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Legislative Memo

Heather Briccetti
Director of Government Affairs
T 518.465.7517 x203
www.bcnys.org

BILL:

S. 6151-B (Winner)
Calendar # 896

Support

SUBJECT:

Franchise restrictions on the Sale of Motor Fuel

 

DATE:

June 20, 2008

 

The Business Council opposes this bill that would amend the General Business Law to statutorily invalidate any provision of existing motor fuel franchise agreements that prohibit the sale of unbranded gasoline.  This would permit gasoline retailers who are franchise holders to purchase and sell unbranded motor fuel in addition to the brand of motor fuel supplied to them under the terms of the agreement. 

While existing law, Section 199-j renders null and void any franchise provision which requires a dealer to purchase or sell products of the distributor other than motor fuel, this proposal goes far beyond Section 199-j and steps into the realm of contractual interference.

Part of the purpose of a franchise is the attraction that the “brand” holds for the consumer.  Franchise agreements are intended to provide uniformity in the delivery and quality of the branded product.  For the same reason that food franchises (i.e., “McDonalds”) do not permit the sale of non-branded food products, motor fuel franchises limit the sale of non-branded fuel except under specified conditions set forth in individual agreements. This bill raises potential constitutional and public policy issues that will only compound competitive disadvantage that many of these businesses face, without providing any assurance that a public benefit will result.

No other state in the nation has enacted “open supply” legislation.  We do not believe this legislation will result in any significant public benefit, such as increased competition.  On the other hand, it will interfere with existing contracts, and raise issues regarding compliance with federal fuel specifications.

For these reasons, The Business Council respectfully opposes S.6151-B.