HELP, HINDRANCE? Bill to aid Md. businesses sparks debate


ANNAPOLIS -- The bill's proponents call it a little matter that would help protect Maryland businesses against the whims of major manufacturers, and save a lot of jobs in the process.

Its opponents say it could lock those manufacturers into business relationships, under threat of an injunction that would prevent the manufacturer from selling its goods in Maryland. That, in turn, could convince some manufacturers to distribute their products in Maryland by using companies based outside the state.

Just as important as what's in House Bill 1314, some observers say, is how it came about.

The bill has some high-powered support. Since last fall, Baltimore businessman Calman "Buddy" Zamoiski, who owns Independent Distributors Inc. and is chairman of the Baltimore Symphony Orchestra board among other civic works, has been lobbying Gov. William Donald Schaefer and others for their support of the measure.

And it was sponsored at the request of the Department of Economic and Employment Development, headed by Mark L. Wasserman, the governor's former chief of staff. The coalition of eight companies that includes Mr. Zamoiski's has hired lobbyist Alan Rifkin, Mr. Schaefer's former chief legislative officer.

The bill requires a manufacturer to buy back whatever inventory it sold to a wholesale distributor -- defined in the bill to include Mr. Zamoiski's company, among others -- if the manufacturer ends the relationship without "good cause."

A manufacturer also must give 60 days' notice before ending a relationship with a Maryland distributor. And the manufacturer must allow the distributor to come up with a plan to solve problems that led to the termination notice.

The bill is needed, Secretary Wasserman told the House Economic Matters Committee last week, to protect some wholesalers. The industry employs about 100,000 people in more than 7,000 companies in Maryland, but it's not clear how many of those employers would be affected.

"Our position is . . . that the state ought not to interfere with private business relationships unless it becomes necessary to protect the economy of Maryland," Mr. Wasserman said, adding that economic protection is warranted in this case.

Mr. Rifkin said the wave of 1980s mergers and acquisitions has led many manufacturers arbitrarily to cut off their distributors.

What if a manufacturer decided to set up an outlet store or othersales network, and suddenly ended relationships with Maryland distributors? That could hurt the R. E. Michel Co. Inc., a Glen Burnie heating and ventilation distributor, according to President Robert Michel. Without the 60-day notice requirement, there would be 700 people out looking for a job while I was out looking for a replacement" manufacturer, he said.

Mr. Michel and others said they have little or no economic leverage when a manufacturer comes to call, and the bill would give them some much-needed protection.

But opponents fear the bill could prohibit companies from ending their relationships with distributors, even if an existing contract allows them to, or if there's a reason not covered under the definition of "good cause."

Good cause, a matter ordinarily left to the courts to decide, is defined in the bill as the distributor's failure to sustain a sales volume or service level comparable to others in the industry, or to make payment for products received.

But if, for instance, a manufacturer decides to drop the distributor in order to set up its own sales network, that's not considered "good cause." Neither is a situation where a major retailer like Wal-Mart or Nordstrom tells a manufacturer it doesn't want to deal with a wholesaler. In those cases, opponents say, the bill would lock the manufacturer into its relationship with the distributor, under threat of injunctions and compensatory damages.

Late Friday evening, Mr. Rifkin was negotiating with his primary opponent, lobbyist Franklin Goldstein, who represents four major manufacturers associations, including furniture makers, electronics and business machine manufacturers.

The negotiations centered around whether the bill merely would include the buyback and 60-day notice requirements, or whether it would block terminations of distributorships, except for narrow exceptions.

The House committee has not voted on the bill yet.

One last note: the bill as amended by Mr. Rifkin is retroactive to Jan. 1, 1992.

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