Judges: D. R. ALEXANDER
Agency: Department of Highway Safety and Motor Vehicles
Latest Update: Aug. 20, 1986
Summary: Application for new car dealership in Palm Beach County was granted.
85-3646.PDFSTATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
PALM OLDSMOBILE, INC. and GENERAL ) MOTORS CORPORATION, )
)
Petitioner, )
)
vs. ) Case No. 85-3646
) CLARK OLDSMOBILE, INC. and DEPARTMENT ) OF HIGHWAY SAFETY AND MOTOR VEHICLES, ) DIVISION OF MOTOR VEHICLES, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on June 23-26, 1986, in West Palm Beach, Florida.
APPEARANCES
For Petitioner: Dean Bunch Esquire General Motors Post Office Drawer 1170
Corporation Tallahassee, Florida 32302
and
Dennis J. Helfman, Esquire Judith L. Collier, Esquire New Center One Building 3031 West Grand Boulevard Detroit, Michigan 48232
For Petitioner: John Raday, Esquire
Palm Oldsmobile, Post Office Drawer 11307 Inc. Tallahassee, Florida 32302
and
Louis L. Williams, Esquire Post Office Box 3887
West Palm Beach, Florida 33402
For Respondent: James D. Adams, Esquire Clark Oldsmobile, 186 Southwest 13th Street Inc. Miami, Florida 33130
For Respondent: No Appearance Department of
Highway Safety & Motor Vehicles
BACKGROUND
This matter arose in August, 1985 when petitioner, Palm Oldsmobile, Inc., filed an application for a license as a motor vehicle dealer with respondent, Department of Highway Safety and Motor Vehicles, seeking to establish a new Oldsmobile dealership in North Palm Beach, Florida. Petitioner, General Motors Corporation, was made a party since the manufacturer carries the burden of proving the applicant's entitlement to licensure.
Respondent, Clark Oldsmobile, Inc., a licensed motor vehicle dealer established in West Palm Beach, filed a letter of protest to the application and requested a formal hearing under Subsection 120.57(1), Florida Statutes (1985). The matter was forwarded by the agency to the Division of Administrative Hearings on October 23, 1985 with a request that a hearing officer be assigned to conduct a formal hearing.
By notice of hearing dated January 10, 1986, a final hearing was scheduled on March 24-27, 1986 in West Palm Beach, Florida.
Thereafter, a continuance was requested by the agency on March 7, 1986 on the ground it intended to conduct a background check of the applicant's president based upon a disclosure made by applicant in a letter dated February 28, 1986 to the agency.
This request was denied by order dated March 10, 1986 on the ground the agency had adequate time to make an inquiry into applicant's moral character prior to the hearing. A similar motion filed by respondent was denied by order dated March 17, 1986. The agency then advised the undersigned on March 18, 1986 that it did not intend to participate in the final hearing, but rather would rely upon the record developed by the parties.
Thereafter, upon motion of respondent, the hearing was continued until May 12-16 in order to allow respondent to inquire into the background of the applicant's president. Palm Oldsmobile then filed a complaint for writ of prohibition in the circuit court in and for Leon County, Florida, seeking to prohibit the undersigned from considering in this proceeding any issues other than those defined in Section 320.642, Florida Statutes (1985). While that complaint was pending, the undersigned continued the final hearing set for May 12-16 until the circuit court action was resolved. On April 30, 1986, the circuit court entered an order granting the relief requested by Palm Oldsmobile and enjoining the undersigned from considering the background or moral character of the applicant's president. Thereafter, on May 18, 1986 the final hearing in this cause was rescheduled to June 23- 26, 1986 in West Palm Beach, Florida. Clark Oldsmobile's request
for a continuance and remand of the case to the agency was denied on June 17, 1986.
At final hearing, General Motors Corporation presented the testimony of John A. Ford, an expert in market research and demographics, James A. Harsant, an expert in automobile dealer network planning, John Martabano, Jacksonville zone manager for Oldsmobile, and James A. Anderson, an expert in dealer network planning and analysis. It also offered exhibits 1-65. All were received in evidence except exhibits 63-65 upon which ruling was reserved. Palm Oldsmobile, Inc. adopted the testimony and exhibits of General Motors Corporation. Respondent, Clark Oldsmobile, Inc., presented the testimony of Harper Clark, Jr., owner and president of Clark Oldsmobile, Earl D. Stewart, owner of a Toyota dealership in Lake Park, Florida, and Dr. Lyman E. Ostlund, an expert on the propriety of adding new dealership points. It also offered respondent's exhibits 1 and 2 and A-T. All were received except exhibits E and Q. A ruling was reserved on exhibit E while exhibit Q was proffered by counsel. There was no appearance by the respondent agency.
The transcripts of hearing (four volumes) were filed on July 14, 1986. Proposed findings of fact and conclusions of law were filed by petitioners and respondent on July 28 and 29, 1986, respectively. A ruling on each proposed finding of fact has been made in the Appendix attached to this Recommended Order.
The issue is whether Palm Oldsmobile's application for a license to establish a new Oldsmobile dealership in North Palm Beach, Florida should be granted.
Based on all the evidence, the following facts are determined:
FINDINGS OF FACT
Introduction
Petitioner, Palm Oldsmobile, Inc. (Palm), made application for licensure on September 10, 1985 with respondent, Department of Highway Safety and Motor Vehicles (agency). According to the application, Palm seeks to establish a new Oldsmobile dealership at 3701 Northlake Boulevard, North Palm Beach, Florida. Oldsmobile is a product line and operating division of petitioner, General Motors Corporation (GM). The application is supported by GM since by law the manufacturer carries the burden of proving Palm's entitlement to licensure.
Respondent, Clark Oldsmobile, Inc. (Clark), is a licensed Oldsmobile dealership with facilities at 717 South Olive
Avenue, West Palm Beach, Florida. It lies approximately eight miles south of where Palm intends to establish its facilities. Clark has operated continuously as an Oldsmobile dealership in West Palm Beach since 1939. Its present owner assumed ownership and operation of the business in 1961. It is the only franchised Oldsmobile dealership in that city.
Clark exercised its rights under Chapter 320, Florida Statutes, and filed a protest to the application. There are two other Oldsmobile dealers in Palm Beach County, Carter Chevrolet- Oldsmobile, Inc. in Pahokee, and Dan Burns Oldsmobile, Inc. (Burns) in Delray Beach, neither of whom opposes this application. By Clark filing the protest, this proceeding ensued.
The Oldsmobile Dealer and Planning Network
For marketing purposes, Oldsmobile has divided the United States into six regions. The regions in turn are divided into twenty-seven zones. The southeast region (made up of all or parts of eleven states) includes the Jacksonville zone, which roughly comprises peninsular Florida and the lower one-third of the State of Georgia. Within the Jacksonville zone are ninety. two Oldsmobile dealerships, including Clark. There are five major metropolitan areas in the Florida portion of the Jacksonville zone classified into major marketing areas known as multiple dealer areas (MDA) A MDA is an automobile marketing area consisting of contiguous communities and is a demographic or geographic area that is too large to be served by one dealer. As is relevant here, the West Palm Beach community or territory has been defined as a MDA and roughly consists of the densely populated portion of eastern Palm Beach County. Because a MDA is too large to be served by one dealer, Oldsmobile has contractually assigned two dealerships, Clark and Burns, to the West Palm Beach MDA.
Oldsmobile has generally divided MDA's into smaller markets known as Areas of Geographic Sales and Service Advantage (AGSSA1 which are used as a dealer network planning tool. Each AGSSA is made up those federal census tracts closest to a proposed or existing dealer and identifies an area of shopping convenience for consumers in the AGSSA. The AGSSA represents the area in which an existing or proposed resident dealer has or would have an advantage over other same line make dealers in the MDA by virtue of the resident dealer's location. Prior to its decision to add a new dealer point in West Palm Beach MDA, Oldsmobile had divided the MDA into two AGSSA's. Under the plan, the northern portion of the eastern half of Palm Beach County was AGSSA 1 while the southern part of the eastern half constituted AGSSA 2. Oldsmobile has now realigned the MDA into three AGSSA's. Under
this plan, the AGSSA 1 is that central portion of eastern Palm Beach County generally between 45th Street and Lantana Road.
AGSSA 2 lies south of AGSSA 1 and essentially lies north of 45th Street in the northeastern portion of the county. Clerk of located in AGSSA 1, Burns to AGSSA 2, while Palm proposes to locate its new dealership in AGSSA 3.
For purposes of this case, the territory or community to be examined is the West palm Beach MDA. A complete description of the MDA is found in GM Exhibits 5 and 6 received in evidence. The West palm Beach MDA constitutes an identifiable and distinct retail marketing area. To determine whether the existing dealers are providing adequate representation with the MDA, the smaller marketing area know as AGSSA 3, GM has proposed to compare the retail penetration (sales) of Oldsmobile in those areas with the penetration achieved on a national level. Although Clark objects to this comparison as a measuring tool for representation, it is found that this standard is appropriate for determining the adequacy of representation by existing dealers.
c. Retail Registration Data
Market penetration or sales is best determined by using retail registration data provided by R. L. Polk and Company (Polk). Polk is a nationally recognized organization that collects and analyzes automobile registration data nationwide for all lines and makes of automobiles. Among other things, Polk attempts to assign each automobile registration to a specific census tract. By doing so, a manufacturer can then determine its marketing success or lack thereof in a given geographic area. In this proceeding, both parties have utilized such data to analyze market penetration. This analysis compares total industry retail registrations to the retail registrations of a particular line make in a given area.
As a forerunner to Palm filing this application, General Motors conducted an analysis of market penetration in the West Palm Beach MDA by reviewing Polk registration data at both the county and census tract levels. The registration data reviewed included every vehicle registered to an address within a particular area of geography (county or census trace) regardless of the sellers dealer. The data also included the components of retail and fleet, as well as a total registration.
Market Penetration in the West Palm Beach Area
Retail market penetration is a relative concept that compares the retail registrations of one make with all industry registrations in a particular geographic area. Stated differently, it represents the percentage of business that
Oldsmobile obtains out of the total universe of business available. For example, in 1985 9.63% of all vehicles registered in the United States for retail use were Oldsmobile. Therefore, Oldsmobile's national market penetration was 9.63%. correspondingly, 6.15% of all retail vehicles registered in the West Palm Beach MDA in 1985 were Oldsmobile. This equates to an MDA penetration of 6.15%, or far below the national average.
Retail registration efficiency to national average is the percentage relationship between retail penetration in a geographic area and national penetration. In 1985, the retail registration efficiency of the West Palm Beach MDA to national average was 63.9% (6.15 divided by 9.63), the lowest in the Jacksonville zone. Moreover, since 1981 retail registration efficiency in the West Palm Beach MDA has steadily declined as follows:
| 1981 | 1982 | 1983 | 1984 | 1985 |
MDA Retail Reg: |
|
|
|
|
|
Industry | 31,845 | 31,328 | 39,273 | 42,247 | 43,797 |
Oldsmobile | 2,632 | 2,294 | 2,666 | 2,719 | 2,693 |
Olds % of Ind | 8.3 | 7.3 | 6.8 | 6.4 | 6.1 |
Nat. Retail Reg: |
|
|
|
|
|
Olds % of |
|
|
|
|
|
Industry | 9.2 | 9.6 | 10.5 | 10.0 | 9.6 |
MDA Efficiency |
|
|
|
|
|
to National | 90.1% | 76% | 65% | 64% | 63.5% |
The downward trend in MDA registration performance has continued through March, 1986 as penetration efficiency has dropped to 60%. Moreover, while national penetration stood at 9.3% in March, 1986 the West Palm Beach MDA penetration dropped to 5.6%. Further, from 1981 to 1985, industry retail registrations in the MDA have increased 11,952 vehicles or 38%, while Oldsmobile retail registrations increased only 61 units or 2%.
In 1985, the Oldsmobile West Palm Beach MDA ranked 143rd in retail penetration when compared with the 159 largest Oldsmobile markets in the United States. Based on retail penetration, the West Palm Beach MDA has been the worst MDA in the Jacksonville zone since 1983. In fact, due to its poor retail sales performance, Clark has been in a special assistance program (the AGSSA program) since 1974. Despite suggestions and assistance offered by zone personnel to Clark, the market penetration in the MDA has continued to deteriorate.
Market Penetration in AGSSA 3
The most current registration data available at the AGSSA level is year end 1985 data. This data reflects that the West Palm Beach MDA retail penetration has been consistently below zone and national retail penetration. AGSSA 1, in which Clark is located, and AGSSA 3 have repeatedly had low penetration.
For the years 1983 through 1985, Oldsmobile's retail penetration for the nation, Jacksonville zone, West Palm Beach MDA and the three AGSSA's were as follows:
| 1983 | 1984 | 1985 |
National | 10.51 | 10.04 | 9.63 |
Zone | 8.77 | 8.25 | 8.00 |
West Palm Beach MDA | 6.89 | 6.36 | 6.15 |
AGSSA 1 | 5.9 | 5.47 | 5.63 |
AGSSA 2 | 8.0 | 7.55 | 6.83 |
AGSSA 3 | 6.26 | 5.45 | 5.60 |
To increase market penetration, the most logical place to locate a new dealer is AGSSA 3 since there is already a dealer (Clark) in AGSSA 1. It has been Oldsmobile's experience that when a new dealer is added in an MDA, the market penetration of all existing dealers is improved.
Lost Opportunities
"Lost opportunity" is the difference between actual Oldsmobile retail registrations in an area and the number of registrations that would have occurred had a given norm (i.e., national average penetration) been achieved. The number of lost opportunities represents the number of registrations available to the Oldsmobile dealers in the MDA had national average penetration been attained. The following chart depicts the lost opportunities experienced during the last three full years by the MDA as a whole and its AGSSA components.
Lost Opportunities Compared to National Retail Penetration I
National | 1983 | 1984 | 1985 |
Penetration | 10.51 | 10.04 | 9.63 |
MDA | (1386) | (1539) | (1507) |
AGSSA 1 | (416) | (450) | (530) |
AGSSA 2 | (668) | (729) | (657) |
AGSSA 3 | (302) | (359) | (319) |
When the West Palm Beach norm is adjusted for product popularity, the lost opportunity both to Oldsmobile and its dealers in the MDA grows. This adjustment is appropriate since the West Palm Beach MDA and AGSSA 3 have a much higher percentage of "high" category vehicle registrations than is found on a national basis. Conversely, subcompacts are less popular in the MDA than in the nation as a whole. Because Oldsmobile's penetration in the "high" class is greater in the MDA, an adjustment for this product popularity is appropriate. After adjusting for product popularity, the 1985 national average penetration expectation and lost opportunity increase to 10.71% and 1,973 registrations, respectively. There is also a high level of in-sells (cars sold by dealers outside the market) into the MDA and AGSSA 3. When in-sells in the West Palm Beach MDA are considered, the lost opportunity to the MDA dealers increases from 1,507 (or 1,973 adjusted for product popularity) to 2,418 (or 2,884 adjusted for product popularity). Indeed, even Clark agrees there is a shortfall in registration penetration in AGSSA
3 and that lost opportunities exist.
Customer Convenience
The number and locations of dealerships for various line makes, including Oldsmobile, provide a basis for comparing the relative levels of customer convenience for buyers in a particular AGSSA. In other words, the lower the distance a customer must travel to a dealership, the higher the convenience to that customer. This is evidenced by the high concentration of retail registration surrounding each MDA Oldsmobile dealer. The Oldsmobile dealer with the best level of convenience has the highest level of sales, and is located in the AGSSA with the highest penetration in the MDA. In this regard, in AGSSA 3, where Oldsmobile has its lowest level of customer convenience in the MDA, its retail registration penetration was also the lowest.
Potential buyers in AGSSA's 1 and 2 enjoy far greater convenience to the nearest Oldsmobile dealer does than a potential buyer living in AGSSA 3. For example, the average consumer must travel almost twice as far from his residence in AGSSA 3 to reach an Oldsmobile dealer than to reach a Honda, Ford, Nissan, Volkswagon or Toyota dealer. The average consumer in AGSSA 3 is also substantially closer to a Chevrolet dealer than to an Oldsmobile dealer. Correspondingly, Chevrolet, Honda, Ford, Nissan and Volkswagon have better penetration in AGSSA 3 compared to their MDA average than does Oldsmobile.
The sales and service facilities offered by the existing Oldsmobile dealers in AGSSA's 1 and 2, though adequate, are not properly located to conveniently satisfy the needs of existing and potential Oldsmobile customers in AGSSA 3.
Interbrand competition is defined as competition among dealers of different line makes such as Oldsmobile, Buick, Pontiac and the like. Proximity has an effect upon such competition. This is borne out by the fact that manufacturers providing convenience to customers in AGSSA 3 have a greater opportunity to enjoy above average penetration performance than manufacturers that do not offer similar levels of convenience.
All parties agree that proximity affects intrabrand competition. This is defined as competition among dealers of the same line make (Pontiac versus Pontiac). The proposed Oldsmobile local-ion in AGSSA 3 will be 7.7 air miles from its nearest same line make competitor in AGSSA 1. That distance equals the distance between the AGSSA 3 Ford dealer and its nearest same line make competitor. It is greater than the distance between the Toyota, Nissan, Volkswagon and Chevrolet dealers in AGSSA 3 and their nearest same line make competitor. Therefore, the distance of the proposed Oldsmobile dealer from Clark is
consistent with the respective distances between nearest same line make dealers in the MDA.
The addition of an Oldsmobile dealer in AGSSA 3 would provide Oldsmobile customers convenience commensurate with the convenience offered by competitive line makes. Further, the customer convenience offered by Oldsmobile in AGSSA 3 would be twice as good as the convenience currently offered by Oldsmobile in AGSSA 3 and would be consistent with convenience offered by Oldsmobile in AGSSA's 1 and 2.
Measured by the shortest route in non-rush hour traffic, drive time from the proposed Palm location to the Clark location is relatively long when compared to the convenience levels offered by other line makes. For example, the drive time between the two locations ranges from 12:50 minutes to 13 minutes via Interstate 95. It takes 23 minutes to drive between the proposed location and Clark's location via U.S. 1. A customer living in a typical residential area in AGSSA 3, such as Frenchman's Creek, would travel only 5.7 miles to Palm as opposed to 14.1 miles to Clark's facility. In addition, the travel time would be shortened by some 13 minutes by the insertion of a new dealer point.
Oldsmobile's lack of competitive convenience in AGSSA 3 is a significant factor in its inadequate retail market penetration. Clark offered no current data or objective, quantifiable evidence to rebut GM's evidence that customer convenience is directly related to retail market penetration.
The Reasonableness of the Penetration Standard
Oldsmobile's national average penetration, 9.63%, is a reasonable norm to use in evaluating the West Palm Beach MDA for a number of reasons. First, the area surrounding the MDA exceeds national average. Secondly, Oldsmobile's penetration in another Florida MDA, Tampa/St. Petersburg, has achieved the national average after an Oldsmobile dealer was added in that MDA in 1985. Third, if the norm is adjusted for product popularity, the MDA should achieve a penetration level of 10.71%. Therefore, the national average is a conservative measure of penetration. Fourth, the demographic characteristics of the community approach national average and identify many prospective Oldsmobile purchasers. Finally, some census tracts in the West Palm Beach MDA are already exceeding national average.
To develop a reasonable norm, it is necessary to determine what level of penetration an MDA can attain. Selecting a market which is inadequate to develop a standard of adequacy is not proper. It is also improper to compare an MDA with the level
it is achieving in a given year and contend that it has reached its full potential. National average is the proper level of performance for an MDA that is performing at substandard levels.
Compared to the 1985 national average of 9.63%, only 6.15% of the vehicles registered in the MDA were Oldsmobiles, and in AGSSA 3, only 5.60% of the vehicles registered were Oldsmobile. That deficiency results in a substantial penetration shortfall of 1,507 units compared to national average. That is particularly significant since only 2,664 Oldsmobile were registered in the MDA in 1985. Similarly, the shortfall in AGSSA
3 is 319 units where only 668 Oldsmobiles were registered in 1985.
I. The Need for Market Representation
The penetration shortfall is a lost opportunity for both Oldsmobile and its dealers. When the 911 units registered in the MDA in 1985 by Oldsmobile dealers located outside the MDA are considered, the total lost opportunity to the MDA dealers approaches 3,000 units.
Oldsmobile is not achieving adequate levels of penetration in either the West Palm Beach MDA or in AGSSA 3. The cause of that inadequacy is too few dealers. In Florida, the ratio of population to approved Oldsmobile dealer points is approximately 250,000 to 1. The ratio of registrations per approved dealer point is approximately 10,000 to 1. Based on the size of the market alone, the West Palm Beach MDA could support at least one additional dealer.
The relative levels of convenience in the MDA also support additional Oldsmobile representation in AGSSA 3. Oldsmobile provides less convenience to AGSSA 3 buyers than Volkswagon, Honda, Chevrolet, Ford, Nissan, Toyota, Cadillac or Buick.
The most recent data available supports the proposition that, in order to have an opportunity to achieve national average or better than national average penetration in an area, a manufacturer must be represented in that area. Of the thirteen major line makes represented in the MDA, six are located in AGSSA
3. only manufacturers represented in AGSSA 3 exceed their MDA average in that AGSSA.
33. The addition of an Oldsmobile dealer in AGSSA 3 would provide levels of convenience already offered Oldsmobile with significant increases during the last five years. For example, the county's population has increased by 23.6% between 1980 and 1985, while AGSSA 3 experienced a 26.1% over the same period. Indeed, the county's population in 1985 stood at 713,253 while the population in AGSSA 3 was 140,007. At the same time, while the growth rates in households, construction, employment, per capita income and various measures of residential and industrial/commercial growth have substantially increased, the rate of growth for these same categories in AGSSA 3 has been even greater.
Uncontradicted exhibits offered by GM also reflect that building permit valuations, retail sales and employment have experienced steady increases in recent times, while traffic counts and volume near Palm's proposed facility have grown at a substantial rate.
In terms of demographics, Palm Beach County has become more urbanized like other counties in Florida. Its middle and upper middle class groups have grown-in size. This is important since the average Oldsmobile buyer is above the age of 45 and in a household having an income in excess of $40,000 per year. Demographic data also demonstrates that the entire MDA, and AGSSA
3 in particular, have heavy concentrations of household income between $15,000 and $40,000 and at levels above $40,000. Moreover, while there are residents in every age group, in the MDA and AGSSA 3 the older age groups of 55-64 and 65 and older are particularly strong when compared to national demographic data.
R. Allocation of Vehicles
The Oldsmobile distribution system is based on national allocation. Each dealer's sales rate and available inventory are compared to that of all other dealers in the United States on a car line-by-car line basis. Dealers largely "earn" cars on the basis of how well they "turn" cars. Other manufacturers, such as Buick, use different allocation systems.
Every dealer sells all the cars it receives. Based on Oldsmobile's distribution system a dealer may not receive every car it orders if its rate of ordering exceeds its "earned rate." In fact, dealers are encouraged to maintain an order bank in excess of the number of cars they expect Oldsmobile to allocate. This insures that, as Oldsmobile builds cars, dealers Will have orders to be filled.
Cars for a new Oldsmobile dealership, such as Palm, are taken from Oldsmobile's national pool prior to allocation being made to all dealers. Thus, the establishment of a new dealership affects each existing dealership in the United States in an equitable manner.
Each zone has a limited amount of discretion to provide vehicles over the "earned rate". Clark received allocations above its "earned rate" in years 1984, 1985 and 1986 as follows:
January 1-December 31, 1984 | 222 |
January 1-December 31, 1985 | 316 |
January 1-June 30, 1986 | 200 |
TOTAL | 738 |
Every vehicle allocated by Oldsmobile to Clark in excess of Clark's "earned rate" would have gone to another dealer in the zone but for the exercise of managerial judgment and discretion. Any dealer can increase its inventory and allocation by buying vehicles from other dealers. Clark has done so in prior years.
Inventory is a factor in sales, but it is certainly not the only factor. In 1984, Clark had the eighth largest inventory in the zone but was twelfth in retail sales. In 1985, Clark had the zone's fifth largest inventory, but was eleventh in retail sales. For 1986, Clark's rank by month as compared to the other dealers in the zone is as follows:
| Jan | Feb | Mar | Apr | Mav |
Reported Retail Deliveries | 11 | 4 | 10 | 15 | 11 |
Reported Inventory | 2 | 3 | 4 | 3 | 4 |
Cooper, another Oldsmobile dealer in the Miami MDA, has consistently outsold Clark in 1986 even though it has had a smaller inventory.
In 1978 Clark made a business decision to merchandise Oldsmobiles with diesel engines. Its "earned rate" was not high enough to obtain an increased allocation of diesels so it chose to purchase 751 diesel vehicles from dealers in New York City and Chicago during the years 1978 through 1981. These purchases were made contrary to Oldsmobile's advice. Clark failed to increase its allocation of diesel vehicles due to its inability to negotiate to obtain the retail delivery card from the selling dealers. However, the registrations of Palm Beach County purchasers were reflected in MDA data. Although the diesel product later suffered serious service problems, Clark performed no studies or analyses to determine the impact of these sales upon the loyalty of Oldsmobile customers. Therefore, its contention that the serious service problems affected market penetration is rejected. Moreover, Oldsmobile's own studies showed continued loyalty on the part of diesel customers.
Clark did not participate in fleet sales until November, 1985, or until shortly after it filed a protest in this proceeding. At that time Clark sold large numbers of fleet units to its leasing subsidiary. Fleet vehicles are allocated separately from retail units. A dealer will be penalized if it sells a fleet vehicle at retail. Clark lost "earned" cars by engaging in that practice.
L. Clark's Sales and Facilities
The parties agree that Clark's facilities are adequate. Indeed, its facilities now cover a seven acre area, and include some $1.2 million in improvements made over the past eight years.
Clark was recognized by GM in 1985 as one of the top
300 dealers in the country out of 3300 dealers nationwide. This
award was based on a combination of sales and customer satisfaction. However, it was largely attributable to Clark's significant fleet sales which occurred in late 1985. During the first part of 1986, Clark was ranked seventy-eighth in the country in sales performance.
Clark contends that its new car inventory is much smaller than its competitors, such as Buick and Pontiac, and that this has hampered its ability to increase market penetration. However, even though a given Buick dealer may have more inventory in stock, Oldsmobile dealers have consistently outsold Buick dealers on a national scale.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes (1985).
Section 320.642, Florida Statutes (1985), establishes the following standards relative to the issuance of a motor vehicle dealer license:
The Department shall deny an application for a motor vehicle dealer license in any community or territory where the licensee's presently licensed 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 agreed that the existing area dealers have complied with their franchise agreements. Therefore, the sole issue is whether the "presently licensed motor vehicle dealer on dealers . are providing adequate representation in the community or territory for such licensee." For purposes of this proceeding, the "community or territory" is the West Palm Beach MDA, that is, the eastern portion of Palm Beach County.
The term "adequate representation" is not statutorily defined, and the agency has promulgated no rules that clarify the meaning of the term, or the standards that should be used in measuring the performance or non-performance of a dealer. There are, however, several judicial decisions which provide insight into the meaning of the law.
To begin with, the purpose of Section 320.642 is to prevent the manufacturer from "overloading a market area with more dealers than can be justified by the legitimate interests of the manufacturer and its dealers, existing and prospective." Bill Kelley Chevrolet, Inc. v. John D. Calvin, 322 So. 2d 50, 52 (Fla. 1st DCA 1975). But where the manufacturer shows that the "sales production of the existing dealers taken together is inadequate by territorial standards," Dave Zinn Toyota v. Department of Hinhway Safety and Motor Vehicles, 432 So. 2d 1320, 1322 (Fla. 3rd DCA 1983), or that within the territory as a whole "there remains an identifiable plot not yet cultivated, which could be expected to flourish if given the attention which the others in their turns received," Bill Kelley Chevrolet, 322 So. 2d at 52, a license may be issued.
To determine adequacy of representation, General Motors has compared its penetration in the West Palm Beach MDA to the national penetration average. This standard has been uniformly supported in a number of final agency orders. See, for example, Fountain Motors, Inc. and General Motors Corporation v. Landmark Oldsmobile Corp. et. al., DOAH Case No. 84-3795, Final order dated December 10, 1985; Application of Fischer Olds-Cadillac, Inc., (Fla. Div. of Motor Vehicles, 1980); Alpha Romeo, Inc. and Prestige Motorcar Imports, Inc. v. Milano ImPorted Motors, Inc. et. al., DOAH Case No. 82-2751, Final Order dated December 15, 1983. Although Clark suggests a better standard is to compare the MDA to itself, the greater weight of evidence supports the conclusion that a comparison of MDA sales penetration with national penetration is appropriate to measure adequate representation.
The record demonstrates that Oldsmobile's penetration in the West Palm Beach MDA has steadily declined from a 90% retail efficiency in 1981 to only 60% in March 1986. In other words, market penetration lags far behind national penetration, and the penetration shortfall has grown as each year passes. During the same time, the record reveals that while industry automobile registrations in the MDA increased by 38%, Oldsmobile registrations increased by only 2%. Moreover, Clark's sales increased by only 41 units from 1981 through 1985. These considerations support a conclusion that GM has sustained its burden of showing that it is receiving inadequate representation in the West Palm Beach MDA. Dave Zinn Toyota, 432 So. 2d at 1322.
The evidence also reveals that market penetration in AGSSA 3 is less than adequate. This conclusion is based upon Oldsmobile receiving only 58% of average national penetration in 1985. Similar shortfalls occurred in 1983 and 1984. This factor supports the conclusion that AGSSA 3 is an identifiable plot not
yet cultivated in the territory as a whole. Bill Kelley Chevrolet, 322 So. 2d at 52.
Given the rapid growth within the West Palm Beach MDA and AGSSA 3, together with the low penetration and resulting lost opportunities, it is concluded that the existing Oldsmobile dealers are now providing inadequate representation in the community or territory as a whole, and in AGSSA 3, and that the application herein should be granted.
Remaining for resolution are two legal issues which arose during the course of the final hearing. First, Clark offered into evidence Exhibit E which consists of thirty-one pages of excerpts of surveys and articles concerning market research from various newspapers, journals and magazines, some of which date back to 1958. Clark relies upon Section 90.704, Florida Statutes (1985), and "the relax(ed) rules of evidence" in an administrative hearing to support the exhibit's admissibility. Section 90.704 authorizes an expert witness to give testimony in the form of an opinion which is based upon facts or data not otherwise admissible. However, the rule does not allow the introduction of the underlying data itself simply because it was used in reaching the opinion. In other words, the expert may rely upon hearsay documents in forming his opinion, but the underlying documents may not be used as substantive evidence unless they are shown to be otherwise admissible. Here the documents in Exhibit E are clearly hearsay, 5/ and except to the extent they supplement or explain other competent evidence of record, they have been disregarded. See, Subsection 120.58(1)(a), Florida Statutes (1985).
Secondly, Clark objected to certain rebuttal testimony of GM witness Anderson on the ground he was "merely expressing an opinion as to the validity of a (prior) witness's opinion." It suggests this was improper rebuttal testimony under the rationale espoused in Thomas v. Lumbermens Mutual Casualty Company, 424 So. 2d 36 (Fla. 3rd DCA 1982). In Thomas, the court affirmed the trial court's exclusion of certain testimony by a witness of Thomas on the grounds the testimony merely expressed an opinion as to the validity of the opinion reached by Lumbermens' witness, was cumulative and would not have impeached Lumbermens' witness. Here, the rebuttal testimony offered by GM was in response to new facts and data concerning a subject previously addressed by GM in its case-in-chief. Therefore, the testimony was proper rebuttal and has been considered by the undersigned.
GM exhibits 63-65 are hereby received in evidence. RECOMMENDATION
Based on the foregoing findings of fact and conclusions of law, it is
RECOMMENDED that the application of Palm Oldsmobile, Inc. for an automobile dealer's license in North Palm Beach, Florida, be GRANTED.
DONE and ORDERED this 20th day of August, 1986, in Tallahassee, Florida.
DONALD R. ALEXANDER
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 20th day of August, 1986.
ENDNOTES
1/ The five MDAs are located in the following metropolitan areas of the State: Jacksonville, Orlando, Tampa-St. Petersburg, West Palm Beach and Miami-Fort Lauderdale. All other areas within the Florida portion of the zone are considered "single dealer areas" where a single dealer has primary responsibility for sales and service.
2/ It is noted that Chevrolet and Ford have three established dealer points in Palm Beach County while Buick, Pontiac, Dodge, Chrysler-Plymouth, Lincoln-Mercury and Cadillac have two dealer points. However, Chevrolet, Ford, and Oldsmobile rank first, second and third, respectively, in national sales.
3/ Depending on their size, automobiles are categorized into subcompact, compact, midsize, regular and high classes.
4/ It is Clark's contention that the national standard is too high a goal to set, particularly since only one MDA (Tampa-St. Petersburg) in the zone achieved the national average during the years 1983-1985. But in response to those shortfalls, Oldsmobile added new dealer points in 1985 to the Orlando, Tampa-St.
Petersburg and Miami MDA's and is now in the process of adding a new dealer point to the Jacksonville MDA.
5/ Although Clark correctly points out that Broward County, with a population of 1,500,000, has only two Oldsmobile dealers, Broward County is a part of the Miami-Fort Lauderdale MDA which has a number of established dealer points.
6/ No objection as to the authenticity of the documents was raised.
COPIES FURNISHED:
Dean Bunch, Esquire
P. O. Drawer 1170 Tallahassee, Florida 32302
James D. Adams, Esquire
186 S.W. 13th Street Miami, Florida 33130
Michael J. Alderman, Esquire Neil Xirkman Bldg., Room A432 Tallahassee, Florida 32301
Dennis J. Helfman, Esquire
General Motors Corp. New Center One Bldg. 3031 W. Grand Blvd. Detroit, MI 48232
Joseph D. Farish, Jr., Esquire
P. O. Box 3887
West Palm Beach, Florida 33402
Robert A. Butterworth, Esquire
P. O. Drawer 2088
Hollywood, Florida 33022-2088
John Radey, Esquire
P. O. Drawer 11307 Tallahassee, Florida 32302
Mr. Charles J. Brantley, Director Division of Motor Vehicles
Neil Kirkman Bldg. Tallahassee, Florida 32301
APPENDIX
PETITIONER GM:
Covered in finding of fact 1.
Covered in finding of fact 3.
Covered in finding of fact 4.
Covered in finding of fact 5.
Covered in finding of fact 5.
Rejected as being unnecessary
Covered in finding of fact 8.
Covered in finding of fact 8.
Covered in finding of fact 9.
Rejected as being unnecessary
Covered in finding of fact 10
Covered in finding of fact 10
Covered in finding of fact 11
Covered in finding of fact 12
Covered in finding of fact 12
Covered in finding of fact 13
Covered in finding of fact 13
Covered in finding of fact 14
Covered in finding of fact 15
Rejected as being unnecessary
Covered in finding of fact 16
Covered in finding of fact 17
Covered in finding of fact 17
Covered in finding of fact 18
Covered in finding of fact 19
Covered in finding of fact 19
Covered in finding of fact 18
Covered in finding of fact 20
Covered in finding of fact 21
Covered in finding of fact 22
Covered in finding of fact 22
Covered in finding of fact 23
Covered in finding of fact 24
Covered in finding of fact 25
Covered in finding of fact 26
Covered in finding of fact 27
Covered in finding of fact 28
Covered in finding of fact 29
Covered in finding of fact 30
Covered in finding of fact 30
Covered in finding of fact 31
Covered in finding of fact 32
Covered in finding of fact 33
Covered in finding of fact 34
Covered in finding of fact 35
Covered in finding of fact 36
Covered in finding of fact 36
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in findings of fact 37-40.
Covered in finding of fact 41.
Covered in finding of fact 42.
Covered in finding of fact 43.
Covered in finding of fact 44.
Covered in finding of fact 44.
Covered in finding of fact 45.
Covered in finding of fact 45.
Covered in finding of fact 46.
Covered in finding of fact 46.
Covered in finding of fact 46.
Covered in finding of fact 47.
Covered in finding of fact 47. Respondent Clark:
Covered in finding of fact 1.
Covered in finding of fact 1.
Covered in finding of fact 2.
Covered in findings of fact 4 and 5.
Covered in finding of fact 3.
Covered in finding of fact 38 and footnotes 3 and 5.
Partially covered in findings of fact 6 and 26 and footnote
4. The remainder is rejected as being contrary to the greater weight of evidence.
Rejected to the extent it contends sales penetration is adequate in AGSSA 3.
Rejected as being unnecessary.
Covered in finding of fact 48.
Rejected as being contrary to the greater weight of evidence.
Docket for Case No: 85-003646
Orders for Case No: 85-003646
