Mr. Speaker, I am pleased to take part in the debate this evening on Bill C-221.
As a former machinery dealer and one who was involved in the industry for a good many years, I can tell the House that the bill has significant importance to me, as I believe it does for most of us in the House.
I am in complete support of this private member's bill as proposed by the hon. member for Lambton-Middlesex, which is a neighbouring riding to mine. I would like to commend my colleague for her efforts to amend the Competition Act.
The purpose of this bill is to put an end to a restriction in almost all franchise agreements that does not allow car or farm equipment dealers to sell a competitor's product. This practice is known as dualing.
As members will know, dealers are only allowed to display and sell the products of the manufacturer or distributor with which they have a franchise agreement because the agreement contains anti-dualing clauses.
In some cases the franchise agreement states that a dealer cannot dual without the written permission of the manufacturer. In practice such permission is rarely given. Franchise agreements can be cancelled and torn up by the manufacturer or the distributor if a dealer sells another line of products. For example, a John Deere dealer cannot sell New Holland tractors.
I have talked to the local farm equipment dealers having a part in those organizations over the years in my riding and in other areas of the province and country. They basically support this bill. They want to be able to sell more than one line of product.
Dealers with a franchise agreement are also required to invest large sums for facilities, equipment, personnel and training in order to provide the sales and servicing deemed necessary by the manufacturer. Sometimes the dealer's investment in inventory and overhead required by the manufacturer is more than economically practical, thus tying up funds that could potentially be used to sell and service a competitor's line if the dealer was allowed to do so.
In small rural areas it makes sense to offer variety. A Case IH dealer, for example, may not be able to go it alone but if allowed to combine with another product, could stay in business.
Franchise agreements with anti-dualing provisions are restrictive and should be trashed. Dealers are unable to provide their customers with the choice from more than one line and consumers are not given the advantage of being able to compare and chose between competing lines of product. This problem becomes more significant in communities and markets not big enough to justify a dealer making a large investment to sell only one line.
It is interesting and ironic to point out that franchise agreements with anti-dualing provisions are illegal in many American states such as Iowa, Missouri, New Hampshire and others. The threat of termination of an agreement is grounds for a civil suit in the U.S.
If American dealers have operated successfully for years without anti-dualing provisions, there is no justifiable reason whatsoever that Canadian manufacturers and distributors can argue to maintain them in this country. On top of that, many of these American companies, such farm equipment dealers, are allowed different products in the U.S., but these same dealers in Canada are not. This is a farce.
Canadian laws do not protect our car and farm equipment dealers from unfair franchise agreements. Current laws are not adequate in their terms or satisfactory in their enforcement to strike down anti-dualing provisions. Bill C-221 proposes an amendment to the Competition Act that will disallow anti-dualing provisions in franchise agreements. It will put us on a level playing field with the U.S. and help our small business people compete in our own markets.
Last year one automaker in Canada recognized that sales were plunging and agreed to allow its dealers to sell cars from other companies. Mazda Canada Incorporated was the first to do so, but others are sure to follow. Mazda had built a very large dealer network but it was not selling enough cars to justify it.
Today's market calls for diversification. Consumers will head to the dealer with the most selection. Competition is healthy. I believe it is the government's responsibility to provide a climate that will
end anti-dualing provisions in franchise agreements to allow dealers to sell products from competing manufacturers.
Manufacturers, distributors or suppliers can argue that scrapping anti-dualing rules is not the way to go. First, they may suggest dealer loyalty will be diluted if they are allowed to sell products from more than one producer. Dealer loyalty should be earned by a manufacturer, not forced or coerced by the threat of termination of an agreement. Imagine if a grocery store were only allowed to sell one brand of peanut butter.
Selling competing brands allows the consumer to choose. Again this is a capitalist system. This bill will strengthen and enhance the free market system.
Second, manufacturers may argue customer loyalty will be lost if dealers are selling products from competing manufacturers. I submit that customers will remain loyal to a dealer as long as they feel they are being dealt with fairly. I also submit a customer will remain loyal to a dealer that does offer them the choice of more than one product. Service and selection are the two main reasons for shopping for and buying any product, whether it is a car, a seed drill, a planter or a new suit.
Third, manufacturers may threaten to take away exclusive distribution of their parts from dealers. That is exactly what this is: a threat that could be used by a manufacturer against a dealer that takes legal action against anti-dualing provisions.
Fourth, a manufacturer may claim if anti-dualing is prohibited that a car or farm equipment dealer would or could become a monopoly supplier in the local market. But, on the other hand, is that not what a manufacturer is promoting if he argues that no other product line can be sold out of that dealership?
Another argument that could be brought forward if an end to anti-dualing practices is put into effect is that the number of dealers will decrease. However, we have to recognize that this is reality in today's marketplace. Companies are diversifying in order to survive. Today, as many MPs from rural areas will know, the farm equipment dealers are gone. There used to be five in the town of Dresden, a town of 2,800, and today there are no dealers left in that community.
In summary, Bill C-221 will allow for automotive and farm equipment dealers to sell products from competing manufacturers. This is diversification. The more selection dealers have to offer consumers, the more likely their businesses will prosper. The amendments in the bill are good for business and they are good for the consumer, who will benefit from more selection.
I applaud my colleague from Lambton-Middlesex for coming forward with this bill. She truly represents her constituents from her mainly rural riding in southwestern Ontario. As was mentioned last night during private member's hour on Bill C-201, partisan politics has no place during Private Members' Business.
I urge all members from all parties to support Bill C-221. It makes sense, it will enhance competition and it will put our small business entrepreneurs on a level playing field with those in the U.S. That is the direction in which we should be going.