Former Honda dealers angered further by ‘threatening’ letter

Article by Chris Biddle

Following the decision by Honda to suddenly axe 50 dealers from their UK Lawn and Garden network without warning or consultation on 30 September 2020, those dealers affected have been angered by the company’s threatening instructions delivered in a letter sent by First Class Recorded Delivery, (but dated 5 January 2020 (sic).)

The letter addressed ‘Dear Franchise Partner’ (although the franchise had formally terminated on 31 December 2020) instructed the sacked dealers to discontinue using any Honda trademarks, trade names etc covered by its Intellectual Property Rights and to destroy or return to Honda (at the dealers own expense) any signs, instructions books, technical pamphlets, catalogues, documents, paperwork or examples- within 14 days or risk legal infringement.

Furthermore, at the same time Honda sent letters directly to the customers of the sacked dealers confirming the removal of their franchise and simply directed them to their website for alternative dealers ‘to service or repair your Honda product’, adding ‘we apologise for any inconvenience’.

There was no explanation or rationale given. Since the circulation of letter by Honda, there have been numerous reports from those dealers impacted of being contacted by customers asking whether were closing down or going bust.

One said: “I’m angry and also very saddened. We’ve lived and breathed Honda for over 30 years. We looked after their products and put them right at our expense if not covered by warranty, including many machines that had been bought on-line. When I got the termination letter in September, without any warning, I felt physically sick.

“We’ve always played the game, registering machines when many non-specialist outlets would not have done so, and they kick us in the teeth by writing to OUR customers, planting a seed of doubt that we might have done something wrong. To me Honda are the Power of Nightmares.”

Strong words. Like most of you, when I get a letter addressed to Dear Homeowner, it goes straight in the bin.

In all my many years covering this industry, I have never come across such a callous, uncaring, unprofessional approach to ending a business partnership as that displayed here by Honda. To address a dealer who has spent thousands upon thousands of pounds with your company over the years, promoted, sold, and serviced your products as ‘Dear Franchise Partner’ rather by name is quite unforgivable.

But that’s only the tip of the issue.  I understand that this dealer still has over £10,000 worth of machines to sell. To comply with the instructions in the letter, it would appear that he cannot display with Honda logos nor advertise these machines that he has paid for in good faith, if he is not to infringe Honda’s Intellectual Property Rights with all its threatened penalties.

I’m no lawyer, but that would seem to constitute restraint of trade, and the letter as defamatory and in breach of GDPR.

Most dealers ‘do the right thing’. They fill in registration cards and hand over details of their customers to manufacturers whereas many non-specialist sellers do not. Honda know that in such cases, their authorised dealers are obligated to put things right.

Honda has completely misused the word Partner.  They use it with the implication that there is, or was, a mutually beneficial Partnership between two parties.   Nonsense.  Dealers signing dealership agreements, drawn up by international lawyers, must know that they have little or no protection against any negative action taken by the manufacturer.

In summary, it saddens me to write in these terms, because I’ve had a very good relationship with Honda, both as a former dealer and as a journalist.  I was around when Honda launched its power equipment range at the IOG Show at Motspur Park, since when the company has established a strong position in the OPE market. During this time, the lawn and garden division has been headed by some highly professional, approachable and business-like people who understood dealers and the dealer business.

Not anymore. Attempts by dealers to engage in dialogue are ignored. The organisation is now seemingly run by answering machines and malfunctioning mail merge communications!

Honda are quite entitled to uphold contracts signed by dealers – but not surely at the expense of common courtesy, respect for those they call Partners, and then compound their behaviour by writing letters to customers which could quite easily be interpreted as wrongdoing by the dealer or a suggestion of closure.

  • Article by Chris Biddle

BAGMA Comment, Keith Christian Director of BAGMA

Chris Biddle kindly let us re produce his article for the BAGMA Bulletin in the interests of fighting for fair play for all dealers. Honda’s lack of sensitivity, attention to detail and the callous manner in which they have written to their ‘ex-franchise partners’ customers without any explanation which may imply that the dealers have done something wrong is appalling.

Honda have been the champion of protecting their intellectual property rights for many years and we have all seen the efforts they have made to protect these rights. It is very unfortunate that they have not demonstrated an ability to respect the business of their now ex franchise partners. They are clear that they want the past, loyal dealers to be cleansed of all things Honda except the stock they have left them with and perhaps the ongoing issues of warranty, customer care and the liability that a seller has to his customer under UK law.

Whilst changes to distribution may be necessary and suppliers may believe they are doing the right thing for the benefit of themselves and the majority of their customers they absolutely should have more respect and support for their business partners during and after any agreement that may have been made. Threatening legal action by letter if there is no compliance to their rules is just an insult to the integrity and long term support they have been accorded by the dealers they have sacked.

The Honda brand carries a huge amount of weight internationally and they are a well-respected company so surely they could be big enough and sensitive enough to handle the changes they have made more professionally and more sympathetically in respect of the dealers that have supported them over the years.

Dealer contracts in both the garden machinery and agricultural machinery world have been a bone of contention for more than a 100 years. They rarely benefit both sides of the equation equally when drawn up and if they ever have to be referred to or acted on it will invariably be the dealer who loses out and is left out of pocket and having to rebuild a business. Fortunately, garden machinery dealers tend to be multi franchised and are very resilient and can adapt to change and survive.

Out of necessity contracts have to contain lots of detail but before a dealer signs one check the performance clauses and the termination clauses. Make sure that in the unhappy event you have to part company you can get out clean and with some of your investment intact to move forward. No doubt the Honda dealer contract is watertight and covers their actions in legal terms but will do little for the reputation of the dealers involved and some of the actions Honda have taken may be considered to be defamatory to their past Franchise Partners.