Editor’s Note: The following report is reprinted from the February 2016 issue of Ag Equipment Intelligence, and is excerpted from a special report prepared by Matthew Larsgaard, president/CEO of the North Dakota Implement Dealers Assn. for his dealer members. In our telephone conversation with Mr. Larsgaard, we discussed their concerns with the SSA and their strong desire to work with manufacturers to address mutual concerns and develop solutions that benefit all parties. In Part 2 of this special report, Larsgaard highlights 11 provisions in the SSA that represent major concerns that his dealers need to be aware of.
Case IH presented its “finalized” version of its Sales and Service Agreement (SSA) on Nov. 9, 2015, according to Matthew Larsgaard, president/CEO of the North Dakota Implement Dealers Assn.
In a special NDIDA report issued to its dealer members earlier this month, Larsgaard, who is also the president and CEO of the Automobile Dealers Assn. of North Dakota, says the new agreement reminds him of the action that some of the automakers took after filing for bankruptcy following the 2009 business downturn.
“The bankruptcies caused the franchise agreements that dealers had with manufacturers to become null and void. The ‘new’ Chrysler and GM that emerged were ‘free and clear of all claims’ and obligations, including their contracts with dealers,” says Larsgaard. “Both companies then proceeded to collectively terminate thousands of dealers. In fact, the termination process was so unreasonable and unfair that our U.S. Congress had to step in and pass legislation in an attempt to reinstate some of those dealers that were wrongfully terminated.”
In the report, Larsgaard points out that, “Following the bankruptcies, the manufacturers developed new franchise agreements that were completely one-sided and entirely unfair. They were take-it or leave-it arrangements under which dealers had no choice but to sign the contracts or not be a dealer.
“With this in mind, one of the manufacturers developed a contract that attempted to force dealers to waive all of their rights under their respective state laws … the manufacturer believed that dealers would have no rights and no choice but to sign the agreement.”
Larsgaard goes on to cite several specific demands in the automakers’ new dealer agreement and suggests that the new Case IH SSA has some similarities. These include the following:
Market Share Requirements: The manufacturer declared that it would determine the annual number of vehicles that dealers must sell in order to fulfill sales expectations. (Compare to Section 9.1(a) of the Case IH SSA.)
Inventory Stocking Requirements: Upon manufacturer request, dealers were required to order and accept any number of vehicles required to fulfill factory sales expectations. (Compare to Section 8.1, 8.2, 19.1 of the Case IH SSA.)
Exclusivity: The manufacturer demanded that dealers abandon any other franchise they had with another manufacturer and maintain exclusive, stand-alone facilities for their brand alone. (Compare to Section 8.3, 9.2 of the Case IH SSA.)
Consent to Jurisdiction: The manufacturer stripped dealers of the option to seek judicial remedy in their home state. (Compare to Section 32.2 of the Case IH SSA.)
At Whim Requirements: Very simply, the manufacturer required dealers to comply with any future “subsequently published guidelines” as they pertained to any aspect of dealership operations. (Compare to Section 27.2 of the Case IH SSA.)
Premises Requirements: The manufacturer retained the ability to force dealers to move their facilities and/or to conduct substantial renovations to their dealerships in order to be compliant with the manufacturer’s “image programs.” This included the requirement to follow the manufacturer’s strict remodeling guidelines with zero promise of any financial assistance.
Etc. The contract also stated that if dealers were unable to comply with any of those demands, even through no fault of their own, the manufacturer could immediately terminate them. (Compare to Section 27.3 of the Case IH SSA.)
Larsgaard adds, “It is important to understand that every single one of those demands would have violated North Dakota state law. However, the manufacturer knew that dealers really had no choice but to sign the agreement.
He says he described in some detail to explain the events that took place immediately following the bankruptcies for two reasons:
- To give dealers a clear indication of how one giant auto manufacturer attempted to impose unreasonable/illegal demands upon dealers.
- To reconfirm the need for strong state franchise laws to protect dealers from unfair business practices.
Larsgaard says in 1991, the ND legislature created the manufacturer “prohibited acts” section within North Dakota state law. They recognized the need to protect North Dakota farm equipment dealers and their employees, and ensure that there is a baseline of fairness in dealers’ contracts with manufacturers.
He adds that one of the protections built into North Dakota’s “prohibited acts” section of a 1991 state law prevents manufacturers from demanding that dealers maintain exclusive facilities. “That provision alone saved 21% of North Dakota’s automobile dealerships from closing their doors during the 2009 auto manufacturers’ bankruptcy process,” says Larsgaard.
Larsgaard’s full report is available on the North Dakota Implement Dealers Assn. website (www.ndida.com) or by calling 701-293-6822.