If you were to read through any of the major farm equipment manufacturers annual reports (also referred to as Form 10-K by the SEC), each of them refers to the businesses that sell their products as “independent dealers.” This would imply that those dealers are free to operate their businesses as they see fit.

We all know this isn’t anywhere close to what’s actually taking place in the real world of the farm equipment business.

So, it’s no surprise that the Assn. of Equipment Manufacturers along with AGCO, CNH Industrial, Deere & Co. and Kubota Tractor Corp. have filed suit to stop a North Dakota dealer protection law that was scheduled to take effect today (Aug. 1).

Specifically, the group is suing North Dakota’s governor and attorney general in regard to Bill 2289, which was passed earlier this year. Generally, the bill addressed “prohibited practices under farm equipment dealership contracts, dealership transfers and reimbursement for warranty repair.”

In its suit the manufacturers say, “Senate Bill 2289 creates arguably the most restrictive dealership law in the entire country. Both individually and in combination, the provisions of Senate Bill 2289 impose unprecedented restrictions on the ability of farm equipment manufacturers to enforce new and existing contracts with dealers, to maintain their federally protected trademark rights, to enforce dealership appearance and performance standards, and to monitor or prevent warranty and incentive payment fraud.”

You need to read the full AEM et al. v North Dakota document to get the real flavor of what the manufacturers think of their dealers. (Full disclosure, I did not read all 82 pages of the filing.) Here’s a sampling.

The filing maintains the bill, if passed, would allow a “North Dakota farm equipment dealer licensed to use and display a Manufacturer’s trademark could not be required to actually maintain the Manufacturer’s farm equipment in stock for sale. Nor could the dealer be required to maintain any inventory of Manufacturer’s parts …” which is not correct.

According to the North Dakota law, “a farm equipment manufacturer may require the dealer to purchase all parts reasonably necessary to maintain the quality of operation in the field of any farm equipment used in the trade area …”

The manufacturers’ suit goes on to say the statute would permit a dealer to use the Manufacturer’s trademark identifying its dealership as ‘bait’ to ‘switch’ customers to competing products.” They also object to the law because it permits equipment dealers to “commingle the facilities, personnel, and display space used to sell and service a Manufacturer’s farm equipment with its competitors’ products.”

They suggest the North Dakota law is “akin to a state law that would require McDonald’s Corporation to permit franchises to sell the Burger King Whopper from facilities licensed to display McDonald’s federally registered trademark and ‘golden arches’ …” 

In other words, what the manufacturers want is a company store without the expense. History has demonstrated time and again that retail locations operated by manufacturers are miserable failures. Yet, the ag machinery makers insist on dictating their whims to the experts who excel at selling product — their products.

In its filing the manufacturers say “Senate Bill 2289 was passed with little legislative explanation or debate. It was discussed for a total of approximately five minutes in the North Dakota Senate … approximately six minutes in the North Dakota House …”

It’s all smoke and mirrors. What they fail to mention is the bill was subject to hours of debate in committee prior to being submitted for final vote, which, by the way, was passed unanimously in the North Dakota Senate (46-0) and 86-5 in the North Dakota House.

In a note to the dealers who are members of the North Dakota Implement Dealers Assn., which introduced the bill, Matthew Larsgaard, president/CEO, said, “This type of manufacturer initiated lawsuit is not a new concept. We have seen both automobile and farm equipment manufacturers sue several states on the East Coast with similar arguments regarding the ‘constitutionality’ of state dealer franchise laws.  In every case, the courts ruled in favor of the dealers.”   

Yes, dealerships are independent businesses as long they do what the manufacturers tell them to do.