States siding with boat dealers

Boat/US Magazine, March, 2005 by Caroline Ajootian

'It looks like the boating industry's need to grow has finally overcome its resistance to change.'

These words, spoken by a Wisconsin boat dealer and quoted on the editorial page of a recent marine industry trade publication, are the equivalent of Pogo's famous declaration, "We have met the enemy and he is us."

Faced with fewer boat sales in 2004 than 15 years ago, the boating industry has undertaken the equivalent of a very public 12-step program for manufacturers and retail dealers alike. In the past two years, each has acknowledged weaknesses and vowed to improve. Even so, the two groups haven't entirely buried the hatchet.

Vigorous lobbying by the National Marine Manufacturers Association against legislated dealer agreements did not stop dealers from scoring some major points in the past year with the passage of three new state boat dealer laws in Missouri, New York and Georgia.

These laws define the business relationships between manufacturers of boats and engines and the retailers who sell them. Among other things, boat dealer laws:

* Define sales territories;

* Require written cancellation notices, usually 90 to 120 days before contracts are terminated by either party;

* Establish a procedure that allows dealers to pass existing boat lines on to future owners of the business;

* Establish equitable arrangements for buying back inventory;

* Require warranty compensation that is close or equal to shop rates.

Why should boating consumers care what deals the industry makes with itself? Well, the rationale is that stable dealers with confidence in their product and their investment are more likely to be able to give the level of service consumers have come to expect from other industries. Like it or not, marine customer service is frequently compared to that of the automotive industry--and just as frequently comes up short.

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State laws addressing dealer agreements have long been a staple for sellers of RVs, automobiles, all-terrain vehicles, farm equipment and motorcycles, but marine manufacturers have lobbied state by state to prevent their passage. The National Marine Manufacturers Association contends that state dealer agreements stifle competition and will be bad for consumers. The industry trade group favors non-mandatory agreements but marine retailers insist that the current system of relying upon dealer agreements written by manufacturers is one-sided.

Boat dealer agreements are already on the books in Oklahoma, Louisiana, Texas, Maine and Michigan. Lawmakers in at least five other states, including California and Ohio, will be actively considering dealer agreement proposals during their 2005 legislative sessions and Florida is expected to jump on board in 2006.

In all other states, marine dealers and manufacturers rely upon agreements written by the manufacturer. Some manufacturers have no written contracts, but rely instead on handshake agreements that dealers say are worthless.

A lawsuit filed in 2002 by Sportsman's Cove, Inc., a dealership in Boutte, LA, against Brunswick Corp. demonstrates what dealers say they're up against. The dealer alleged that the industry titan, parent company of Bayliner, Sea Ray, Mercury and others, offered him incentives to shift his company's focus solely to Brunswick's products. Unbeknownst to him, at the same time they were offering even better incentives to a larger, rival dealer in the area. The dealer contended that this amounted to restraint of trade, attempted monopolization and discriminatory pricing but he lost his case because the courts found that Brunswick hadn't violated any of Louisiana's existing unfair trade laws.

At the time of the lawsuit, Louisiana's marine dealer agreement law didn't define sales territories or prohibit manufacturers from this kind of wheeling and dealing. Those changes were added to Louisiana law in 2004.

In another example, a dealer agreement law that passed in Missouri last year came about because dealers in that state, irate about a decision by Genmar Industries to cancel four Four Winns dealerships, wanted to make sure they had some protection before it happened again.

The new law requires a manufacturer to give a dealer a 120-day written notice before canceling a contract and to provide reasons for the cancellation. Dealers must also be given the opportunity to correct problems that may lead to cancellations. In other words, they can't summarily lose a product line--good news for boat owners who could find themselves without recourse to warranty service.

That the times are a-changing recently became clear when industry leader Cobalt Boats of Neodesha, KS, broke its 35-year tradition of relying on a handshake agreement with its dealers. Cobalt recently switched to a written agreement.

Cobalt President Pack St. Clair said his company conferred with dealers when they wrote the agreement. "The single thing that will grow the sport is dealers and manufacturers truly working together with a single purpose and with trust that doesn't always put the customer in the middle."