[Congressional Record Volume 146, Number 121 (Tuesday, October 3, 2000)]
[House]
[Pages H8688-H8690]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MOTOR VEHICLE FRANCHISE CONTRACT ARBITRATION FAIRNESS ACT OF 2000
Mrs. BONO. Madam Speaker, I move to suspend the rules and pass the
bill (H.R. 534) to amend chapter 1 of title 9 of the United States Code
to permit each party to certain contracts to accept or reject
arbitration as a means of settling disputes under the contracts, as
amended.
The Clerk read as follows:
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Motor Vehicle Franchise
Contract Arbitration Fairness Act of 2000''.
SEC. 2. ELECTION OF ARBITRATION.
(a) Motor Vehicle Franchise Contracts.--Chapter 1 of title
9, United States Code, is amended by adding at the end the
following:
``Sec. 17. Motor vehicle franchise contracts
``(a) For purposes of this section, the term--
``(1) `motor vehicle' has the meaning given such term under
section 30102(6) of title 49; and
``(2) `motor vehicle franchise contract' means a contract
under which a motor vehicle manufacturer, importer, or
distributor sells motor vehicles to any other person for
resale to an ultimate purchaser and authorizes such other
person to repair and service the manufacturer's motor
vehicles.
``(b) Whenever a motor vehicle franchise contract provides
for the use of arbitration to resolve a controversy arising
out of or relating to the contract, arbitration may be used
to settle such controversy only if after such controversy
arises both parties consent in writing to use arbitration to
settle such controversy.
``(c) Whenever arbitration is elected to settle a dispute
under a motor vehicle franchise contract, the arbitrator
shall provide the parties to the contract with a written
explanation of the factual and legal basis for the award.''.
(b) Technical and Conforming Amendment.--The table of
sections for chapter 1 of title 9, United States Code, is
amended by adding at the end the following:
``17. Motor vehicle franchise contracts.''.
SEC. 3. EFFECTIVE DATE.
The amendments made by section 2 shall apply to contracts
entered into, amended, altered, modified, renewed, or
extended after the date of enactment of this Act.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
California (Mrs. Bono) and the gentleman from Michigan (Mr. Conyers)
each will control 20 minutes.
The Chair recognizes the gentlewoman from California (Mrs. Bono).
General Leave
Mrs. BONO. Madam Speaker, I ask unanimous consent that all Members
may have 5 legislative days to revise and extend their remarks and
include extraneous material on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from California?
There was no objection.
Mrs. BONO. Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, I rise today in support of my legislation that will
correct unfair auto dealer franchise agreements that are purposefully
written in favor of the manufacturer. With over 250 cosponsors, this
Congress has realized that America's community auto dealers are in a
unique position in franchise law and that relief is needed.
In 1925, Secretary of Commerce Herbert Hoover said of the Federal
Arbitration Act that was recently passed by Congress, ``If the bill
proves to have some defects, and we know most legislative measures do,
it might well, by reason of the emergency, be passed and amended later
in the light of further experience.'' It is the result of ``further
experience'' that brings us to amend the Federal Arbitration Act today.
Current business practice is that both the auto dealer and the
manufacturer go through a process of mandatory binding arbitration in
the case of a legal dispute. Unlike other forms of legal resolution,
the auto dealer arbitration process has no jury, no rules of evidence
or appeals process. H.R. 534, however, would simply make this mandatory
binding arbitration in motor vehicle franchise contracts voluntary.
It is our turn to amend the Federal Arbitration Act and return some
of the power back to the States. In my home State of California, there
are numerous State laws that cover motor vehicle franchise contracts
and sufficient State forums to hear the legal disputes that may arise
from these agreements.
However, California's efforts to preserve the right of its auto
franchisees to obtain a fair hearing for claims brought under the
California franchise investment law have been preempted by Federal law.
Because State laws to provide auto dealer protections are currently
prohibited, it is now appropriate to revisit this issue.
Madam Speaker, many vehicle manufacturers already have inserted
mandatory binding arbitration clauses in their standard dealer
agreements. With broad power to unilaterally amend their dealer
agreements without dealer input at any point, every manufacturer could
force mandatory binding arbitration on its dealers tomorrow.
Madam Speaker, I would like to thank the gentleman from Illinois (Mr.
Hyde) for his leadership and the gentleman from Massachusetts (Mr.
Delahunt) for his dedication to see this legislation passed into law.
It has been with his hard work and bipartisan spirit that this bill has
made it to the floor of the House today. I would also like to take this
opportunity to thank the gentleman from Pennsylvania (Mr. Gekas), the
subcommittee chairman, for his effort and leadership on this issue. The
gentleman from Pennsylvania has been a true leader in the Subcommittee
on Commercial and Administrative Law since I have been a Member, and I
have appreciated his counsel and friendship in my 2 years on this
committee.
I would like to thank Jim Hall on my staff and Chris Katopis and Ray
Smietanka on the Judiciary staff as well.
Madam Speaker, I reserve the balance of my time.
Mr. CONYERS. Madam Speaker, I yield myself such time as I may
consume.
(Mr. CONYERS asked and was given permission to revise and extend his
remarks.)
Mr. CONYERS. Madam Speaker, I rise in strong support of this very
important measure which would amend the Federal Arbitration Act to
permit parties to automobile manufacturers and automobile dealer
agreements to accept or reject arbitration of disputes. Essentially,
H.R. 534 prohibits binding arbitration in contracts between automobile
manufacturers and automobile dealers.
This legislation deals with an increasing problem of motor vehicle
manufacturers forcing small business automobile and truck dealers into
non-negotiated agreements containing mandatory binding arbitration
clauses. As a result of these clauses, binding arbitration becomes the
sole remedy for resolving disputes between the manufacturer and the
dealer. Although arbitration is a valuable form of alternative dispute
resolution, when its use is
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forced upon automobile dealers, they are denied use of courts and other
state forums otherwise available to resolve such disputes. Such
restrictive contractual terms are frequently proffered to the dealer on
a ``take it or leave it'' basis with the threat of loss of manufacturer
support for the dealer.
H.R. 534 responds to this problem by allowing the use of arbitration
as a method to settle contract controversies if both parties consent in
writing. This would ensure that dealers are not forced to give up their
legal rights to obtain or maintain their business. In addition, this
legislation will send a strong message regarding the inequitableness of
mandatory binding arbitration and will act as an incentive for broader
legislation that prohibits mandatory arbitration contract clauses for
consumers as well.
Requiring dealers to agree to mandatory binding arbitration as a
condition of obtaining, renewing, or maintaining their dealership is
contrary to fundamental fairness. The intent of this proposed
legislation is to make arbitration of disputes between dealers and
manufacturers absolutely voluntary and I support it wholeheartedly.
Madam Speaker, I yield such time as he may consume to the gentleman
from Massachusetts (Mr. Delahunt).
Mr. DELAHUNT. I thank the gentleman for yielding me this time.
Madam Speaker, I rise in support of H.R. 534. I particularly want to
commend my friend and colleague, the gentlewoman from California, for
her authorship and her fine work on this very significant bill before
us. This bill is about fairness, the most American of virtues, if you
will. It is really, truly about preserving local businesses that are a
cornerstone in our communities.
{time} 1730
For small business, arbitration is often an effective alternative to
going to court to settle disputes, and where arbitration is in their
interests, sensible business people will generally agree to do that.
But they do not need to be coerced. Chances are that when coercion is
involved, it is because the party with greater leverage stands to gain
from a procedure that deprives the other party of its rights and
remedies under State law, laws that were enacted to protect the less
powerful from predatory practices.
By passing H.R. 534, we can level the playing field, so that both the
manufacturer and the dealer are free to negotiate dispute resolution
procedures that are truly voluntary and truly in their mutual interest.
Some have charged that this interferes with freedom of contract.
Nothing could be further from the truth, unless you define ``freedom of
contract'' as the freedom of giant multinational auto makers to impose
one-sided, take-it-or-leave-it contracts on small, locally owned
dealerships.
Let us pause and remember who these local dealers are. They are the
people who sustain our local economies, who offer valuable goods and
services to consumers and provide jobs, and they pay taxes. They are
the people who contribute to their communities in ways that cannot be
measured in terms of dollars and cents.
It is the local dealer who sponsors the little league team; it is the
local auto dealer who funds the after-school programs, and church
picnics, and food banks, and domestic violence shelters. It is the
local auto dealer who is often the president of the local chamber of
commerce and also the chairman of the United Way.
The people we are talking about are an integral part of the fabric of
our communities. They are truly a mainstay of the American way of life,
and they are slowly, inexorably being squeezed out by economic forces
that they cannot control, but by forces we can control.
We have heard a lot about globalization lately, and many of us are
frustrated by our inability to temper its negative effects on the
health of our communities. The use by large corporations of unfair,
unbalanced franchise agreements is only one of those effects; but it is
one that we can address, and we do it with this bill.
Some have complained that the bill does not go far enough, that
consumers and other segments of the small business community deserve
comparable attention. Well, they are right, but that is not an argument
against this bill. It is an argument, in fact, in favor of it. But by
passing H.R. 534 we will be raising the bar for what constitutes fair
dealing in all commercial relationships and setting a precedent that
will ultimately lead to greater fairness and greater freedom for all.
Again, I conclude by thanking the sponsor of this bill for her
outstanding work, and urge its enactment.
Mr. CONYERS. Mr. Speaker, I yield such time as he may consume to the
gentleman from Wisconsin (Mr. Barrett).
Mr. BARRETT of Wisconsin. Mr. Speaker, I rise today in strong support
of H.R. 534, the Fairness and Voluntary Arbitration Act. I am proud to
be one of the 252 cosponsors this bill introduced by the gentlewoman
from California (Mrs. Bono), and I congratulate her for taking the
leadership on this issue.
H.R. 534 would correct what many of us see as a serious problem. When
disputes arise between automobile manufacturers and dealers, the
manufacturers are able to enforce mandatory arbitration provisions in
their contracts. Quite simply, this bill would specify that binding
arbitration is an option only if both sides agree to go in that
direction.
The relationship between automobile manufacturers and dealers has
often been one-sided over the years, with manufacturers enjoying
substantial bargaining advantages over dealers, many of whom are small
businesses. Dealers often have no choice but to sign a contract that
includes mandatory binding arbitration, further eroding their rights.
This is an issue of fairness for small businesses, who should not be
forced into binding arbitration against their will. I urge my
colleagues to pass this bill.
Mr. GEKAS. Mr. Speaker, the Judiciary Committee has reported H.R.
534, a bill that allows parties who have signed motor vehicle franchise
contracts containing arbitration clauses to accept or reject
arbitration as a means of settling their contractual disputes.
Arbitration is an increasingly common form of dispute settlement
where parties submit their contractual claims for resolution by a
neutral arbitrator. Arbitration and other forms of alternative dispute
resolution have greatly reduced formal litigation costs while providing
parties with a fair, efficient, and timely venue to resolve their
disputes.
Some parties, however, claim that arbitration may be burdensome and
unfair. Motor vehicle dealers in particular have complained that
manufacturers use superior bargaining power to require that they accept
nonnegotiable franchise contracts containing binding arbitration
clauses. These mandatory arbitration clauses place dealers in the
position of having to forego state legal protections designed to remedy
the bargaining imbalance between dealers and manufacturers. H.R. 534
addresses this concern by allowing dealers or manufacturers to reject
arbitration and seek legal relief for breach of contract.
Since passage of the Federal Arbitration Act in 1925, the Congress
has unequivocally encouraged alternative dispute resolution. We will
continue to do so. However, we must also periodically examine the
efficacy of binding arbitration clauses in exceptional circumstances to
ensure that arbitration continues to serve as a fair and efficient
alternative to formal litigation. H.R. 534 addresses one such
exceptional circumstance, and I urge your support of the bill.
Mr. PASCRELL. Mr. Speaker, I am pleased to rise today in support of
H.R. 534.
This legislation is designed to specifically help automobile dealers,
but it is also legislation that will help consumers and our communities
at large.
There are 700 new automobile retail businesses throughout New Jersey.
Dealerships are located on every highway, and in almost every downtown
area throughout the state. I know driving down Route 46, and Route 23,
and on other roads, I see dozens of these businesses that are
contributing to the betterment of Northern New Jersey.
These small businesses serve as important parts of the community. You
can see their names on the backs of youth sports league jerseys and
they always provide funds to civic events and fundraising drives.
It is time we in Congress give back on behalf of our communities, and
do something to resolve an inequity and promote fairness in the
automobile industry.
H.R. 534 merely makes binding arbitration in dealer/manufacturer
disputes a voluntary option. This is needed legislation to help a
segment of the small business community that needs our help.
We must pass this legislation for not only business owners, but for
their employees as well.
Automotive retailing in New Jersey accounts for the direct employment
of almost 45 thousand workers. There are also 24 thousand workers who
indirectly owe their jobs to these businesses in the Garden State. That
is 67
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thousand workers who will see the benefits this legislation provides.
This legislation is also of great benefit to the consumer, who as we
all know, is always looking to get the best possible deal on a car.
H.R. 534 promotes competition in an already very competitive industry,
yielding the best prices for dealers, and these deals can be passed
onto the consumer.
As a member of the House Small Business Committee, I am always
looking to help small businesses succeed and grow. Small business is
the engine that has brought our economy to where it is today.
This legislation will help one group of small businesses in their
pursuit of economic success. I am pleased to be a cosponsor of this
bill and support it on the floor.
Mr. NADLER. Mr. Speaker, today we consider legislation intended to
protect automobile dealers against binding arbitration clauses in
contracts with manufacturers and franchisers. Although it was narrowed
in Subcommittee to cover only one industry, it is an important and
necessary step, one for which the testimony we received in the
Judiciary Committee certainly makes the case.
Too often, these businesses are presented with contracts on a take-
it-or-leave-it basis. If they do not accept the contract, with the
binding arbitration clause, they risk losing their franchise and with
it years of investment, both financial and the hard work they and their
families have put into the business. That is a pretty coercive
situation and one which most members of this House rightly view as
contracts of adhesion.
Moreoever, binding arbitration often deprives these businesses of
their rights under State law, and their due process rights in court.
Under certain circumstances, binding arbitration even threatens some
contractual protections.
Prohibiting this kind of unconscionable coercion is appropriate and I
plan to support it.
In addition to leaving other businesses exposed, this bill fails to
protect individual consumers who also suffer violations of their rights
under binding arbitration clauses in service agreements with sellers,
and in credit agreements. During our hearing one witness for the auto
dealers did admit that some dealers use these clauses in their
contracts with their customers.
Clearly this is a situation which also needs to be remedied. Now that
the House has endorsed this fundamental protection for automobile
dealers, I hope that the same concern which animates the bipartisan
support for this legislation will help bring that bill into law as
well.
So while I do not believe this legislation goes far enough, it is an
important step to protect small businesses and I urge its passage.
Mr. CONYERS. Mr. Speaker, I have no further requests for time, and I
yield back the balance of my time.
Mrs. BONO. Mr. Speaker, I have no further requests for time, and I
yield back the balance of my time.
The SPEAKER pro tempore (Mr. Ose). The question is on the motion
offered by the gentlewoman from California (Mrs. Bono) that the House
suspend the rules and pass the bill, H.R. 534, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
The title of the bill was amended so as to read: ``A bill to amend
chapter 1 of title 9, United States Code, to provide for greater
fairness in the arbitration process relating to motor vehicle franchise
contracts.''.
A motion to reconsider was laid on the table.
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