STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

STEVE SORENSEN CHEVROLET, INC., ) d/b/a STEVE SORENSEN CHRYSLER, ) PLYMOUTH, AND DODGE, and CHRYSLER ) CORPORATION, ORLANDO ZONE, )

)

Petitioners, )

)

vs. ) CASE NO. 83-2596

) TOM EDWARDS, INC. and DEPARTMENT ) OF HIGHWAY SAFETY AND MOTOR ) VEHICLES, )

)

Respondents. )

)

RECOMMENDED ORDER

This case was heard on December 2, 1983, by R. L. Caleen, Jr., Hearing Officer with the Division of Administrative Hearings, in Lake Wales, Florida. The following appearances were entered:

APPEARANCES

For Petitioner Steve Jack P. Brandon, Esquire Sorensen Chevrolet, Inc., Peterson, Myers, Craig,

d/b/a Steve Sorensen Crews, Brandon & Mann, P.A. Chrysler, Plymouth, and Post Office Box 7608

Dodge: Winter Haven, Florida 33883-7608

For Petitioner Chrysler Edward H. Weeby, Esquire Corporation, Orlando Chrysler Corporation Zone: Post Office Box 1919

Detroit, Michigan 48288

For Respondent: Frank J. Rouse, Esquire 680 East Main Street Bartow, Florida 33830

ISSUE

Whether the application of petitioner, STEVE SORENSEN CHEVROLET, INC. d/b/a STEVE SORENSEN CHRYSLER, PLYMOUTH, AND DODGE ("Applicant") for a new motor vehicle dealer license under Section 320.642, Florida Statutes, should be granted on the ground that existing Chrysler dealers, including respondent TOM EDWARDS, INC. ("Existing Dealer"), are not providing adequate representation of the manufacturer, Chrysler Corporation ("Chrysler") in the Lake Wales sales locality.

Background

Applicant STEVE SORENSEN CHEVROLET, INC. d/b/a STEVE SORENSEN CHRYSLER,

PLYMOUTH AND DODGE, filed with the State of Florida, Department of Highway Safety, and Motor Vehicles, ("Department") an application for the issuance of a motor vehicle dealer's license under Section 320.642, Florida Statutes, to operate a Chrysler dealership in Lake Wales, Florida. TOM EDWARDS, INC., the existing dealer in Bartow, Florida--14 miles from Lake Wales--objected to the issuance of a license. The Department forwarded this matter to the Division of Administrative Hearings for assignment of a hearing officer to conduct a Section 120.57(1) hearing. Hearing was set for December 2, 1983.

On November 9, 1983, the Existing Dealer moved for a continuance. The motion, opposed by the Applicant and Chrysler, was denied.

At final hearing the Applicant and Chrysler presented the testimony of V.

1. Hanwell, Richard Snyder, Steve Sorensen, Wayne Finley, and Vance Gordon. Petitioners' Exhibit Nos. 1 through 14 were received into evidence. The Existing Dealer presented the testimony of Tom Edwards. The transcript of hearing was filed on January 6, 1984, and the parties submitted proposed findings of fact and conclusions of law by February 16, 1984.

   
   

   Based on the evidence presented, the following facts are determined:

   
   

   FINDINGS OF FACT

   
   

   I.

   
   

   The Parties

   
   

   1. The Applicant seeks a license to operate a Chrysler, Plymouth, Dodge and Dodge Truck dealership two miles north of Lake Wales on U.S. Highway 27, Polk County, Florida. This would be a "dual" dealership, since the Applicant currently operates a Chevrolet dealership at that location--and has since 1979. 1/ It acquired the Lake Wales Chevrolet dealership in 1975 and operated his dealership at a location on Highway 60, east of Lake Wales, prior to moving to its current location.

      
      

   2. The Applicant is a successful Chevrolet dealer operating a 22,000 square foot facility located on approximately three acres, with an additional two acres available for future expansion. This is a complete sales and service facility, including 15 mechanical service stalls, 6 body shop stalls, and a large parts department. It exceeds Chevrolet's guidelines for space requirements.

      
      

   3. Chrysler is the licensed distributor of Chrysler, Plymouth, and Dodge cars, and Dodge truck vehicles. It supports the licensing of the Applicant's proposed dealership in Lake Wales on the ground that there are no dealers presently located in Lake Wales and dealers outside this locality are not adequately representing Chrysler in that sales locality.

      
      

   4. Since 1973, the Existing Dealer has continuously operated a licensed Chrysler dealership selling Chrysler and Dodge cars, and Dodge trucks, in Bartow, Florida. It opposes granting the requested license, contending it adequately represents Chrysler in the Lake Wales area and that the location of the proposed dealership in Lake Wales would adversely affect its business.

      II

      
      

      The Applicant's Qualifications to Operate a Chrysler Dealership

      
      

   5. The parties agree that the Applicant is financially qualified to operate a Chrysler dealership in Lake Wales. By its past performance, it has proved that it has the necessary talent and resources to capably operate a motor vehicle dealership.

      
      

   6. In anticipation of receiving a Chrysler dealership, the Applicant has hired additional personnel in its parts department, including an additional clerk, and a full-time sales manager. It also purchased a $40,000 Reynolds Vim- Net computer. These additional resources will also serve the existing Chevrolet dealership.

      
      

   7. Registration data reflects there are approximately 2,000 owners of Chrysler Corporation vehicles in the Lake Wales sales locality which could be served by a new Chrysler dealership.

      
      

      Market Area involved

      
      

   8. The Applicant's proposed dealership facility is in a trade area which Chrysler designates as the "Lake Wales sales locality," consisting of Lake Wales, Babson Park, Frostproof, and Waverly. Chrysler identified the Bartow sales locality, which is being served by the Existing Dealer, as consisting of the towns of Bartow, Alturas, Bradley, Fort Meade, Homeland, Mulberry, Nichols, and Pembroke. All of these communities are located in Polk County, Florida.

      
      

   9. Prior to May of 1980, when Scenic Chrysler-Plymouth business, a Chrysler dealer had been located in the Lake Wales sales locality. Since 1980, Chrysler has actively sought applicants to open a Chrysler dealership in Lake Wales.

      
      

   10. There are currently three Chrysler dealerships in Polk County: one in Lakeland, one in Winter Haven, and one in Bartow. These dealerships are reasonably available to residents of Lake Wales, both for sales and service. Lakeland is 20-25 miles (30 45 minutes' driving time) from Lake Wales; Winter Haven is 10-11 miles (15-20 minutes' driving time); and Bartow is 14 miles (20

       25 minutes' driving time).

       
       

   11. Polk County has a population of approximately 330,000. In September of 1983, Ford Motor Company had nine dealerships in Polk County and General Motors, fifteen. Although Chrysler had fewer dealerships, the significance of this disparity has not been shown since Ford and General Motors have consistently sold more vehicles and represent greater shares of the market.

       
       

   12. A comparison of the number of Chrysler dealerships with population served in other parts of Florida indicates that Polk County as a whole, does not have a disproportionately small number of Chrysler dealerships. In Hillsborough County, four Chrysler dealerships serve a population of 670,000. In Pinellas County, five Chrysler dealerships serve a population of 700,000. If the proposed dealership is licensed, Polk County would have the same number of Chrysler dealerships as Hillsborough County, which as more than twice the population.

   13. Lake Wales currently has, within its boundaries, Chevrolet, Ford, Buick-Oldsmobile, and Pontiac-Cadillac dealership. It does not have any imported car dealerships or Chrysler, Lincoln-Mercury or American Motors dealerships.

       
       

       IV.

       
       

       Adequacy of Existing Dealer's Representation of Chrysler in Lake Wales

       
       

   14. Chrysler measures the adequacy of its sales performance or representation in various sales localities by comparing its corporate penetration of total industry sales (by percentage) corporate, within a zone, 2/ to its corporate penetration of industry sales within a given sales locality, such as Lake Wales. This is the "benchmark for comparing how well we're doing in the various sales localities . . . ." (TR.-74)

       
       

   15. The Applicant and Chrysler rely on a comparison using new vehicle registration figures compiled by the R. L. Polk Market Action Report. For the years 1980-1983 Petitioners' Exhibit No. 9 shows the following comparison between Chrysler's Zone and Lake Wales' market penetration:

       
       

       Car Industry	1980	1981	***	1982	1983*
       Zone Corporate Car Penetration	7.1	7.5		8.9	10.5
       Lake Wales Sales Locality**	8.3	5.1		6.7	8.7
       Truck Industry
       Zone Corporate Care	11.6	8.1		8.8	8.5
       Lake Wales Sales Locality	8.3	2.9		6.3	4.0

       
       

       *8 months-annualized.

       
       

       **Includes, Lake Wales, Babson Park, Frostproof, and Waverly.

       
       

       ***1981 was an unusually bad year for Chrysler because of weakness of the national economy and fears that Chrysler would go bankrupt.

       
       

       For car sales, this comparison shows that in 1980, Chrysler had better market penetration (as a percentage of total industry sales) in Lake Wales than in the Orlando Zone; but in 1981 through 1983, its zone penetration exceeded its Lake Wales penetration. These figures also show continuous penetration gains in both, areas since 1981, but the annual rate of increase in Lake Wales has been greater than in the zone.

       
       

   16. For truck sales, a similar relationship is found except for 1983, when both Lake Wales and Zone penetrations declined.

       
       

   17. In conjunction with this comparison, the Applicant and Chrysler rely on R. L. Polk Market Action Report vehicle registration figures showing that

       the Existing Dealer sold the following number of vehicles to persons residing in the Lake Wales Sales locality:

       
       

       	1980	1981	1982 8 mo.
       			1983
       Lake Wales Sales by	14	10	6 10
       Existing dealer

       
       

       (Petitioner's Exhibit No. 7)

       
       

   18. The R. L. Polk Market Action Report figures for Lake Wales, used in both of these comparisons, have been shown to be inaccurate and unreliable. These figures, and the conclusions based on their use, are rejected as suspect and unworthy of belief. The R. L. Polk figures show that in 1982, the Existing Dealer sold 6 Chrysler vehicles to persons in Lake Wales. In fact, he sold 8--a statistical error of over 33 percent. The Polk figures show that in 1983 (8 months) the Existing Dealer sold 10 units in Lake Wales, when, in fact, he sold 13--a 30 percent error. Finally, the Polk figures show that the Existing Dealer sold 82 vehicles residents of Polk County during the first 8 months of 1983; in fact, it sold 102.

       
       

   19. The Existing Dealer (in Bartow) has actively cultivated the Lake Wales area since mid-1980, when the Lake Chrysler dealership went out of business. It advertises newspapers, on radio, and in telephone directory yellow pages services Lake Wales. It is the only Chrysler dealership in Polk County which advertises in the Lake Wales telephone directory.

       
       

   20. The Existing Dealer's sales efforts in the Lake Wales area have recently begun to bear fruit. In 1982, its first profitable year since 1977--it earned profits of $13,000. Without the 8 sales in Lake Wales, it would have remained "in the red" another year.

       
       

   21. The opening of the Applicant's proposed dealership would decrease the number of sales which the Existing Dealer could otherwise reasonably expect to make in the Lake Wales area. During the first 9 months of 1983, the Existing Dealer's Lake Wales' sales accounted for gross profits of $28,000. The loss of sales of this magnitude to the Applicant would seriously impact the profitability--and continued viability--of the Existing Dealer.

       
       

   22. Chrysler has not previously expressed any serious dissatisfaction with the Existing Dealer's representation or sales performance. The only document used by Chrysler to openly "evaluate a dealer's annual performance is known as the "Sales Responsibility Review." For the year ending December, 1982, the Existing Dealer's Sales Responsibility Review showed it exceeding all of its fair market share requirements by over 100 percent. In Dodge cars, it exceeded sales requirements by over 200 percent; in Chrysler cars, by over 160 percent; and in Dodge trucks, by 104 percent.

       
       

       CONCLUSIONS OF LAW

       
       

   23. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Section 120.57(1), Fla.Stat. (1983).

       
       

   24. Section 320.642, Florida Statutes (1983), prescribes standards for the issuance and denial of motor vehicle dealership

       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.

       
       

   25. The purpose of this statute is to prevent a manufacturer from taking unfair advantage of a dealer by overloading a market area with more dealers than can be justified by the legitimate interests of the manufacturer and its dealers, existing and prospective. Plantation Datsun, Inc., v. Calvin, 275 So.2d 26 (1st DCA 1973); Bill Kelly Chevrolet, Inc. v. Calvin, 322 So.2d 50 (1st DCA 1975). In Plantation Datsun, the court cited, with approval the following language from a Wisconsin Supreme Court opinion construing a similar statute:

       
       

       Implicit in this law is the recognition

       of the gross disparity of bargaining power between the manufacturer of automobiles and the local retailer. It was enacted

       in recognition of the long history of the abuse of dealers by manufacturers . . .

       The purpose of the law is to furnish the dealer with some protection against unfair treatment by the manufacturer.

       
       

   26. The Applicant, and Chrysler, have failed to sustain the burden of proof placed on them by the statute. They have not proven that Chrysler is inadequately represented in the Lake Wales sales locality by nearby existing dealers, including the Existing Dealer. The application must, therefore, be, denied.

       
       

   27. The parties' proposed findings of fact have been considered. To the extent they are incorporated in this recommended order, they are adopted. Otherwise, they are rejected as unsupported by the evidence, as irrelevant, or as unnecessary to resolution of the issues presented.

RECOMMENDATION

Based on the foregoing, it is RECOMMENDED:

That the application by Steve Sorensen Chevrolet for a motor vehicle dealer's license be denied.

DONE and ORDERED this 15th day of May, 1984, in Tallahassee, Florida.

R. L. CALEEN, JR. 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 15th day of May, 1984.

ENDNOTES

1/ This "dualing" of the "Big Three" (Ford, General Motors, and Chrysler) in one dealership is almost nonexistent in Florida.

2/ Here, the applicable zone is designated the Orlando Zone, which includes most of Florida and part of Georgia. (Petitioner's Exhibit No. 1)

COPIES FURNISHED:

Jack P. Brandon, Esquire Peterson, Myers, Craig, Crews, Brandon & Mann, P.A,

P. O. Box 7608

Winter Haven, Florida 33883-7608

Edward H. Weeby, Esquire Chrysler Corporation Detroit, Michigan 48288

Frank J. Rouse, Esquire 680 East Main Street Bartow, Florida 33830

Robert Butterworth, Executive Director

Department of Highway Safety and Motor Vehicles

Neil Kirkman Building Tallahassee, Florida 32301

Docket for Case No: 83-002596

Orders for Case No: 83-002596