THERE
ARE MANY
LAWS AND REGULATIONS
THAT GOVERN HOW WE DO BUSINESS IN
CALIFORNIA
Unfortunately everyone seems to
think it’s OK to ignore them. For
instance, all of a sudden it’s OK
to come up with a flat rate that
has nothing to do with your cost
of doing business plus a reasonable
profit. Presumption of the law is
that your out of warranty rates
are the warranty rate.
Also,
there is an ongoing dumping of product
in
California
by many off brand manufacturers
that do not provide the essential
support, including parts and service
literature, thus ultimately damaging
the consumer. This has got to be
challenged in the most aggressive
way possible.
How many people have negotiated
warranty labor rates on the assumption
of a good faith discount?
In
1989 California had the Song-Beverly
Act, section 1793, defined by the
Department of Consumer Affairs.
These are tentative answers to industry
questions involving the practical
application of the Song-Beverly
Act.
“Good Faith Discount”
“The Song-Beverly refers to an allowance
to the manufacturer for a “Good
Faith Discount”.
Question 1:
What are the definitions and/ or
terms of a good faith discount?
Answer:
The concept of a “good faith discount”
is not defined by the act. However,
its meaning seems reasonably clear.
If payment for warranty work is
assured, a repair facility in fact
does not bear the risk of non-payment
or the cost of credit, billing and
related operations. The amount of
the discount, therefore, may not
exceed the net cost savings to the
repair facilities that actually
result from the manufacturers’ payment
for warranty work. If there are
no net cost savings then no discount
would be proper; the amount of the
discount must reflect the net cost
savings the repair facilities generally,
in fact, enjoy as a result of direct
payment from the manufacturer.
Question 2:
If the manufacturer revokes benefits
which were defined under the terms
of “good faith discount” then is
the manufacturer in violation of
Song- Beverly?
Answer:
Whether the “good faith discount”
is lawful and proper is always a
matter of fact. If the amount of
the discount is dependent on the
facility’s receipt of certain material
benefits which are withdrawn, that
fact is relevant in determining
whether the amount of the discount
is lawful and proper.
Question 3:
If
the manufacturer, in revoking the
benefits defined under the terms
of “good faith discount”, does not
renegotiate to a higher rate schedule,
then is the manufacturer in violation
of Song-Beverly?
Answer:
The same answer applies to this
question. The amount of the discount
must not exceed the net cost savings
that repair facilities generally,
in fact, enjoy as a result of direct
payment from the manufacturer.
Warranty service contracts:
Question 1:
How
often is a contract to be renewed
in accord to “Song-Beverly? “
Answer:
The Song-Beverly Act states that
any warranty service contract cannot
have a duration that exceeds one
year, but may be renewed by a new
contract or an exchange of letters
agreeing that the contract will
be renewed.
Question 2:
Is an open ended contract (renewed
by default) in accord with Song-
Beverly?
Answer:
A contract that provided a renewal
by default would be in violation
of the Song-Beverly act.
Question 3:
Many manufacturers within their
contract state that the contract
is in accord with the state of (other
than
California).
Is this valid in
California?
Answer:
The validity of a contract is determined
solely by the law of California;
statements in the contract itself
would not determine, one way or
the other, whether the contract
was valid in California.
Note:
Song-Beverly Act is a civil law
and is not being enforced by the
Department of Consumer Affairs.
To my knowledge most major manufactures
provide parts, service or exchange
product to take care of a mutual
consumer. This article is for the
purpose of educating servicers and
any manufacturer that may not know,
or forgot the laws we adhere to
in the State of California.
If you do warranty work in the State
of California and you don’t negotiate
rates on an annual basis shame on
you! Also it is important that you
understand your cost of doing business!
You should be prepared if asked
by a manufacturer. A manufacture
does not have to do business with
you, however if they do they must
consider your cost of doing business
plus a reasonable profit.
The next newsletter article will
include the concept of negotiation
and delay of servicing due to lack
of parts and service literature.
