Vermont Law Misses Mark, Assumes Wrong Balance in Negotiations
In the past week, we have seen yet another example of the result of grossly unfair contract conditions imposed by state legislation on relationships between manufacturers and distributors of shortline farm equipment and their independent dealers.
Well-intentioned elected representatives passed state laws over recent decades to protect independent dealers from giant, multi-national corporations, but now those laws are being used to invoke buyback provisions, which advance “dealer purity,” hamper competition and deprive farmers and ranchers of the choice, value and innovation our members’ equipment brings to the market.
Last month, we alerted members to an attempt, supported by the Northeast Equipment Dealers Association, to modify Vermont law dealing with the state’s warranty and buyback provisions. Senate Bill 224 has now advanced from committee to the full state senate without addressing the false assumption that small suppliers are in a position to impose one-sided contract conditions on independent dealers.
The stated rationale for the Vermont bill is to protect dealers from an alleged “inequality of bargaining power,” which purportedly “enables equipment, snowmobile, and all-terrain vehicle suppliers to compel dealers to execute dealer agreements, related contracts, and addenda that contain terms and conditions that would not routinely be agreed to by the [dealer].”
Setting aside whether this allegation is true, S224 in its current form does not account for the reality of the bargaining landscape between dealers and the vast majority of small manufacturers and distributors that are the backbone of the Farm Equipment Manufacturers Association.
In the vast majority of cases, any of our members would account for only a small percentage of a dealer’s annual sales, and by no stretch of the imagination do they have the bargaining power to exert any real pressure on dealers during contract negotiations. Accordingly, we do not believe that small manufacturers and their distributers fall within the stated rationale of S224.
We thus believe it appropriate to exclude small manufacturers from the scope of Vermont’s Machinery Dealership laws. To that end, we recommend that Section 4071 DEFINITIONS, Subsection (6) of S 224 be amended to include the following language:
| (6) “Supplier” means a wholesaler, manufacturer or distributor of inventory as defined in this chapter who enters into a dealer agreement with a dealer. As used in this chapter, “supplier” does not include a wholesaler, manufacturer or distributor of inventory that enters into a dealer agreement with a dealer where the wholesaler’s, manufacturer’s or distributor’s inventory accounts for less than 15% of the dealer’s annual net sales during the one-year period ending on the last day of the calendar month immediately preceding either (i) the date the wholesaler, manufacturer or distributor provides notice of the termination of the dealer agreement, or (ii) the date that the wholesaler first attempts to invoke the protections of this chapter, whichever occurs first. |
While this legislation has advanced out of Committee, we urge both members of the Vermont Senate and House of Representatives to correct this major flaw in the pending legislation.
A complete copy of Vermont S224, including updates on its progress, is available at FarmEquip.org/Vermont. S