Jerry Kopel

Deere Franchise

By Jerry Kopel

Sept. 19, 2007

Deere & Co's CEO Robert Lane recently told the Wall Street Journal that Deere is a company, not a family. Deere is having a fabulous year, but is still zeroing in on an increase in sales of farm machinery, such as tractors, and farm machinery components.

What does that have to do with Colorado? The company is getting tough with franchisees that don't meet Deere's expectations. The company apparently wants franchisees that have more than one store and they want to reduce mom and pop operations.

Quoting from the Journal, Lane says: "For years, we talked about Deere as a family. The fact is, we are not a family. What we are is a high-performance team...If someone is not pulling their weight, you're not on the high-performance team anymore." In my opinion, the new motto is "expand (or consolidate) or get out."

Colorado passed a minor Farm Equipment Fair Dealership Act in 1984 sponsored by Rep. John Hamlin (R) and Sen. Tilman Bishop (R) dealing mainly with repurchasing inventory when a franchise has ended.

But in 1995, the act was repealed and re-enacted as an all-encompassing document. SB 18 was carried by Sen. Don Ament (R) and Rep. Bud Moellenberg (R). It was, basically THE franchise contract under the same title as in 1984.

The Journal points out "By contract, dealers have to meet Deere's performance targets or face losing their right to sell Deere products. If someone wants to transfer his dealership to a child or anyone else, Deere must approve."

In Colorado, that's not exactly how it happens. Under the 1995 law, written consent by the supplier is needed, but it cannot be denied if the transferee meets the reasonable financial, business ability, experience, and character standards of the supplier, and the area has sufficient sales potential to reasonably support the dealer.

The supplier has the burden of proof to show otherwise. In another section, the supplier "shall not withhold consent without good reason".

In Colorado, the contract can continue until the world ends, or the dealer or heir does something out of the ordinary such as file bankruptcy or commit a felony or fails to carry on business in a normal fashion..

A supplier can't "fail to renew" a contract "without cause". If the supplier has cause, the dealer has six months "to cure any claimed deficiency".

What constitutes "cure" will be decided by a court decision, especially if dealer and supplier don't even agree on how to interpret the statutory list of "causes".

Other "franchisee" benefits in SB 18: No "unique" supplemental impositions, getting deliveries on time, no price discrimination, the right to transfer minority interests in the business without supplier's consent and a damages section that spells out only the rights of the dealers.

Also, a dealer (not the supplier) under SB 18 "may be granted injunctive relief against unlawful termination, cancellation, non-renewal, or change in competitive circumstances.

There are some supplier rights, but many of them only occur when the dealer 'consistently" does or fails to do something. The term is not defined.

If the supplier has a right to a claim under this law, the law states it is "void" unless brought in a court in this state, or under the laws of Colorado. The rights of the dealer in claims under this law are also brought under this law, either in a Colorado court or elsewhere. But that doesn't eliminate other potential remedies for the dealer.

I don't know if former Gov. Roy Romer's family is still involved as Deere dealers, but I believe they were when SB 18 was passed. Romer did not veto and did not sign the bill. He let it become law without his signature.

Fascinating to me back in 1995 was the fact that a majority of the Senate Republicans voted for SB 18. So much for the "anti-nanny" vote.

In 1991, then-Gov. Romer had vetoed a "dealer-oriented" bill for beer distributors, with this message:

"I feel obliged to defend Adam Smith and the free market economy. One of the strengths of this nation has been its willingness to allow the free market economy to create new wealth, and to share it broadly without excessive government interference. When government is needed to protect public health or the consumer, I believe it should act with prudence and caution. 

 

"I have vetoed this bill because it is an unwarranted intrusion by government into the contractual relationship between beer suppliers and distributors. I believe that we can have orderly relationships within the beer industry without  the government dictating terms of contracts. In addition, this bill would set a precedent that would invite other businesses to seek government protection and intervention in their franchise  relationships.

 

"Many individuals within this state have said in various ways that there is too much government intrusion in our lives. As a Democrat I hear that point of view and am responsive to it. In my opinion, this bill does not represent a wise or necessary intervention, and for that reason I have vetoed it."

SB 18 in 1995 became law ten days after Romer received it and failed to sign it.

My advice for CEO Robert Lane: Keep away from Colorado. Concentrate on states that don't have a Fair Dealership Act.

(Jerry Kopel served 22 years in the Colorado House.)