Pennsylvania Legislation Aims to Ease 'Take It or Leave It' Franchise Agreements

For various reasons the number of farm equipment dealers in Pennsylvania has dwindled from 1,500 to 500 in the past two decades. But among the main culprits in that alarming decline are the onerous "take it or leave it" exclusive franchise agreements handed down to dealers from equipment manufacturers.

That was the overriding message of equipment dealers and others testifying before the Pennsylvania House Commerce Committee here Tuesday during Ag Progress Days.

Farmers are also among those impacted by franchise agreements that limit the ability of their dealers to be competitive. And in the bigger picture, the loss of agricultural infrastructure through the decline of dealerships erodes the entire farm economy in the state.

To "level the playing field" for dealers, Rep. Mike Hanna has introduced House Bill 1498 to update Pennsylvania's Fair Dealership Law, passed in 1987.

On hand to voice support for the bill were Pennsylvania Secretary of Agriculture Dennis Wolff and representatives from the Northeast Equipment Dealers Association, Pennsylvania Farm Bureau and PennAg Industries.

Hanna (D-76), chairman of the House Agriculture and Rural Affairs Committee, said a key provision of the bill is that it would allow franchise agreements to be terminated with "good cause."

The bill also curbs the manufacturers' power to force dealers to exclusively carry certain brands, which limits buyers' choices and hurts the competitiveness of the dealers.

Tim Wentz, field services director for the Northeast Equipment Dealers Association, told the committee that franchise agreements in recent years have made manufacturers "less like partners and more like an adversary."

"Selling by brand alone, we will lose the faith of our customers in our ability to provide creative choices," Wentz said.

Another key element in the new bill is that manufacturers would be required to provide fair compensation for warranty work and related expenses, such as transportation, incurred by dealers.

Brad Finch of Finch Services in Hanover, Pa. spoke about the unfairness of dealers carrying out warranty agreements under current conditions.

With dealers picking up the costs, "warranty work is a losing proposition," Finch said.

Jay Meyers, former owner of Meyers Implements in Greencastle, Pa., told of how a decision by a major manufacturer in the late 1990s not to renew a franchise agreement forced his sons out and caused him to lose the business.

Meyers' father first signed on with the manufacturer in the early 1940s, and through the years the dealership has offered a choice of brands. But the loss of the franchise agreement cut in half the choices the dealership could offer farmers, making the future of the business too uncertain for the next generation.

According to Wentz, franchise agreements have gotten even more restrictive in recent years.

"Within the past five years, all major manufacturers have issued a new franchise agreement," he said. "It's brutal."

Joel Rotz, state governmental relations director with the Pennsylvania Farm Bureau, spoke about the impact farmers experience from the loss of dealers, and the need for farmers in some areas to travel ever farther — some as far as two hours or more one way — to get parts.

"Delays during harvest can literally mean a loss of 10s of thousands of dollars," Rotz said.

Secretary Wolff emphasized his concern over the loss of agricultural infrastructure and its adverse effects on the state's number one industry.

Rep. Hanna pointed out that numerous other states, including New York, Vermont, and some major midwestern farm states such as Iowa, Nebraska and Wisconsin have laws similar to HB 1498 in place to protect dealers.

Also on hand to voice support for the bill were Jennifer Reed-Harry of PennAg Industries Association and Ralph Perilli, representing a Mercer County dealership.

Perilli joined Finch, Meyers and Wentz in a panel of members representing the Northeast Equipment Dealers Association.

No one at the hearing spoke in opposition to the bill, although a New Holland representative turned in a letter, said Rep. Peter Daley (D-49), who presided over the hearing as chairman of the House Commerce Committee.