Question: Why regulate contracts between farm implement dealers and distributors?

Answer: Farm implement dealers have been complaining about “dealer purity” policies in their contracts for quite some time. Dealer purity forces the dealer to sell only products supplied by the manufacturer. As a result, dealers have had to stop selling machinery from “shortliners” (small manufacturers and distributors), as well as from less expensive manufacturers. The issue of dealer purity policies has worsened significantly in the past few years due to consolidation in the industry. Dealer purity issues are not addressed under Ontario’s franchise legislation – the Arthur Wishart Act.

Question: How does dealer purity affect dealers? And, how many dealers are affected?

Answer: There are about 150 dealers, or 50 per cent of the field equipment dealers in Ontario affected by dealer purity policies. Dealer purity prevents dealers from offering a range of farm machinery to farmers. Farm implement dealers sell over 50 different types of farm machinery and within these types, different manufacturers offer different features to address the variations in farming needs. Dealer purity restricts dealers to only one make of farm machinery, limiting both the types of machinery and the choices within any type that the dealer can offer. Dealer purity causes owners economic hardship because in the past in order to be profitable, dealers depended on being able to sell a range of machinery.

Question: Are there other issues addressed in the proposal aside from dealer purity?

Answer: Yes. The proposed amendment addresses the vulnerability of dealers to termination without cause by large manufacturers. As well, it enables dealers to pass on warranty, parts supply and inventory responsibilities to their manufacturers.

Question: How does dealer purity affect farm machinery companies in Ontario?

Answer: Across the province, there are roughly 80 shortliners operating in rural communities. These shortliners constitute a $240 million industry annually and are 80 per cent dependent on dealers for distribution of their products. As large manufacturers continue to enforce dealer purity policies, shortliners are being shut out of the dealerships. This not only threatens the economic survival of shortliners but also that of their communities.

Question: Does dealer purity affect farmers?

Answer: Yes. 1) the range of machinery offered is reduced, therefore competition is reduced with a resultant rise in prices 2) farmers are forced to travel greater distances to reach dealers who can provide parts and service for machinery they already own 3) as shortliners are denied access to dealer networks, the cost of farm implements will increase to cover the development of new marketing and service structures 4) as shortliners are forced out of business through dealer purity, farmers are left with tractors and machinery for which parts or service are not available.