Protecting Maryland Distributors

March 12, 1992

The newspaper ad, sponsored by a coalition of national manufacturers, pushes all the right buttons: failed businesses, lost jobs, higher prices for consumers and the "destruction of Maryland's business climate!" And the target of this disinformation campaign? A bill in the General Assembly that simply seeks to force manufacturers to give their distributors cause and notice before ending a business relationship.

The aim of this bill is to protect thousands of mom and pop distributors who operate at the whim and pleasure of manufacturers. Since many manufacturers insist on verbal agreements with distributors -- no written contracts -- they can terminate the arrangement at any moment. Local agents are in no position to challenge them. Thus, a distributor is vulnerable to being instantly stripped of his or her livelihood and being left with hundreds of thousands of dollars in unsold inventory.

The bill, sponsored by the Department of Employment and Economic Development, says these agreements can still be broken, but on terms fair to both parties. The manufacturer must give notice and state the reasons for ending the relationship -- and take back the unsold goods and parts.

That's only fair. Indeed, fairness and equity are the reasons for approving this bill. The kind of protection contemplated by this bill is already available to automobile and equipment dealers, beer distributors and franchisees. The continuing consolidation of manufacturers and the concentration of market power make a persuasive case for extending this protection to all industries.

Yet from the manufacturers' coalition propaganda, you would think the American way of life was under attack. They claim consumers would pay higher prices, retailers wouldn't open new stores, existing distributors would freeze others out of the market and plants would close or go bankrupt.

Can anyone really believe these blatantly transparent scare tactics?

Yet members of the House Economic Matters Committee seem to be falling for this claptrap. They can't seem to summon the intellectual courage to look beyond the propaganda.

These legislators should move to safeguard an industry that accounts for $51 billion in wholesale sales and employs 110,000 workers. They should not fall for the artlessly dishonest tactics of big -- and mostly out-of-state -- manufacturers.

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