STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CLASSIC CHEVROLET CO., INC., and ) GENERAL MOTORS CORPORATION, )

)

Petitioners, )

)

vs. )

) CASE NO. 94 DON MEALEY CHEVROLET, INC., and )

CHEVROLET WORLD, INC., d/b/a ) WORLD CHEVROLET GEO, )

)

Respondents. )

)

RECOMMENDED ORDER

A formal hearing was conducted in this proceeding before Daniel Manry, a duly designated Hearing Officer of the Division of Administrative Hearings, on April 24-28 and May 12, 1995, in Tallahassee, Florida, and on July 17 and 18, 1995, in Orlando, Florida.

APPEARANCES

For Petitioner Edward W. Risko, Esquire General Motors General Motors Corporation Corporation: New Center One Building

3031 West Grand Boulevard Post Office Box 33122 Detroit, Michigan 48232

Fred J. Lotterhos, III, Esquire Holland and Knight

50 North Laura Street, Suite 3900 Jacksonville, Florida 32202

For Petitioner Nancy Faggianelli, Esquire Classic Chevrolet Carlton, Fields, Ward, Emmanuel, Co., Inc.: Smith and Cutler, P.A.

Post Office Box 3239 Tampa, Florida 33601

For Respondents Daniel E. Myers, Esquire Don Mealey Chevrolet Walter E. Forehand, Esquire Inc, and Chevrolet J. Martin Hayes, Esquire World, Inc. d/b/a Myers and Forehand

World Chevrolet Geo: 402 Office Plaza Drive

Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

The issue for determination in this proceeding is whether an additional Chevrolet dealership should be established in the Orlando, Florida area.

PRELIMINARY STATEMENT

On March 25, 1994, Petitioner, General Motors Corporation, published notice of its intent to establish an additional dealer at 9400 State Road 434 South, Altamonte Springs, Seminole County, Florida. Respondents timely protested the proposed dealership and requested a formal hearing.

At the formal hearing, the parties presented the testimony of nine witnesses and submitted numerous exhibits for admission in evidence. The identity of the witnesses and exhibits, and the rulings concerning each, are set forth in the transcript of the formal hearing filed on August 8, 1995.

The parties timely filed proposed recommended orders ("PROs") on October 24, 1995. Proposed findings of fact in the parties' PROs are addressed in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Petitioner, General Motors Corporation ("Chevrolet"), proposes to locate an additional dealer at 9400 State Road 434 South, Altamonte Springs, Seminole County, Florida. Petitioner, Classic Chevrolet Co., Inc. ("Classic"), is the owner and operator of the proposed dealership.

   
   

2. Respondent, Don Mealey Chevrolet, Inc. ("Mealey") is located in Orlando, Florida, approximately six miles from the site of the proposed dealership. Respondent, Chevrolet World, Inc., d/b/a World Chevrolet Geo ("World"), is located in Orlando approximately 13 miles from the site of the proposed dealership.

   
   

3. The proposed dealership is located within an area identified by Chevrolet as the Orlando multiple dealer area ("MDA"). The MDA is the area of primary responsibility ("APR") described in each contract between Chevrolet and the four existing dealers in the MDA.

   
   

4. The four existing dealers in the MDA are Mealey, World, Ken Rummel Chevrolet-Geo ("Rummel"), and Roger Holler Chevrolet ("Holler"). Petitioners propose to establish Classic as a fifth Chevrolet dealership in the MDA.

1. Relevant Community Or Territory

   
   

   1. This proceeding is governed by Section 320.642, Florida Statutes. 1/ Chapter 320 does not define the community or territory to be used in determining whether existing dealers adequately represent Chevrolet. 2/

      
      

   2. The APR described in the contracts between Chevrolet and the existing dealers in the MDA is a material fact entitled to great weight. However, the APR is not determinative of the relevant community or territory.

      
      

      1. Fringe Areas

   3. Ten dealers have an APR adjacent to the MDA ("fringe areas"). The dealers in fringe areas are Seidle, Starling, Gannaway, Holiday, Bondesen, Eckler, Higgingbothom, Sorensen, Steele, and Blount.

      
      

   4. The issue of whether fringe areas should be included in the relevant community or territory is determined by all of the facts and circumstances surrounding the proposed dealership. 4/ The "cross-sell test" is one means of determining whether fringe areas should be included in the relevant community or territory.

      
      

   5. The cross-sell test measures sales by a fringe dealer to consumers in the MDA and sales by dealers in the MDA to consumers in the fringe areas. A fringe area satisfies the cross-sell test for inclusion in the relevant community or territory if more than 30 percent of sales by a fringe dealer are made to consumers in the MDA and if more than 30 percent of sales by dealers in the MDA are made to consumers in the fringe area.

      
      

   6. Only Seidle and Starling make more than 30 percent of their sales to consumers located in the MDA. Therefore, only Seidle and Starling satisfy the first part of the conjunctive requirements for the cross-sell test.

      
      

   7. Seidle is located in Clermont, Florida. Starling is located in Kissimmee, Florida.

      
      

   8. Only 19 percent of the consumers located in Kissimmee purchase Chevrolets from MDA dealers. Kissimmee does not satisfy the second requirement of the cross-sell test. Kissimmee is not in the relevant community or territory.

      
      

   9. More than 40 percent of consumers in Clermont purchase vehicles from MDA dealers. Clermont satisfies the second part of the conjunctive requirements for the cross-sell test.

      
      

   10. Clermont is not included in the relevant community or territory due to low sales volume by Seidle and ineffective performance by Seidle. Seidle sold only a nominal number of vehicles in 1993 compared to other dealers in the MDA. Of those sales, only 24 percent were sales in the APR for Clermont.

       
       

   11. The vast majority of consumers in Clermont purchased automobiles from dealers in the MDA or other more remote dealers. Mealey sold more vehicles to consumers in Clermont than did Seidle. Seidle achieved only 56 percent of the sales opportunities available to it.

       
       

       1. The MDA

       
       

   12. An Area of Geographic Sales and Service Advantage ("AGSSA") is an area within which a dealer is closer to consumers than any other same line-make dealer. There are five AGSSAs in the MDA.

       
       

   13. Holler is located in AGSSA 1. Mealey is located in AGSSA 2. Classic, the proposed dealership, is located in AGSSA 3. Rummel is located in AGSSA 4. World is located in AGSSA 5.

       
       

   14. Each AGSSA satisfies both conjunctive requirements in the cross-sell test. Each AGSSA is connected by consumer behavior, road networks, and inter- brand dealer locations.

   15. The relevant community or territory is the MDA. The MDA consists of AGSSAs 1-5. AGSSAs 1-5 are identifiable plots within the relevant community or territory.

       
       

2. Adequate Representation

   
   

   1. In order for the adequacy of representation by existing dealers in the MDA to be assessed, their performance must be compared to a reasonable standard. A reasonable standard for such a comparison is the national average for Chevrolet's market share.

      
      

      1. The Florida Average

         
         

   2. The Florida average is not a reasonable standard. Florida has lagged behind the national average from 1991 through June, 1994.

      
      

   3. In 1993, Chevrolet's market share in Florida ranked 43 out of 50 states. Unique characteristics of Florida consumers account for only a portion of the difference between Florida and national averages.

      
      

   4. The remaining shortfall is attributable to deficiencies in Chevrolet's statewide dealer network. A dealer network includes the number and location of individual operations.

      
      

   5. Chevrolet's share of competitive franchises in Florida is below its national average. This is a significant factor in a brand's ability to achieve a reasonably expected market share.

      
      

   6. The Florida average includes network deficiencies for Chevrolet. It is inappropriate to use the Florida average as a standard to assess the adequacy of representation by existing dealers in the MDA.

      
      

      1. The National Average

         
         

   7. National average is first adjusted to account for unique consumer characteristics in Florida. After the appropriate adjustment, Chevrolet market penetration in the MDA is below national average.

      
      

   8. In 1993, for example, Chevrolet market share expectation in the MDA was 15.42 percent. In AGSSA 3, Chevrolet market expectation was 15.23 percent.

      
      

   9. In 1993, actual Chevrolet market penetration in the MDA was 12.32 percent. Actual market penetration in AGSSA 3 was only 10.76 percent.

      
      

   10. The shortfalls experienced in the MDA and AGSSA 3 are not attributable to local characteristics such as the presence of large numbers of daily rental cars in Orlando. More than half of all local markets in Florida exceed market share expectation adjusted for local characteristics.

       
       

   11. From 1991 through June, 1994, the MDA and AGSSA 3 performed significantly below the minimum market expectation. The degree of shortfall in the MDA has steadily declined on a percentage basis.

       
       

   12. The contribution by World to Chevrolet performance in the MDA has steadily increased. However, World's contribution to Chevrolet performance in AGSSA 3 did not improve Chevrolet performance in AGSSA 3 even though World had significant improvement in the MDA as a whole.

   13. The combined effort of existing dealers besides World has remained relatively constant. Through June, 1994, the MDA reached only 86.9 percent of the minimum expected market penetration.

       
       

   14. The contribution by existing dealers to Chevrolet performance in AGSSA

       3 also remained relatively constant. It ranged from 68.8 percent of minimum expected penetration in 1991 to 71 percent through June, 1994.

       
       

       1. Vehicle Registration

          
          

   15. New vehicle registration density for the automobile industry mirrors patterns for population and households. The trend for the industry in the MDA and AGSSA 3 is upward.

       
       

   16. Each AGSSA in the MDA, including AGSSA 3, has experienced significant growth in population and households during the past 14 years. Growth rates are about four times the national rate and are expected to continue for at least the next five years. 5/

       
       

   17. The MDA population has a strong distribution of median and above average income. There are virtually no economically depressed areas. There is a steady upward trend in employment.

       
       

   18. These factors represent a favorable environment for new vehicle sales. Growth in the MDA and AGSSA 3 represents new opportunity for Chevrolet.

       
       

   19. Registration activity in AGSSA 5 increased substantially after World was added as an existing dealer in the MDA. Sales by existing Chevrolet dealers in the MDA also increased.

       
       

   20. From 1991 through 1994, registrations in AGSSA 3 were less than the MDA and AGSSA 5. Chevrolet performance in AGSSA 3 ranks well below expected market penetration.

       
       

       1. Market Opportunity

          
          

   21. Gross registration loss is the number of registrations needed to raise each census tract within the MDA to the expected registrations for that area. Gross registration loss is a reasonable means of calculating market opportunity but does not represent the maximum opportunity.

       
       

   22. The amount and location of gross registration loss for Chevrolet in the MDA demonstrates a consistent pattern of under performance by existing dealers from 1991 through 1994. The establishment of World in 1991 raised the market efficiency of AGSSA 5 from 75.9 percent of expected market in 1990 to 103 percent in 1994. Chevrolet's overall market share increased. However, the addition of World did not eliminate under- performance.

       
       

   23. After controlling for the establishment of World, the gross registration loss for Chevrolet from 1991-1994 in AGSSAs 1- 4 was 6,083. That is an annual average loss of 1,521.

       
       

   24. The average annual loss in AGSSAs 1-4 from 1991-1994 is consistent with the loss for each year. The gross registration loss for AGSSAs 1-4 in 1991 was 1,489. In 1992, the loss was 1,510. The 1993 and annualized 1994 losses were 1,667 and 1,632, respectively.

   25. Chevrolet's overall registration shortfall in the MDA for 1993, including AGSSA 5, was 1,920 units. Of the units Chevrolet did sell in the MDA, approximately 1,216 were attributable to sales by Chevrolet dealers located outside the MDA ("insell").

       
       

   26. If the proposed dealership had existed in 1993 and had penetrated the market at the same level as the average of existing dealers in the MDA, the proposed dealer would have sold 1,602 units. Projected sales by the proposed dealer in 1993 represent only 51.1 percent of combined shortfall and insell. Without insell as a component of opportunity, projected sales would not have eliminated gross registration loss.

       
       

   27. Assessing lost opportunity by gross registration loss is consistent with actual experience. The addition of World in 1991 raised AGSSA 5 efficiency from 75.9 percent of expected in 1990 to 103 percent of expected in 1994. Sales by existing dealers in the MDA remained stable through 1993 and increased in 1994. Chevrolet's overall market share increased and insell declined.

       
       

   28. The addition of a new dealer in a market in which there is sufficient opportunity for additional representation generally expands the market. Establishment of a Chevrolet dealer in the MDA for Jacksonville, Florida increased efficiency from below expected to above expected without decreasing sales by existing dealers. Insell also declined. The addition of a GMC Truck dealer in the MDA for St. Petersburg and Clearwater, Florida achieved similar results.

       
       

       1. Dealer Network

          
          

   29. Despite significant growth in population, households, and new vehicle registrations, Chevrolet's dealer network in the MDA has not expanded since 1930. Chevrolet's share of automobile franchises nationally is 10 percent. Its share of franchises in the MDA is only five percent.

       
       

   30. Chevrolet needs 8.5 dealers to achieve the same share of franchises in the MDA that it maintains nationally. The addition of the proposed dealer would raise Chevrolet's share of MDA franchises to 6.25 percent. Chevrolet has not been able to achieve its minimum expected market share with four dealers in the MDA.

       
       

       1. Proximity

       
       

   31. The ability of existing dealers to penetrate the market is strongest near their dealerships. It tapers off substantially as distance increases. 6/

       
       

   32. Chevrolet is farther from AGSSA 3 than approximately 23 other brands. Ford has nearly a four mile advantage in distance over Chevrolet in AGSSA 3. The proposed dealer would improve Chevrolet's proximity to AGSSA 3 consumers.

       
       

   33. A brand's ability to penetrate a market diminishes as proximity to consumers diminishes, and vice versa. Before World was added to the MDA, Chevrolet's lowest market penetration occurred nearer the World site. Market penetration in the MDA increased nearer to Chevrolet dealers in existence prior to the addition of World. After World was added to the MDA, Chevrolet's highest market penetration occurred nearest the World site.

   34. World improved Chevrolet proximity to consumers in AGSSA 5 by approximately 2.5 miles. Chevrolet's efficiency to the expected market share improved in AGSSA 5 from 74.4 percent to 102.9 percent.

       
       

   35. Other line-makes experience similar market penetration. Market share for Ford is highest near their respective dealerships. Market share diminishes as distance from the dealerships increases.

       
       

   36. Ford achieves approximately 200 percent of the market penetration achieved by Chevrolet in the vicinity of the Ford dealer in AGSSA 3. The establishment of the Ford dealer in 1988 resulted in an increase of Ford market share relative to the national average.

       
       

   37. The site of the proposed dealer is close to an optimal location that maximizes Chevrolet proximity to consumers in the MDA and AGSSA 3. The site of the proposed dealer is further enhanced by an anticipated extension of Maitland Boulevard. The extension will facilitate greater visibility and accessibility to consumers.

   
   

3. Operating Efficiency

   
   

   1. If all dealers in the MDA are operated as efficiently as they can be operated, a new dealer is most disadvantaged in the relevant community or territory. The new dealer lacks customer loyalty, word of mouth recommendations, and an established warranty and customer service business.

      
      

   2. If an existing dealer is forced to withdraw from the MDA as a result of the addition of a new dealer, the impact on the public interest, consumers, the manufacturer, and remaining existing dealers is positive. The addition of the new dealer eliminates inefficiency and strengthens the brand's overall competitiveness in the market, thereby increasing value and convenience for consumers.

      
      

   3. It is undisputed that Rummel is an inefficient Chevrolet dealer. Chevrolet loses approximately 1,000 sales each year as a result of inefficient operation of Rummel.

      
      

   4. Rummel failed to maintain the minimum level of operating capital prescribed in its dealer agreement with Petitioner. From 1989 through 1993, Rummel operated far below its required operating capital level and at a deficit.

      
      

   5. Inadequate working capital can interfere with a dealer's ability to adequately represent product in the market. Inadequate working capital can prevent the dealer from paying the floor plan lender and thereby prevent the dealer from obtaining product to sell.

      
      

   6. Rummel's inadequate working capital caused problems in its floor plan financing. Rummel's floor plan financing was revoked from March 16, 1992, through May 1, 1992.

      
      

   7. Rummel sales were substantially below its contractual sales obligations with Chevrolet from 1990 through 1993. Chevrolet placed Rummel on Chevrolet's Performance Improvement Program in February, 1993. However, Rummel did not submit a plan to address its sales deficiencies that was satisfactory to Chevrolet.

   8. Chevrolet granted Rummel's request for a special allocation of vehicles. However, Rummel refused to submit orders so that the allocation could be delivered.

      
      

   9. Mr. Ken Rummel frequently replaced himself as dealer operator without approval from Chevrolet. The dealer agreement requires a dealer to devote his or her personal services to the daily management of the dealership.

   
   

4. Order Bank Management

   
   

   1. Chevrolet distributes new vehicles to its national dealer body based upon a mathematical formula that accounts for each dealer's rate of sale and current product availability. A dealer can grow its business by increasing the rate at which it sells the product allocated to it.

      
      

   2. Before Chevrolet can ship a vehicle to a dealer, the dealer must submit a "selectable" order to Chevrolet. Product allocated to a dealer but not ordered may be purchased by other dealers. A dealership must properly manage its order bank.

      
      

   3. For approximately 100 production weeks for 1992 and 1993 model vehicles, Mealey placed no selectable orders for a broad range of Chevrolet product. From August, 1991, through July, 1993, Mealey frequently rejected its allocation of product through a lack of selectable orders. During the same period, World and other existing dealers in the MDA received additional product which was available to Mealey. To a lesser degree, World practiced selective ordering.

      
      

   4. World and Mealey are adequately capitalized and in sound financial condition. Neither would suffer any adverse financial impact from the proposed dealership.

   
   

5. Enhanced Competition And The Public Interest

   
   

   1. Where there is sufficient opportunity for additional representation, as there is in the MDA and AGSSA 3, the impact on consumers from an additional dealer is positive. Enhanced intra- brand and inter-brand competition results in lower transactional costs, lower pricing, better trade-in value, better financing, greater selection, and better service. Enhanced competition also increases the perception by consumers that they are receiving greater value.

      
      

   2. Existing Chevrolet dealers in the MDA will benefit from the proposed dealer. Public exposure to the Chevrolet brand will be greater. Existing dealers will share the benefits of greater advertising, public display, and demonstration of product.

      
      

   3. Enhanced competition encourages existing Chevrolet dealers to become more efficient and aggressive. There is greater opportunity to convince non- brand or marginal customers to buy Chevrolets.

      
      

   4. Enhanced competition is unlikely to result in reduced profits for existing dealers due to elasticity of demand in the automobile industry. Enhanced competition stimulates the competitive viability of the line-make in the market through greater efficiency and perceived value.

   5. The proposed dealer favorably impacts the public interest. The public obtains greater value, and there is a better allocation of scarce resources.

      The proposed dealership also means additional employment and enhanced tax revenues.

      
      

      CONCLUSIONS OF LAW

      
      

   6. The Division of Administrative Hearings ("DOAH") has jurisdiction over the subject matter of this proceeding and the parties. The parties were duly noticed for the formal hearing. 7/

   
   

6. Burden Of Proof

   
   

   76. The burden of proof is on Chevrolet. Section 320.642(2)(a)2. The manufacturer has the burden of coming forward with competent and substantial evidence concerning the relevant community or territory and the adequacy of representation in that community or territory. Chevrolet World, Inc. v. Century Chevrolet, Inc., DHSMV Order of Remand at 4, DOAH Case No. 86-3617 (1988), affirmed per curium, Century Chevrolet, Inc. v. Department of Highway Safety and Motor Vehicles, 550 So.2d 479 (Fla. 5th DCA 1989). The protesting dealers have the burden of going forward with competent and substantial evidence to controvert the proof established by the manufacturer. Id.

   
   

7. Applicable Law

   77. Section 320.642 provides, in relevant part: (2)(a) An application for a motor vehicle

   dealer license in any community or territory

   shall be denied when:

   * * * *

   2. The licensee fails to show that the existing franchised dealer or dealers who register new motor vehicle retail sales or retail leases of the same line- make in the community or territory of the proposed dealership are not providing adequate representation of such line-make motor vehicles in such community or territory. The burden of proof in establishing inadequate representation shall be on

   the licensee.

   
   

8. Relevant Community Or Territory

   
   

   1. Section 320.642 does not define the term "community or territory." The relevant community or territory is identified on the basis of the facts presented at the formal hearing. Anthony Abraham Chevrolet Company, Inc. v. Collection Chevrolet, Inc., 533 So.2d 821, 824 (Fla. 1st DCA 1988). In determining the relevant community or territory, the area described in the

      contract between the manufacturer and dealer is entitled to great weight, but it is not conclusive. Bill Kelley Chevrolet, Inc. v. Calvin, 308 So.2d 199, 201 (Fla. 1st DCA 1974); Larry Dimmitt Cadillac, Inc. v. Seacrest Cadillac, Inc., 558 So.2d 136, 138 (Fla. 1st DCA 1990).

      
      

   2. Inadequacy of representation may be demonstrated in the community or territory as a whole. It may also be demonstrated in an identifiable plot

      within the community or territory that is not yet cultivated and could be expected to flourish if given the attention which others receive. Bill Kelley Chevrolet v. Calvin, 322 So.2d 50, 52 (Fla. 1st DCA 1975) cert. denied 336 So.2d

      1180 (Fla. 1976).

      
      

   3. The Orlando MDA is the area described in the contract between Petitioner and Respondents. It is the area in which the proposed dealer is located. Fringe areas are not sufficiently connected to the MDA to overcome the great weight accorded the MDA.

      
      

   4. The MDA has been consistently recognized as the relevant community or territory. The AGSSA has been consistently recognized as an identifiable plot.

      
      

   5. The Orlando MDA consists of AGSSAs 1-5. AGSSA 3 is interconnected with the other AGSSAs and is an identifiable plot within the relevant community or territory.

   
   

9. Adequacy Of Representation

   
   

   1. Section 320.642 does not define the term "adequate representation." The meaning of adequate representation must be interpreted in a manner that is consistent with legislative intent. Tampa-Hillsborough County Expressway Authority v. K.E. Morris Alignment Service, Inc., 444 So.2d 926, 929 (Fla. 1983).

      
      

   2. The legislature does not intend Section 320.642 to foster combinations to prevent the introduction of dealer competition which is reasonably justified in terms of market potential. Bill Kelley Chevrolet, 322 So.2d at 52. The legislature intends, in relevant part, to:

      
      

      . . . protect the public health, safety, and welfare of citizens of the state by regulating the licensing of motor vehicle dealers and manufacturers, maintaining competition, providing consumer protection and fair

      trade . . . .

      
      

      Section 320.605.

      
      

   3. Denying an application where there is sufficient opportunity for an additional dealer would frustrate legislative intent. Where there is sufficient opportunity for an additional dealer, an application should be granted. Dave Zinn Toyota, Inc. v. Department of Highway Safety and Motor Vehicles, 432 So.2d 1320, 1322-23 (Fla. 3d DCA 1983).

      
      

   4. Section 320.642(2)(b) lists 11 categories of evidence that may be considered in determining whether existing dealers are adequately representing Chevrolet. The categories are assessed based on the evidence submitted at the formal hearing.

10. Impact

    
    

    1. Section 320.642(2)(b)1. provides in relevant part that evidence of the following factors may be considered:

       
       

       The impact . . . of the proposed . . . dealer on the consumers, public interest, existing dealers, and the licensee. . . .

       
       

    2. There is more than sufficient opportunity for an additional Chevrolet dealer in the Orlando MDA. The MDA has experienced significant growth during recent years. Each AGSSA within the MDA has experienced similar growth. That growth is predicted to continue into the foreseeable future.

       
       

    3. The existing Chevrolet dealer network has not sufficiently stimulated intra-brand and inter-brand competition. The MDA has fallen below minimum expectations.

       
       

    4. The proposed dealer will benefit consumers and the public interest. It will enhance competition, create greater value, and improve allocation of scarce resources. The proposed dealership will provide more convenient sales and service facilities for an important segment of the population.

       
       

    5. The proposed dealer will not deprive existing dealers in the MDA of any sales. Due to the level of opportunity and demand elasticity, sales will, in all likelihood, increase through enhanced competition.

       
       

    6. Existing dealers will benefit from greater product exposure and greater efficiencies. The manufacturer and existing dealers will benefit from a stronger dealer network. They will maintain competitive viability into the future by garnering a reasonable share of the market.

    
    

11. Investment

    
    

    1. Section 320.642(2)(b)2. provides in relevant part that evidence of the following factors may be considered:

       
       

       The size and permanency of investment reasonably made and reasonable obligations incurred by the existing . . . dealers to perform their obligations under the dealer agreement.

       
       

    2. Respondents are not at risk of losing their investments as a result of the proposed dealer. Improved competitive viability will bolster the effectiveness and security of their investments.

    
    

12. Market Penetration

    
    

    1. Section 320.642(2)(b)3. provides in relevant part that evidence of the following factors may be considered:

       
       

       The reasonably expected market penetration of the line-make motor vehicle for the community or territory involved, after

       consideration of all factors which may affect said penetration, including, but not limited

       to, demographic factors such as age, income, education, size class preference, product popularity, retail lease transactions, or other factors affecting sales to consumers of the community or territory.

       
       

    2. From 1991, through June, 1994, sales of Chevrolets in the MDA have fallen below the reasonably expected market penetration calculated from the national average. The addition of World in 1991 improved market penetration for Chevrolet in the MDA. However, the improvement is not sufficient to raise sales above the minimum expectation.

       
       

    3. Sales in AGSSA 3 have been below minimum expected penetration. Improvement in AGSSA 3 from the addition of World in 1991 is nominal.

    
    

13. Actions By The Manufacturer

    
    

    1. Section 320.642(2)(b)4. provides in relevant part that evidence of the following factors may be considered:

       
       

       Any actions by the licensees (sic) in denying its existing . . . dealers . . . the opportunity for reasonable growth, market expansion, or relocation, including the availability of

       line-make vehicles in keeping with . . . reasonable expectations of the licensee in providing an adequate number of dealers in the community or territory.

       
       

    2. Population and household growth increased opportunities in the relevant community or territory. Chevrolet has not denied existing dealers an opportunity to capture the increased opportunity through market expansion and relocation.

       
       

    3. Chevrolet has not denied reasonable quantities of product in relation to the rate of sale achieved by existing dealers. Mealey and World have been selective in ordering vehicles. They sometimes placed no orders for a broad cross- section of the Chevrolet line for extended periods.

    
    

14. Coercion

    
    

    101. Section 320.642(2)(b)5. provides in relevant part that evidence of the following factors may be considered:

    
    

    Any attempts by the licensee to coerce the existing . . . dealers into consenting to additional or relocated franchises of the same line-make in the community or territory.

    
    

    Chevrolet did not coerce, or attempt to coerce, existing dealers into consenting to the proposed dealership.

    
    

15. Proximity

    
    

    1. Section 320.642(2)(b)6. provides in relevant part that evidence of the following factors may be considered:

       Distance, travel time, traffic patterns, and accessibility between the existing . . . dealers . . . and the location of the proposed additional or relocated dealer.

       
       

    2. Chevrolet is farther from consumers in AGSSA 3 than 23 other brands. The proposed dealer will bring Chevrolet's proximity in AGSSA 3 in line with that available in other AGSSAs in the MDA.

       
       

    3. The proposed site is near an optimal location that will maximize proximity for Chevrolet to all consumers in the MDA. The distance between Mealey and the proposed dealer is consistent with the distance between Holler and Mealey.

    
    

16. Benefits To Consumers

    
    

    1. Section 320.642(2)(b)7. provides in relevant part that evidence of the following factors may be considered:

       
       

       Whether benefits to consumers will likely occur from the establishment or relocation

       of the dealership which the protesting . . . dealers prove cannot be obtained by other geographic or demographic changes or expected changes in the community or territory.

       
       

    2. The necessary enhancement to inter-brand and intra- brand competition can not be achieved by other geographic and demographic changes in the community or territory. The benefits derived by consumers from such enhanced competition are unobtainable by other geographic and demographic changes.

    
    

17. Substantial Compliance

    
    

    107. Section 320.642(2)(b)8. provides in relevant part that evidence of the following factors may be considered:

    
    

    Whether the protesting . . . dealers are in substantial compliance with their dealer agreement.

    
    

    Mealey and World are in substantial compliance with their dealer agreement.

    
    

18. Competition

    
    

    1. Section 320.642(2)(b)9. provides in relevant part that evidence of the following factors may be considered:

       
       

       Whether there is adequate interbrand and intrabrand competition with respect to said line-make in the community or territory and adequately convenient consumer care for the motor vehicles of the line-make, including the adequacy of sales and service facilities.

       
       

    2. The Chevrolet dealer network has not kept pace with growth in the MDA. Chevrolet has only half its national average of franchises in the MDA. There are not sufficient numbers of dealers to stimulate effective intra-brand competition.

    3. Chevrolet dealers have not kept pace with inter-brand competition that has already responded appropriately to growth in the MDA. Performance by Chevrolet dealers is below minimum expectations.

    
    

19. Economic And Marketing Conditions

    
    

    1. Section 320.642(2)(b)10. provides in relevant part that evidence of the following factors may be considered:

       
       

       Whether the establishment or relocation of the proposed dealership appears to be warranted and justified based on economic

       and marketing conditions pertinent to dealers competing in the community or territory, including anticipated future changes.

       
       

    2. Significant economic and marketing conditions pertinent to existing dealers in the community or territory are attributable to significant growth in the MDA and its separate AGSSAs. Population and households have increased many times over during the past decades. Employment levels and incomes have increased.

       
       

    3. Growth experienced in the MDA means greater market opportunity for existing dealers. That growth and will continue in the future, as will the increased market opportunity associated with it.

    
    

20. Registrations And Service

1. Section 320.642(2)(b)11. provides in relevant part that evidence of the following factors may be considered:

   
   

   The volume of registrations and service business transacted by the existing . . . dealers of the same line-make in the relevant

   community or territory of the proposed dealership.

   
   

2. The MDA represents one of the highest levels of opportunity in Florida based on industry registrations. The level of opportunity is more than sufficient to support the proposed dealership.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and therein GRANT the

application for the proposed dealership.

RECOMMENDED this 1st day of February, 1996, in Tallahassee, Florida.

DANIEL S. MANRY, Hearing Officer Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 1st day of February, 1996.

ENDNOTES

1/ All chapter and section references are to Florida Statutes (1995) unless otherwise stated.

2/ Sec. 320.642(2)(a)2. provides in relevant part that Petitioners' application for a motor vehicle dealer license shall be denied when GM fails to show that existing dealers:

. . . in the community or territory of the proposed dealership are not providing adequate representation . . . in such community or territory

3/ Bill Kelly Chevrolet, Inc. v. Calvin, 308 So.2d 199, 201 (Fla. 1st DCA 1974); Larry Dimmitt Cadillac, Inc. v. Seacrest Cadillac, Inc., 558 So2d 136,

138 (Fla. 1st DCA 1990).

4/ See, Anthony Abraham Chevrolet Company, Inc. v. Collection Chevrolet, Inc.,

533 So.2d 821, 824 (Fla. 1st DCA 1988) (holding generally that a determination of the relevant community or territory must be based on the facts presented at the formal hearing)

5/ MDA population increased 48.08 percent. Households in the MDA increased

54.74 percent. AGSSA 3 population increased by 47.25 percent. The number of households in AGSSA 3 increased by 60.89 percent.

6/ Within two miles of their locations, the market penetration of existing dealers ranges from 12.5 percent for World to 4.3 percent for Rummel. Mealey and Holler are at 5.8 and 7.6 percent respectively.

7/ Rummel was originally a party to this proceeding and a consolidated proceeding in DOAH Case No. 94-2376. Rummel withdrew its protest of the proposed dealership during this consolidated proceeding. Case No. 94-2376 was closed and Rummel was eliminated as a named party in this proceeding. Sec.

320.642(2)(b)1. provides in relevant part that financial impact may be considered only with respect to protesting dealers.

APPENDIX

Petitioner, General Motors Corporation, Proposed Findings Of Fact.

credibility or weight to be given the evidence solely within the province of the trier of fact

56. Rejected as recited testimony 57.-73. Accepted in substance

74. Rejected as recited testimony 75.-89. Accepted in substance

Petitioner, Classic Chevrolet Co., Inc., Proposed Findings Of Fact.

Classic adopted the PRO filed by Chevrolet.

Respondents' Proposed Findings Of Fact.

1.-3. Accepted in substance

1. Rejected as recited testimony

2. Rejected as not supported by credible and persuasive evidence

3. Accepted in substance

4. Rejected as conclusion of law 8.-9. Accepted in substance

10.-11. Rejected in part as not supported by credible and persuasive evidence

12.-13. Accepted in substance

1. Rejected in part as not supported by credible and persuasive evidence

2. Accepted in substance

3. Rejected in part as recited testimony 17.-19. Rejected as recited testimony

20.-21. Rejected as not supported by credible and persuasive evidence

1. Rejected as irrelevant and immaterial

2. Accepted in part and rejected in part as not supported by credible and persuasive evidence

24.-25. Rejected as recited testimony

26.-27. Rejected as not supported by credible and persuasive evidence

1. Rejected as argumentative and an issue of credibility or weight to be given the evidence

   solely within the province of the trier of fact

2. Accepted in substance

30.-34. Rejected as recited testimony

1. Rejected as not supported by credible and persuasive evidence

2. Rejected as irrelevant and immaterial

3. Rejected as recited testimony

38.-39. Rejected as not supported by credible and persuasive evidence

40. Rejected as argumentative and an issue of credibility or weight to be given the evidence solely within the province of the trier of fact

41.-45. Rejected as not supported by credible and persuasive evidence.

1. Rejected as irrelevant and immaterial

2. Accepted in substance

3. Rejected as recited testimony

49.-51. Rejected as not supported by credible and persuasive evidence

COPIES FURNISHED:

Charles J. Brantley, Director Division of Motor Vehicles Department of Highway Safety and

Motor Vehicles

Room B439, Neil Kirkman Building Tallahassee, Florida 32399-0500

Enoch Jon Whitney, General Counsel Department of Highway Safety and

Motor Vehicles

Room B439, Neil Kirkman Building Tallahassee, Florida 32399-0500

Edward W. Risko, Esquire General Corporation

New Center One Building 3031 West Grand Boulevard Post Office Box 33122 Detroit, Michigan 48232

Fred J. Lotterhos, III, Esquire Holland and Knight

50 North Laura Street, Suite 3900 Jacksonville, Florida 32202

Nancy Faggianelli, Esquire Carlton, Fields, Ward, Emmanuel,

Smith and Cutler, P.A. Post Office Box 3239 Tampa, Florida 33601

Daniel E. Myers, Esquire Walter E. Forehand, Esquire

J. Martin Hayes, Esquire Myers and Forehand

402 Office Plaza Drive Tallahassee, Florida 32301

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 94-002377

Orders for Case No: 94-002377