SENATE BILL REPORT

SHB 2296

BYHouse Committee on Commerce & Labor (originally sponsored by Representatives Cole, Smith, Vekich, Prince, Leonard, Chandler, Walker, Prentice, Jones,R. King, Jacobsen, McLean, Wolfe and Kirby)

Regulating business relationships between manufacturers and distributors of agriculture equipment and independent retail dealers.

House Committe on Commerce & Labor

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 19, 1990

Majority Report:  Do pass as amended.

      Signed by Senators Lee, Chairman; Anderson, Vice Chairman; McMullen, Matson, Murray, Saling, Smitherman, Warnke, West, Williams.

Senate Staff:Forrest Bathurst (786-7429)

                  February 20, 1990

AS REPORTED BY COMMITTEE ON ECONOMIC DEVELOPMENT & LABOR, FEBRUARY 20, 1990

BACKGROUND:

An increasingly adversarial relationship is developing between agricultural implement dealers and manufacturers due to manufacturer bankruptcies, consolidations, mergers and acquisitions in this industry.  The result has been a growing number of threatened and actual cancellations or terminations of dealership contracts without provisions for adequate notification or compensation for dealers.

SUMMARY:

Manufacturers are prohibited from terminating dealership contracts without good cause.  Good cause is defined as failure by the dealer to comply with the dealership agreement if its provisions are essential and reasonable and all similarly situated dealers in the state are treated in the same manner.

Manufacturers are required to provide dealers with written notice of termination for good cause and allow the dealer to cure any deficiency.  If the deficiency is rectified within 60 days, the notice shall be void.

A manufacturer shall give a dealer 90 days written notice of the manufacturer's intent to terminate, cancel, or not renew a dealer's agreement, or before substantially changing the competitive circumstances of a dealer.  The contractual terms of the dealer shall not change, or the competitive circumstances shall not be changed, without the written consent of a dealer.

Manufacturers are prohibited from terminating, cancelling or failing to renew a dealer agreement, or from substantially changing the competitive circumstances of the dealer without good cause.

Manufacturers cannot prevent dealers from selling or transferring ownership of the dealership if the new person or party meets reasonable qualifications that indicate they will be successful in the business.  Succession agreements shall remain in effect and cannot be unilaterally changed by the manufacturer.

Manufacturers are prohibited from:  (1) forcing dealers to order equipment; (2) requiring dealers to enter into supplementary agreements unless other similarly situated dealers are also required to enter in the same supplementary agreements; (3) refusing to deliver reasonable quantities of merchandise in a reasonable time period; (4) conditioning renewal of a dealer's contract on substantial renovations of a facility or requiring the dealer to move to a new facility unless the supplier has notified the dealer at least one year prior and the supplier demonstrates a need for the change; (5) unreasonably withholding consent from a dealer to change the capital structure of the dealership; (6) requiring a dealer to assent to a release that relieves any person from liability; and (7) discriminating in prices charged to dealers (discounted pricing schedules offered to dealers based on volume purchases from the manufacturer are not unfair pricing practices).

Dealers shall be able to bring action for damages against manufacturers that include repurchases at fair market value of any data processing hardware, specialized repair tools, agricultural equipment, compensation for loss of business, costs associated with bringing the action, and reasonable attorneys' fees.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

SUMMARY OF PROPOSED SENATE AMENDMENT:

Automobile and motorcycle dealers are excluded from the provisions of this act.

Senate Committee - Testified: Bill Cross, Hardware and Implement Dealers Association (pro); Ray Shindler, Hardware and Implement Dealers Association (pro); Jim Beaulaurier, office of the Attorney General