STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

COLONIAL PONTIAC, INC., d/b/a ) COLONIAL ISUZU and AMERICAN ) ISUZU MOTORS, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 81-3054

) DAVE ZINN TOYOTA, INC., d/b/a ) ISUZU OF NORTH MIAMI and ) DEPARTMENT OF HIGHWAY SAFETY ) AND MOTOR VEHICLES, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause came on for hearing before Linda M. Rigot, the assigned Hearing Officer of the Division of Administrative Hearings, on April 14, 1982, in Miami, Florida.

APPEARANCES

For Petitioners: William E. Sundstrom, Esquire

Tallahassee, Florida

For Respondent Dave Zinn Karl J. Leib, Jr., Esquire Toyota d/b/a Isuzu of Coral Gables, Florida North Miami:

For Respondent DHSMV: No Appearance

ISSUE

Colonial Pontiac, Inc., d/b/a Colonial Isuzu was issued a letter of intent to become an Isuzu dealer by American Isuzu Motors, Inc., and filed an application with the Department of Highway Safety and Motor Vehicles for the issuance of a license as an Isuzu dealer. Dave Zinn Toyota, Inc., d/b/a Isuzu of North Miami filed a written protest to the issuance of such license.

Accordingly, the issue for determination is whether the application of Colonial Pontiac, Inc., to do business as a licensed Isuzu dealer should be approved.

Petitioners Colonial Pontiac, Inc., d/b/a Colonial Isuzu and American Isuzu Motors, Inc., presented the testimony of William Abbott, Mark Darling and Mark Kahn. Additionally, Petitioners Exhibits numbered 1, 2, 5, 6 and 7 were admitted in evidence. Petitioners' Exhibits numbered 3 and 4 were withdrawn by the Petitioners.

David Zinn and Carl M. Yearington testified on behalf of Respondent Dave Zinn Toyota, Inc., d/b/a Isuzu of North Miami. Additionally, Respondent's Exhibits numbered 1 and 2 were admitted in evidence on behalf of Respondent Dave Zinn Toyota, Inc., d/b/a Isuzu of North Miami.

Both petitioners and Respondent Dave Zinn Toyota, Inc., d/b/a Isuzu of North Miami submitted posthearing proposed findings of fact in the form of a proposed recommended order. To the extent that any proposed findings of fact have not been adopted in this Recommended Order, they have been rejected as not having been supported by the evidence, as having been irrelevant to the issues under consideration herein, or as constituting unsupported argument of counsel or conclusions of law.

In conjunction with the filing of proposed findings of fact, the same parties filed written closing arguments. Thereafter, Respondent Dave Zinn Toyota, Inc., d/b/a Isuzu of North Miami filed an Objection and Motion to Strike the Petitioners' Statement of the Case and Attachments to the Statement of Case, to which pleading Petitioners filed their Reply to Objection and Motion to Strike. Although the most that can be said for the subject documents is that they are supportive of some argument of counsel, counsel are usually afforded wide latitude in argument and, therefore, Respondent's Motion to Strike be and the same is hereby denied.

FINDINGS OF FACT

1. Petitioner American Isuzu Motors, Inc. (hereinafter Isuzu"), is the duly licensed distributor of Isuzu cars and trucks in the United States. Isuzu motor vehicle are manufactured in Japan. The Isuzu passenger car is intended to compete with smaller cars (compacts and subcompacts) presently merchandised in the United States, such as Toyota, Datsun, Mazda, Subaru, Honda and Volkswagen products. The Isuzu truck being marketed in the United States is a lightweight pickup truck.

   
   

2. Isuzu's initial marketing strategy was to open 200 dealerships in 22 states. The dealerships were to be average-size and full-line, meaning they would sell both Isuzu passenger vehicles and pickup trucks. Isuzu required, however, that Isuzu sales and service occur in areas or facilities separate and distinct from where sales or servicing for other manufacturers occur.

   
   

3. Isuzu refuses to assign a particular market area or territory to any dealer.

   
   

4. At the time Isuzu commenced the establishment of its dealer network, it conducted market surveys and determined that there should be three Isuzu dealers in Dade County, Florida. In order to avoid any misunderstanding, each dealer was required by Isuzu to sign and date a memorandum containing that information. The memorandum established that during Isuzu's marketing Phase I and II there would be two Isuzu dealers in Miami/Dade County, and during Phase III an additional dealer would be added. Isuzu's plan and representation to dealer applicants was that there would be no more than three Isuzu dealers in Miami/Dade County, with one being located in North Dade, one being located in Central Dade and one being located in South Dade. By the time of the hearing in this cause, Isuzu had not yet reached Phase III of its marketing strategy.

5. Isuzu began marketing vehicles in the United States in March, 1981. On April 1, 1981, the Japanese government imposed voluntary trade restrictions upon its manufacturers. Under the voluntary restraints, Isuzu is permitted to import into the United States only 17,000 to 18,000 cars per year.

   
   

6. Isuzu did not change any of its marketing concepts due to the decreased availability of its product to be caused by the voluntary restraints. Rather, since the restraints apply only to passenger cars and not to trucks, Isuzu began appointment of additional "trucks only" representatives. Isuzu continued to establish its dealer distribution network of 200 dealers planned before the imposition of trade restraints.

   
   

7. Respondent Dave Zinn Toyota, Inc., d/b/a Isuzu of North Miami (hereinafter "Zinn") was the first dealer established by Isuzu in Dade County. As part of Zinn's approval, David Zinn initialed the agreement that there would eventually be up to three dealers in Dade County. Zinn's location made him the North Dade dealer of Isuzu. He constructed a facility in accordance with plans approved in advance, as required, by Isuzu. He opened his dealership for business in September, 1981. Zinn was the only Isuzu dealership in Dade County until January, 1982, when the second Isuzu dealer commenced business as Midway Isuzu and became the Central Dade dealer. By the time of the formal hearing in this cause, a letter of intent had been issued by Isuzu to Potamkin to operate an Isuzu dealership in South Dade, at Cutler Ridge.

   
   

8. In September, 1981, the same month that Zinn was opening for business, Isuzu issued a letter of intent to Colonial Pontiac, Inc., d/b/a Colonial Isuzu (hereinafter "Colonial") authorizing Colonial to become its "East-Central" dealer in Dade County. Colonial filed an application for licensure as an Isuzu dealer with the Respondent Department of Highway Safety and Motor Vehicles. Zinn filed a protest against the issuance of a license to Colonial, the proposed fourth dealer in Dade County.

   
   

9. The parties have stipulated that Zinn is fully complying with all provisions of its agreements with Isuzu and that the only basis upon which Colonial can be licensed over Zinn's protest is if Isuzu can show its existing dealers to be providing inadequate representation.

   
   

10. The parties have stipulated that both Colonial and Zinn are experienced and very successful automobile dealers.

    
    

11. The site of Colonial's proposed Isuzu facility is 6.8 miles from Zinn.

    
    

12. Between September, 1981, when Zinn opened for business, and December, 1981, Zinn was the only Isuzu dealer in Dade County. The end-of-year 1981 statistics introduced by Isuzu reveal that Zinn sold fewer Isuzu cars during his three months in business than all of the Isuzu dealers in Broward County combined, than all of the Isuzu dealers in Orange County combined, and than all of the dealers in the five-county Jacksonville area combined for the 1981 calendar year. Additionally, Zinn sold fewer Isuzu automobiles than all of the Florida dealers selling all makes of competing cars during the year 1981. No further finding can be based upon these statistics since there was no evidence to show how many Isuzu dealers were in the "comparative" areas, when they commenced business, or how many cars they received for sale in order than any meaningful comparison can be made to the one dealer in Dade County in operation for only three months. Additionally, some of the figures introduced by Isuzu relate to a combined Dade/Broward Counties market.

13. Some of the competing manufacturers have more than three dealers in Dade County. No evidence was introduced to show the location of all competing dealers, how long they have been in business in Dade County, where their sales are made, or how many automobiles each dealer has for sale in comparison to the number available for sale by the existing Isuzu dealers in Dade County.

    
    

14. When Isuzu established its system of distribution and sale, it determined through its own market studies that it would achieve adequate representation in Dade County by the placement of one dealer each in North, Central and South Dade County. Isuzu admits it has not changed its estimate of the number of dealers supportable in Dade County, and it conducted no market survey before deciding to give Colonial an Isuzu dealership.

    
    

15. Since the voluntary restraints were imposed on the importation of Isuzu passenger automobiles, Isuzu has established a formula for allocating the small number of cars being imported among its full-dealer network. That formula has never been reduced to writing and therefore had not been distributed among the Isuzu dealers. Isuzu admits it can exercise discretion as to whether a dealer will receive any vehicles to sell at all.

    
    

16. Isuzu introduced extensive evidence to show the location "clusters" of dealers in Dade County. A review of those maps indicates that the identification of where a cluster begins and ends depends only on the imagination of the person drawing the line. Although the cluster concept is generally accepted as a strong factor in determining the placement of dealers, no evidence was introduced to show that the "cluster" where Colonial is located is likely to increase Isuzu's representation within Dade County. For example, extensive evidence was proffered on where Colonial sells Pontiacs; however, Pontiacs per se are not competitive with Isuzu. Likewise, almost all of the dealers located in Colonial's "cluster" sell products which are not competitive with Isuzu.

    
    

17. The automobile industry recognizes one year as a fair amount of time for a dealer to be in business before he is evaluated as to performance and market penetration since the business is cyclical and because such a time period allows for a change in model. No Isuzu dealership has been in business in Dade County for one year.

    
    

18. When Zinn opened its Isuzu dealership in September, 1981, the facility was not completely constructed. David Zinn determined to utilize the first three months of 1982 as a grand opening promotion. He met with William Abbott, the regional manager for the southeastern region of American Isuzu, and with Mark Darling, the regional sales manager of the southeast regional office of American Isuzu. David Zinn agreed to spend $32,000 in advertising for the promotion, and Abbott and Darling agreed to send him 30 extra cars over his "normal allotment" in exchange for his advertising expenditures. Zinn ran his advertising promotion and spent the agreed upon $32,000. Isuzu gave Zinn a "zero allocation", thereby withholding any cars being delivered to him during the first three months of 1982, and only sent to Zinn the promised 30 bonus cars.

    
    

19. Zinn has never refused delivery of an Isuzu car; rather, he has repeatedly requested additional autos which he has not received. According to industry standards, a dealer should have a 60-day supply of cars on hand to adequately serve the manufacturer. Zinn has not had a 60-day supply of cars. Additionally, a dealer's ability to sell is affected by the mix of models. In other words, a dealer who has many cars of the same color with the same number

    of doors and other features and type of transmission in actuality may only have an inventory of one car as seen through the eyes of a prospective purchaser.

    Isuzu has established no sales objectives for Zinn or the other existing dealer in Dade, has not evaluated Zinn's performance, and has provided no information comparing Zinn's or competing sales with registrations in Zinn's "market". No evidence was introduced to show where Zinn's Isuzus or where competitive cars were being sold or not being sold. Since no evidence was introduced to show where Isuzu is being represented in Dade County, no conclusion can be drawn as to where Isuzu is not being represented in Dade County. No identifiable plot not yet cultivated has even been suggested.

    
    

20. Due to import restrictions, Isuzu has not been able to provide an adequate supply of cars for sale by its existing dealers. There is unquestionably a direct relationship between the availability of a product to be sold in a market area and the determination of the effectiveness of a dealer in such market area. Performance cannot be evaluated where there is no product available to sell. Isuzu's own witnesses admitted that Zinn had not been afforded a reasonable period of time in which to achieve a level of representation of Isuzu in Dade County and that the level of penetration in a market area is controlled by the availability of product.

    
    

    CONCLUSIONS OF LAW

    
    

21. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties hereto. Section 120.57(1), Florida Statutes (1981).

    
    

22. Section 320.642, Florida Statutes (1981), provides as follows:

    
    

    The department shall deny an application for a motor vehicle dealer license in any community or territory where the licensee's presently licensed franchised motor vehicle dealer or dealers have complied with licensee's agreements and are providing adequate representation in the community or territory for such

    licensee. The burden of proof in showing inadequate representation shall be on the licensee.

    
    

    The parties have stipulated that Isuzu's presently licensed dealers have complied with Isuzu's agreements. The only question, therefore, is whether Isuzu's existing dealers are providing adequate representation. Isuzu's own witnesses admit that one dealer in Dade County selling a limited number of Isuzu automobiles for well under one year cannot be evaluated. Zinn's performance since opening in September, 1981, has been totally controlled by the unavailability of product, and his sales are totally under the control of Isuzu and Isuzu's administration of its unwritten allocation formula. When Isuzu determined that three dealers in Dade County would provide it adequate representation, it made that decision based upon market studies. Since then, no market studies have been made, and there are not yet three dealers in operation.

    
    

23. Since Isuzu is unable to show where Zinn (or any other existing Isuzu dealer) has sold his cars, thereby indicating where Isuzu is being represented, then Isuzu is also obviously unable to show where it is not being represented or is not being adequately represented. Isuzu's witnesses do not know where

Isuzu's competing dealers are located in Dade County, do not know where each one of those dealers sells its product, and do not know where those dealers do not sell their product. One of Isuzu's witnesses was candid enough to admit that no determination was made that Zinn was providing inadequate representation when the decision was made to offer an Isuzu dealership to Colonial Pontiac at the same time that Zinn was just opening for business. Although it is obvious that Isuzu may desire additional representation in Dade County, Isuzu has not shown that it is being afforded inadequate representation in Dade County.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED THAT:

A final order be entered denying the application of Colonial Pontiac, Inc., d/b/a Colonial Isuzu for a license to engage in business as a franchised Isuzu dealer in Dade County, Florida.

DONE and RECOMMENDED this 5th day of November, 1982, in Leon County, Florida.

LINDA M. RIGOT, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 5th day of November, 1982.

COPIES FURNISHED:

William E. Sundstrom, Esquire 1020 East Lafayette Street Tallahassee, Florida 32301

Karl J. Leib, Jr., Esquire

201 Alhambra Circle, Suite 1200 Ponce de Leon Plaza

Coral Gables, Florida 33134

John D. Calvin, Director Division of Motor Vehicles Department of Highway Safety

and Motor Vehicles Neil Kirkman Building

Tallahassee, Florida 32301

Docket for Case No: 81-003054

Orders for Case No: 81-003054