accessible without the need for proprietary tools and that any information needed to repair the emissions system be made available to the independent aftermarket. The legislation protects the trade secrets of the car companies but specifies that no information may be withheld if that information had been provided directly or indirectly to the new car dealer.

“The gains made by the Clean Air Act have been tempered in the last several years by the fact that the computers now being installed on vehicles go well beyond emissions – monitoring and controlling nearly every function of the vehicle from safety to entertainment. New technologies are coming quickly down the pike that could provide vehicle manufacturers with even more of a competitive advantage when it comes to repairing a customer’s vehicle,” Lowe said.

Lowe contends that the aftermarket is not attempting to stop the use of any technology that improves the car owner’s experience or safety or reduces harmful emissions, but rather that once a car owner purchases a vehicle, they should have the right to decide where it is serviced and where any information that’s transmitted from the car regarding vehicle diagnosis or repair is sent, whether it’s a dealership or independent shop.

Federal – The U.S. Senate has unanimously passed S.B. 3325 on intellectual property rights enforcement without language from H.R. 5638, which would have created an exception from infringement for certain component parts used to repair articles of manufacture, including cars. The exemption would have been for parts with the sole purpose of repairing the original appearance of the article of manufacture.

The bill will now head to the White House for the President’s signature.

Proponents of S.B. 3325, sponsored by Sen. Patrick Leahy (D-Vt.) and Sen. Arlen Specter (R-Pa.), believe it will increase tools and resources for the Department of Justice’s programs to fight intellectual property theft, protect innovation and advancement within the United States, and establish federal efforts to eliminate counterfeiting and piracy. Both the House and Senate believe that intellectual property, which includes copyrights, patents and trademarks, is critical to U.S. economic success but is presently vulnerable to numerous types of theft and misuse.

H.R. 5638 (Rep. Zoe Lofgren, D-Calif.), which was supported by the Automotive Aftermarket Industry Association (AAIA), would have left in place patent protection for the first sale of the vehicle, but would have permitted the production by aftermarket companies of replacement cosmetic parts. Similar legislation has been enacted in several countries, such as Australia, and has gained approval in the European Union (EU) Parliament, with action expected soon from the EU Council of Ministers.

AAIA told Congress that failure to enact this legislation would mean that car companies could obtain a monopoly in the sale of replacement collision repair market parts, thus raising repair costs for car owners.

In July, the Intellectual Property Owners (IPO) Association sent a letter opposing Lofgren’s bill to U.S. Patent and Trademark Office Director John Dudas. IPO based its lack of support on what it said were four flaws in the legislation: the undermining of the policy rationale for IP rights; the targeting of only replacement parts; the removal of existing rights; and the creation of an uneven playing field.

For more information on these bills, visit www.takingthehill.com or www.qualitypartscoalition.com.

California – As part of a flurry of legislative activity taken in California recently, S.B. 1371, which outlaws the capping of material prices by insurers in California, was signed into law and A.B. 2825, which would have forced repairers to share wholesale crash parts invoices, was vetoed.

S.B. 1371 (Sen. Lou Correa, D-Santa Ana) was designed to limit the insurance company practice of placing “caps” or arbitrary limits on reimbursements for collision repairs. The bill, which was backed by the California Autobody Association (CAA), will become law on Jan. 1, 2009.

Introduced in February, S.B. 1371 was revised several times this year as legislators attempted to define capping. In June, after revisions by both the state’s Senate and Assembly, the Assembly finally defined capping as “offering or paying an amount that is unrelated to a methodology used in determining paint and materials charges that is accepted by automobile repair shops and insurers.”

The bill states that if pricing agreements involving discounts are reached voluntarily between auto repair shops and insurers, capping rules don’t apply. Otherwise, the methodologies for calculating the paint and materials charge, which must be accepted by both shops and insurers, is determined by multiplying refinish unit by the refinish rate. Other price-determining factors include manuals and estimating systems that estimate how much refinish will be required to repair a certain part of the automobile, and software programs that automatically do the calculations.

The CAA credited Correa with bringing the repair and insurance industries together to hash out the details of the legislation.

“On behalf of the CAA, we would like to thank the Governor, Sen. Correa, the insurance industry and our members on getting this law passed,” CAA President Ted Stein said.

A.B. 2825 (Assemblywoman Wilma Carter, D-62nd) would have required repairers to give customers wholesale invoices for crash parts that cost $50 or more and would have mandated that estimates and final invoices contain a disclosure that parts switching is illegal.

The Center for Auto Safety, Consumer Action and Consumers Union urged Gov. Schwarzenegger to sign the bill, while the Collision Repair Association of California (CRA), CAA and California Motor Car Dealer Association opposed it.

“This is a huge victory for repairers,” said Stein.

Consumer groups argued that the bill would protect motorists from potential auto body repair fraud and save California consumers hundreds of millions of dollars annually by eliminating parts switching by “dishonest body shops.”

Current law requires that consumers be provided an itemized written estimate prior to work commencing, as well as a final invoice listing work completed and parts provided.

Dubbed the “Paperwork Act of 2008” by the CRA, the bill, which passed the State Assembly Aug. 18, would have made California the first state in the nation to require businesses to turn over wholesale records to customers. The CRA believed the purpose of A.B. 2825 was unclear, given that the state Bureau of Automotive Repair updated invoice requirements through rulemaking last year. Gov. Schwarzenegger also noted when he vetoed the bill that it was similar to legislation he rejected last year.

California – California Gov. Arnold Schwarzenegger vetoed S.B. 1167, an anti-steering bill that would have required insurers to ask policyholders if they have chosen a repair shop prior to suggesting one. Schwarzenegger said he did not sign it due to a delay in passing the state’s 2008-2009 budget and the fact that the bill is not of “the highest priority” to the state.

The California Senate approved S.B. 1167 (Sen. Pat Wiggins, D-Santa Rosa) in August. The Collision Repair Association of California (CRA) originally sponsored the bill, which was introduced in February, until it became obvious that the measure didn’t have enough votes to be passed by the Senate Banking, Finance and Insurance Committee. Wiggins then amended the bill to require that the insurance commissioner form a task force to study issues addressed by Insurance Code Section 758.5 (the anti-steering statute), and the Assembly and Senate subsequently passed it.

When the bill was first introduced and insurance companies voiced their opposition to it, then-CRA Executive Director Allen Wood said, “By opposing the bill, insurers are admitting they currently violate the law, which protects consumer choice by not allowing an insurer to suggest or recommend an alternative shop to claimants who have already selected a repairer.”

The bill has now been sent back to the Senate and listed under “unfinished business.”

Rhode Island – The Rhode Island Department of Business Regulation (DBR) and the Property Casualty Insurers Association of America (PCI) have appealed an August Superior Court decision that would require insurance companies to use data collected from labor rate surveys as the lone determinant for collision repair rates. The Rhode Island Supreme Court was scheduled to decide Oct. 23 whether it would hear the appeal.

On Sept. 18, the DBR instructed insurers required to file surveys to do so by Sept. 26. The bulletin stated “the filings should be made in accordance with Insurance Regulation 108 and do not need to be modified to conform with the Superior Court Decision,” as a stay was made on the judge’s decision until Oct. 23.

The state’s labor rate survey statute requires that insurers with more than 1 percent of the market use a standardized form to survey independent body shop labor rates. DRP shops don’t participate in the surveys. The court case, Auto Body Association of Rhode Island (ABARI) vs. State of Rhode Island Department of Business Regulation, arose from the department’s interpretation of the statute that the labor rate survey is not the sole determinant of the prevailing labor rate; instead, it’s only one factor which insurers are to consider in determining the rate.

ABARI appealed DBR’s decision to the Superior Court, and PCI made a filing in the case asking the court to affirm DBR’s decision. If upheld, the ruling by a Rhode Island Superior Court judge in August would require every insurance carrier authorized to sell motor vehicle liability insurance in the state to conduct a labor rate survey and use this information as the sole determinant of the prevailing auto body labor rate.

"The ruling has the potential to mandate a badly flawed scheme for calculating the prevailing rate that could result in inflated rates and higher repair costs," Frank O’Brien, vice president and regional manager for PCI, said in August. "ABARI wants to circumvent the role of competition in setting prices and force insurers to pay whatever amount is reported to them in the Auto Body Labor Rate Survey.”

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