[Congressional Record Volume 148, Number 102 (Wednesday, July 24, 2002)]
[Senate]
[Page S7311]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REID (for himself, Mr. Burns, and Mr. Ensign):
  S. 2781. A bill to amend the Petroleum Marketing Practices Act to 
extend certain protections to franchised refiners or distributors of 
lubricating oil; to the Committee on Energy and Natural Resources.
  Mr. REID. Mr. President, during the 103rd Congress in 1994, the 
Petroleum Marketing Practices Act, PMPA, was amended to protect 
independent petroleum wholesalers and retailers from arbitrary and 
unfair termination or non-renewal of their franchise relationships with 
major oil companies.
  However, this protection was provided only to motor and diesel fuel 
franchisees. Franchisees of other petroleum products sold by the major 
oil companies lack similar protection.
  Today, I rise with Senators Burns and Ensign to introduce a bill that 
extends the same protections enjoyed by the motor fuel industry to the 
lubricant industry.
  I have heard from a constituent in Nevada that his franchise 
agreement to sell lubricating oils to car dealers in Las Vegas was 
arbitrarily canceled with 30 days notice. In essence, he had thirty 
days to convert all of his customers to a new brand.
  This seem grossly unfair and, in fact, if the product sold by my 
constituent were gasoline or diesel fuel rather than lubricating oil, 
it would have been illegal.
  I have been made aware of similar terminations or non-renewals in 
other states.
  Without equal protection under the law, lubricant franchisees are 
vulnerable to predatory cancellation by their suppliers. This situation 
is exacerbated by recent mergers and acquisitions in the petroleum 
industry.
  The merger of oil giants Chevron and Texaco and Shell Oil's recent 
acquisition of Penzoil-Quaker State will undoubtedly result in the 
termination of many independent lubricant franchisees. In New Mexico, 
there was a lubricant franchisee who had been promoting and 
distributing a branded lubricant to his customers for over 30 years, 
only be canceled with 30 days notice following a merger of refiners. 
This unfair practice stifles competition in the marketplace and 
invariably results in raising the price of the product, which hurts 
American consumers and small business. This is especially troublesome 
in rural areas.
  Given the increasingly anti-competitive nature of the petroleum 
industry, the time has come to extend protections under current law for 
motor fuel marketers to include lubricant franchisees.
  There are approximately 3,500 independent distributors and nearly 
25,000 commercial retail lube oil outlets that could be impacted by the 
increasing frequency of lubricant franchise cancellations. Refiners 
have not suffered by complying with PMPA in motor fuels. Consequently, 
it is hard to believe it would be much of an imposition to include the 
much small segment of lubricant franchisees.
  I introduce this bill today because it protects small businesses, 
benefits consumers and ensure fair competition in the marketplace.
  In short, this bill is the right thing to do and I hope my colleagues 
will support it.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2781

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. PROTECTION OF FRANCHISED DISTRIBUTORS OF 
                   LUBRICATING OIL.

       (a) Definitions.--Section 101 of the Petroleum Marketing 
     Practices Act (15 U.S.C. 2801) is amended--
       (1) in paragraph (1)(B)--
       (A) in clause (ii)(II), by striking ``and'' at the end;
       (B) by redesignating clause (iii) as clause (iv); and
       (C) by inserting after clause (ii) the following:
       ``(iii) any contract under which a refiner authorizes or 
     permits a distributor to use, in connection with the sale, 
     consignment, or distribution of lubricating oil, a trademark 
     that is owned or controlled by the refiner; and'';
       (2) in paragraphs (2), (5), and (6), by inserting ``or 
     lubricating oil'' after ``motor fuel'' each place it appears;
       (3) by striking paragraphs (3) and (4) and inserting the 
     following:
       ``(3) Franchisee.--The term `franchisee' means--
       ``(A) a retailer or distributor that is authorized or 
     permitted, under a franchise, to use a trademark in 
     connection with the sale, consignment, or distribution of 
     motor fuel; or
       ``(B) a distributor that is authorized or permitted, under 
     a franchise, to use a trademark in connection with the sale, 
     consignment, or distribution of lubricating oil.
       ``(4) Franchisor.--The term `franchisor' means--
       ``(A) a refiner or distributor that authorizes or permits, 
     under a franchise, a retailer or distributor to use a 
     trademark in connection with the sale, consignment, or 
     distribution of motor fuel; or
       ``(B) a refiner that authorizes or permits, under a 
     franchise, a distributor to use a trademark in connection 
     with the sale, consignment, or distribution of motor fuel.''; 
     and
       (4) by adding at the end the following:
       ``(20) Lubricating oil.--The term `lubricating oil' means 
     any grade of paraffinic or naphthenic lubricating oil stock 
     that is refined from crude oil or synthetic lubricants.''.
       (b) Protection of Franchised Distributors of Lubricating 
     Oil.--Section 102(b)(2) of the Petroleum Marketing Practices 
     Act (15 U.S.C. 2802(b)(2)) is amended by inserting after 
     subparagraph (E) the following:
       ``(F) Franchised distributors of lubricating oil.--In the 
     case of a franchise between a refiner or a distributor for 
     the sale, distribution, or consignment of trademarked 
     lubricating oil, a determination made by the franchisor in 
     good faith and in the normal course of business to withdraw 
     from the marketing of the lubricating oil in the relevant 
     geographic market in which the franchised lubricating oil is 
     distributed, if--
       ``(i) the determination is made--

       ``(I) after the date on which the franchise is entered into 
     or renewed; and
       ``(II) on the basis of a change in relevant facts or 
     circumstances relating to the franchise that occurs after the 
     date specified in subclause (I); and

       ``(ii) the termination or nonrenewal is not for the purpose 
     of converting any accounts subject to the franchise to the 
     account of the franchisor.''.
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