It’s been just over a year since Case IH’s revised sales and service agreement was making waves (see “Case IH ‘Finalized SSA Reminiscent of Automakers’ After 200- Bankruptcies”). At that time, Matthew Larsgaard, president/CEO of the North Dakota Implement Dealers Assn., highlighted 11 provisions that represent major concerns in the agreement that dealers needed to be aware of. Since then, dealer purity issues haven’t been making much noise.
But, a couple weeks ago, we reported news that North Dakota’s legislature was considering legislations that relates to “prohibited practices under farm equipment dealership contracts, dealership transfers and reimbursement for warranty repair.” The bill had strong support and passed out of the Ag Committee on a 13-0 vote. It passed the senate with a vote of 46-0 and the house with a vote of 86-5. On March 16, North Dakota’s Gov. Doug Burgum signed the bill into law.
The bill amends some rules and laws that were already in place, Rep. Cindy Schreiber Beck told the Daily News, a paper serving Wahpeton, N.D. and Breckenridge, Minn. “They [the manufacturers] can’t require the farm equipment dealer to maintain or stock a level of equipment, parts or accessories. They can’t require them to purchase a minimum amount of farm equipment as a condition for filling an order for farm equipment. It’s the same for parts and accessories,” she explained. “There would also be no requirement for dealers to establish or maintain exclusive facilities, personnel or display space with manufacturers, or to abandon an existing relationship with a particular manufacturer to renew, reinstate or enter into a dealership agreement.”
In other words, manufacturers can’t demand that dealers carry only their products.
The law had the support of farm equipment dealers, but also shortline equipment manufacturers. In its communication with the Ag Committee chairman, the Farm Equipment Manufacturers Assn. said:
“We believe every independent dealer in North Dakota should be free to select the equipment that best meets the needs of local customers and offers the dealership the best return on its investment. If dealers offer only one brand of equipment, built to one design standard and sold globally, the decision to do so should be made by the local independent dealer without pressure from a major supplier … Should the independent dealer, however, offer several equipment brands, the consumer gains the benefit of competition in the marketplace, and the dealer, in addition to bringing diversity to the marketplace, gains the ability to negotiate contract terms with shortline suppliers. These shortline manufacturers are thrilled to compete for the independent dealer’s business.”
Deere and CNH, as expected, opposed the bill. Deere claimed, “If ultimately enacted, this (dealer purity) provision of the legislation would destroy the competitive lines aspect which actually John Deere customers currently benefit from.” Concerned over the risk the legislation may have on its dealer contract, CNH went as far as calling the legislation “anti-consumer and anti-competitive” … “This provision will reduce competition, adversely influence consumer pricing.”
Anti-consumer? Anti-competitive market? That seems a little extreme and far-fetched. Based on the description from Rep. Schreiber Beck, the legislation wasn’t just looking out for the dealer, but the consumer too by giving dealers the right to carry whatever lines they choose — and thus providing choices — regardless of how their major might feel about it (and from the sound of it, the majors aren’t feeling so hot about it). Sounds more like they’re worried about the competition the law promotes.