The bill amends the General Business Law to prohibit a gasoline producer, refiner or wholesaler from selling, transferring or assigning its business interest in a retail gasoline outlet that is leased to a motor fuel dealer unless it first makes a bona fide effort to sell the outlet to the dealer, or provides the dealer a “right of first refusal” of any offer to buy the outlet by a third party.
While the legislation targets a narrow component of the commercial sector, it raises contract and property right issues of broad interest to the state's business community.
The Business Council opposes the legislation on a number of grounds including:
- The bill interferes with the established contracts and franchise arrangements, for no compelling public policy purpose.
- The bill will impact the property rights of the current retail outlet owner, and will likely lead to a diminution of its present value.
- The bill grants various property rights to lessees that are comparable to those of a landowner although they incur less risk as a tenant, thus providing an unfair benefit to lessees without the risk.
- The bill would prohibit a producer that reorganizes its business from transferring its station to an affiliate or subsidiary without first providing an opportunity for the lessee to make an offer.
- The bill does not provide for a time limit on the dealer's right of refusal, which could enable dealers to tie up a potential sale through court action.
- This bill has been identified by the Rainbow Push Coalition as a potential barrier to inclusion in the oil and gas business, by locking in existing dealerships and keeping out new entrants
While this "first right of refusal" seems innocent on its face, it could have a devastating impact on minority participation in the oil and gas industry.. As the major companies like Shell, Exxon and others move to divest themselves of these gas stations and distributorships, African American entrepreneurs for the first time have broken through the segregation barrier and been able to acquire these retail assets.
- Rainbow Push Coalition Veto Request Memo for S.7410-B (2010)
Finally, Existing federal law governs these transactions: The Petroleum Marketing Practices Act (PMPA) was enacted in 1978 to provide franchisees with a level playing field with in contract disputes with their franchisors. Furthermore Article 11-B of the General Business Law already prohibits franchise terminations, except for good cause shown (e.g., fraud, mismanagement).
For these reasons, The Business Council recommends against advancement of this legislation.