HOUSE BILL REPORT
HB 2296
BYRepresentatives 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
Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. (11)
Signed by Representatives Vekich, Chair; Cole, Vice Chair; Smith, Ranking Republican Member; Forner, Jones, R. King, Leonard, O'Brien, Prentice, Walker and Wolfe.
House Staff:Jim Kelley (786-7166)
AS REPORTED BY COMMITTEE ON COMMERCE & LABOR JANUARY 23, 1990
BACKGROUND:
There is currently very little statutory regulation of the business relations between dealers and manufacturers of agricultural equipment.
SUMMARY:
SUBSTITUTE BILL: The relationship between dealers and suppliers of agricultural equipment is regulated. "Supplier" is defined as manufacturer, wholesaler, or distributor of the equipment to be sold.
Prohibited Acts.
There are 11 prohibited acts that may give rise to a legal cause of action. They are:
1) Requiring a dealer to take equipment, parts, or any equipment with features not included in the base list price as publicly advertised, which the dealer has not voluntarily ordered;
2) Requiring or attempting to require a dealer to enter into any agreement that is supplementary to an existing agreement with the supplier, unless the supplementary agreement is imposed on other similarly situated dealers.
3) Refusing to deliver equipment in reasonable quantities and within a reasonable time to a dealer with a dealer agreement for the retail sale of new equipment, if the equipment is specifically advertised or represented to be available for immediate delivery, unless the cause is beyond the control of the supplier;
4) Terminating, canceling or failing to renew a dealer agreement or substantially changing the equipment dealer's competitive circumstance or attempting or threatening these actions without good cause.
5) Conditioning the renewal, continuation, or extension of a dealer agreement on the dealer's renovation of the place of business or acquisition of a new place of business without giving one year's notice, demonstrating the need for change, and unless the dealer does not make a good faith effort to complete the plans within one year;
6) Offering to sell equipment to one dealer at a lower price than that at which it is offered to another similarly situated dealer unless the differentials make due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which the equipment is sold. A seller may offer a lower price in order to meet an equally low price of a competitor.
7) Unreasonably withholding consent from a dealership to change its capital structure or means of financing ;
8) Preventing any dealer or officer, member, partner, or stockholder of a dealer from selling or transferring any part or all of the interest in the dealership if the consent is unreasonably withheld;
9) Requiring a dealer to assent to a release, assignment, novation, waiver, or estoppel that would relieve the supplier from liability;
10) Unreasonably withholding consent, in the event of death of the dealer, to the transfer of the dealer's interest in the dealership to the dealer's family, if practicable. The supplier's consent is required for such a transfer to occur.
Termination or Nonrenewal
Ninety days written notice is required if a supplier intends to terminate, cancel, or not renew a dealer agreement or substantially change the dealer's competitive circumstances. The notice shall state all reasons constituting good cause. If the problem is corrected within 60 days, the notice is void. Good cause for termination includes:
1) Transferring a controlling ownership in the dealership without the supplier's consent;
2) Making a material misrepresentation to the supplier;
3) Bankruptcy;
4) Felony conviction;
5) Failure to operate in business for 10 consecutive days;
6) Relocating without the supplier's consent;
7) Engaging in excessive pricing, misleading advertising, or failure to provide service and replacement parts or perform warranty obligations;
8) Lack of performance in sales, service, or warranty;
9) Failing to meet building, housekeeping, or personnel requirements of the dealer agreement;
10) Failing to comply with licensing laws; or
11) Failing to comply with the terms of the dealer agreement.
SUBSTITUTE BILL COMPARED TO ORIGINAL: The substitute bill makes the following changes to the original bill:
1) Some language was simplified;
2) The substitute bill brings the language covering discriminatory pricing more into line with the language of the federal Robinson- Patman Act;
3) It changes the standard for a violation relating to the control exercised by the supplier over changes in the financing and capital structure of the dealership. The original bill makes it a violation to prevent or attempt to prevent such a change, if the dealer meets any reasonable capital requirements of the supplier. The substitute makes it a violation to unreasonably withhold consent to such a change if the dealer meets the capital requirements of the supplier;
4) It deletes the provision that would have made it a violation to "attempt to" prevent any sale or transfer of a dealership;
5) The substitute adds a provision prohibiting a supplier from unreasonably withholding consent to a transfer of interest in the dealership by a dealer, if the transferee meets the financial, business experience, and character standards of the supplier;
6) It clarifies that, in the event of death of the dealer, the supplier's consent is required in order to transfer the business to a family member;
7) It makes it good cause for termination if a dealer makes any material misrepresentation to the supplier, rather than only material misrepresentations in the application process.
8) It details the types of remedies available to a dealer, including the repurchase of required tools and equipment, and loss of business. The original bill made injunctive relief the appropriate remedy for a change in competitive circumstances. The substitute bill provides for injunctive relief when the change in circumstances is substantial; and
9) The substitute bill clarifies that obligations of the supplier under this chapter, as opposed to all obligations, are applied to any successor in interest.
Fiscal Note: Not Requested.
House Committee ‑ Testified For: Bill Cross, Northwest Hardware and Implement Association; Brian Nelson, Northwest Hardware and Implement Association; Wes Loomis, Loomis Truck and Tractor; Bill Loomis, Loomis Truck and Tractor; Bill Kabrich, Barrows Tractor, Inc.
House Committee - Testified Against: No one.
House Committee - Testimony For: Dealer agreements are contracts of adhesion, either you accept them or you cannot sell the product. Company owned stores are often placed near existing dealers and are able to sell the products at a lower price. Unfair pricing is a common problem. On the issue of terminations, this bill only requires good cause, otherwise the suppliers should pay damages.
House Committee - Testimony Against: None.