Eight years after it was promised, the U.S. Senate has received a proposal that would afford lubricant distributors the same rights as fuel distributors in dealing with their suppliers.
Sen. Harry Reid, D-Nev., submitted a bill last month that would bring lube distributors under the Petroleum Marketing Practices Act. An industry trade group said the action would be especially welcome during a time when the industry has been unsettled by merger after merger.
Whenever you have these mergers, the suppliers end up making a lot of changes in their networks, and inevitably some distributors get left out, said Dan Gilligan, president of the Petroleum Marketers Association of America. We would just like to see some protection to ensure that lube distributors are treated fairly when those kinds of things happen.
According to Gilligan, the most important benefit that lube distributors stand to gain is a requirement that suppliers give at least 90 days notice before canceling contracts.
The chief problem is the short notice that many distributors are receiving, he said. I know a distributor in New Mexico who has been carrying a particular brand for more than 30 years. The supplier was involved in a merger recently, and [the distributor] was told that he was going to be dropped in 30 days.
The same thing happened to more than 100 other marketers. Of course, you cant avoid changes in networks. But for 30 years, this guy has been telling his customers that his brand is the best stuff, and now he has just 30 days to convince them otherwise. We think its only fair to give them more time.
The Petroleum Marketing Practices Act was last amended in 1994, when Congress clarified a clause prohibiting fuel suppliers from terminating or not renewing franchise dealers in order to convert their business to company operations. The legislation also expanded franchisee rights in third-party lease situations and strengthened clauses prohibiting distributors from waiving their rights under the act.
The PMAA lobbied to bring lube distributors under the act as part of the 1994 amendment. It failed but convinced Reid and former Sen. Bennett Johnston, D-La., that lube distributors deserved the same protection. The pair agreed to revisit the issue but were unable to do so when Democrats lost control of the Senate to Republicans.
The PMAA is lobbying to have Reids bill included as an amendment to larger bills, but Gilligan acknowledged that the chances of that happening are not great. If the bill remains by itself, it will probably not be voted on this year and will have to be passed over into the next session of Congress.
You start at the beginning and thats certainly where we are, he said. It may take a few years, but were confident that it will get done eventually. There will be hearings and once marketers come in and describe how they were affected by these mergers, Im sure Congress will recognize that some people were not treated right.