STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SATNAM ENTERPRISES, INC., d/b/a ) HONDA OF FT. LAUDERDALE, and ) INTERNATIONAL CYCLES, INC., d/b/a ) HONDA INTERNATIONAL, )

)

Petitioners, )

)

and )

)

R.B.L. CYCLES, d/b/a BOCA )

HONDA SALES, )

)

Intervenor, )

)

vs. ) CASE NO. 85-0836

)

S.G. SILVERMAN and DEPARTMENT OF ) HIGHWAY SAFETY AND MOTOR VEHICLES, ) DIVISION OF MOTOR VEHICLES, )

)

Respondents. )

)

and )

) AMERICAN HONDA MOTOR COMPANY, )

)

Intervenor. )

)

RECOMMENDED ORDER

A final hearing was held in this case on September 11 and 12, 1985, in Fort Lauderdale, Florida, before Donald D. Conn, a duly designated Hearing Officer of the Division of Administrative Hearings. The parties were represented as follows:

APPEARANCES

For Petitioners and Gerald McBride, Esquire Intervenor R.B.L.Cycles, du Fresne and Bradley d/b/a Boca Honda Sales: 2950 S.W. 27th Avenue

Suite 310

Coconut Grove, Florida 33133

For Respondent N. Sandy Konigsberg, Esquire

S. G. Silverman: Smith and Berman

2310 Hollywood Boulevard

Hollywood, Florida 33020

For Intervenor Julia Sullivan-Waters, Esquire

American Honda Motor Holland and Knight Company: Post Office Box 1288

Tampa, Florida 33601 and

Robert Dickerson, Esquire Lyon and Lyon

611 West 6th Street, 34 Floor Los Angeles, California

90017

The Department of Highway Safety and Motor Vehicles received notice of the final hearing and arranged to have a court reporter present to preserve the record of the proceedings, but the Department was not represented at the hearing.

ISSUE

The issue in this case is whether a motor vehicle dealer license should be issued to S.G. Silverman, Respondent, by the Department of Highway Safety and Motor Vehicles, Department. Intervenor American Honda Motor Company has the burden of proof in this case, pursuant to Section 320.642, Florida Statutes. The Department must deny an application if existing dealers have complied with their franchise agreements and are providing adequate representation. There is no contention in this case that the existing dealers, Petitioners Satnam Enterprises, Inc., d/b/a Honda of Fort Lauderdale, and International Cycles, Inc., d/b/a Honda International and Intervenor R.B.L. Cycles, d/b/a Boca Honda Sales, have breached their franchise agreement with American Honda Motor Company. The only issue presented is whether they are providing adequate representation in the community or territory.

Petitioners' Exhibit 1 was a deposition upon written interrogatories of Edward Lemco taken by Petitioners on

September 4, 1985 in Albany, Oregon. Upon the agreement of the parties, the Hearing Officer instructed Petitioners to make Mr. Lemco available following the hearing at a mutually convenient time to place to allow Respondent and Intervenor American Honda Motor Company to cross-examine him, and to submit a transcript of that cross-examination. Petitioners complied with this instruction, confirmed by Order dated September 25, 1985, and filed the deposition of Edward Lemco on November 4, 1985 which is hereby received as exhibit P-1A. Petitioners' Exhibit 14 was a map of the area prepared by the general manager of one of the Petitioners, Surg Soni, and Petitioners were instructed to reproduce the exhibit and provide copies to all parties within twenty days of the hearing. The exhibit, P-14, was returned to Petitioners for this purpose. Since Petitioners have failed to comply with this instruction or to return P-14 to the Hearing Officer, this exhibit is excluded and not received in evidence. Petitioners' remaining fifteen (15) exhibits have been received in evidence. Respondent Silverman offered three (3) exhibits which were received. Intervenor American Honda offered eighteen(18) exhibits, two of which (I-10 and I-ll) were rejected, but the remaining sixteen (16) were received in evidence.

The general managers of Satnam Enterprises, Inc. and International Cycles, Inc., Surg Soni and Pablo Canseco, as well as the owner of R.B.L. Cycles, Ron Lipack, testified on behalf of Petitioners and Intervenor, R.B.L. Cycles. S.

G. Silverman testified on his own behalf. Intervenor American Honda Motor Company called Joe Prussiano, Jr., former southeastern zone manager, Gerald L. Ford, Ph.D., who was accepted as an expert in market and economic analysis, and Dick Clark, current southeastern zone manager, to testify on its behalf.

A transcript of the final hearing was filed on October 22, 1985 and thereafter the parties were allowed ten (10) days to file proposed findings of fact pursuant to Section 120.57(1)(b)4., Florida Statutes, and Rule 221-6.31, Florida Administrative Code. A ruling on each proposed finding of fact has been made in this Recommended Order as reflected in the attached Appendix.

FINDINGS OF FACT

1. On or about January 24, 1985, Respondent S. G.

   Silverman submitted an application for a license as a motor vehicle dealer to the Department of Highway Safety and Motor Vehicles. The application indicated that his business would be located in the vicinity of Copans and Powerline Roads in Pompano Beach, Broward County, Florida. On or about November 12, 1984, Silverman had received a tentative approval from American Honda Motor Company, Intervenor, of his application for a Honda motorcycle, all- terrain-vehicle and motor scooter franchise.

   
   

2. Three Honda motorcycle, all-terrain-vehicle and motor scooter dealerships presently exist within the community or territory to be served by Respondent Silverman. These are: Petitioners Satnam Enterprises, Inc., d/b/a Honda of Fort Lauderdale, and International Cycles, Inc., d/b/a Honda International, and Intervenor

   R.B.L. Cycles, d/b/a Boca Honda Sales. Petitioners are located in Broward County, south of Silverman's proposed location, and Intervenor is located in the southern part of Palm Beach County, north of Silverman's proposed location. Intervenor R.B.L. Cycles accounts for 10 percent of all American Honda units sold to Broward County residents, and one-third of its sales are to Broward County residents. These three existing dealers have protested the issuance of a license to Respondent Silverman.

   
   

3. Based upon the testimony and evidence presented by Gerald L. Ford, Ph.D., who was accepted as an expert in market and economic analysis, American Honda Motor Company is not being adequately represented in the territory or community by these existing three dealers. Specifically this is evidenced by the following:

   
   

   1. According to R. L. Polk, from 1981 through 1984 American Honda's statewide market share increased from

      40.87 percent to 55.73 percent while its market share in Broward County only increased from 45.06 percent to 48.07 percent, and from 45.16 percent to 54.58 percent in Palm Beach County. Thus, while its market share in Broward and Palm Beach Counties exceeded its statewide market share in 1981, American Honda's market share in Broward and Palm Beach Counties lagged behind its statewide market share in 1984. For the five year period from 1980 to 1984, American Honda's market penetration in Broward County averaged approximately 10 percent behind that in the entire state.

      
      

   2. At the location now occupied by Petitioner Satnam Enterprises, Inc., American Honda had sales of 1064 units in 1981 and Petitioner Satnam Enterprises, Inc. had sales of 1131 units in 1984. At the location now occupied by Petitioner. International Cycles, Inc., American Honda had sales of 961 units in 1981 and Petitioner International Cycles, Inc. had sales of 831 units in 1984. At the location now occupied by Intervenor R.B.L. Cycles, American Honda had sales of 1159 units in 1981, and Intervenor

      R.B.L. Cycles had sales of 798 units in 1984. Thus, sales of 3184 American Honda units took place at these three locations in 1981, and these three existing dealers had a decrease in sales to 2760 units in 1984.

      
      

   3. Between 1981 and 1984 an increasing number and percentage of American Honda purchasers from Fort Lauderdale and Broward County went outside the community or territory to make their purchase of an American Honda unit from dealers other than these three existing dealers.

      
      

   4. Since there are currently fifty-two (52) American Honda dealerships in Florida and the 1984 state population was estimated to be 10,930,389, the current statewide ratio of dealerships to population is 1 to 210,200. If Respondent Silverman's application is approved there will be fifty-three (53) American Honda dealerships in Florida and the ratio will be 1 to 206,234. There are currently two dealerships in Broward County, which had a population of approximately 1,100,000 in 1984. The ratio of dealers to population in Broward County is 1 to 550,000 and it would be 1 to 366,666 if Respondent Silverman's application is approved. Thus, population per dealership in Broward County currently far exceeds the statewide ratio, and would continue to exceed the statewide ratio by a significant amount if the Silverman application is approved.

      
      

   5. There are a total of six (6) dealerships currently existing in Broward and Palm Beach Counties and a total population in those two counties in 1984 of approximately 1,800,000. If Respondent Silverman's application is approved the ratio of dealers to population in these counties would be 1 to 257,143, which exceeds the current statewide ratio of 1 to 210,200, and the ratio statewide that would exist if this application is approved of 1 to 206,234.

      
      

   6. While American Honda sales in Broward County were only slightly below the statewide ratio of sales to population in 1981 and 1982, sales per population in Broward County fell significantly in 1983 and 1984 compared to the statewide ratio. There was one sale for every 367 people throughout the state in 1984, but in Broward County there was only one sale for every 503 people.

      
      

   7. If the ratio of sales to population in Broward County had been the same as the statewide ratio in 1984, 3112 American Honda units would have been sold. In fact, the two existing Broward County dealers sold 1628 units and other dealers sold 644 units to Broward County residents in 1984, for a total of 2272 sold to Broward County residents in 1984. Therefore, there was an estimated unmet sales potential of 840 units in Broward County in 1984. In 1984 each American Honda dealership sold an average of 585 units.

      
      

   8. Sales in 1984 by Petitioners and Intervenor

      1. Cycles exceeded the statewide average of 585 units, and Petitioner Satnam Enterprises, Inc. has shown a significant increase in sales from 1983 to 1984. Despite this performance, however, an unmet sales potential, which exceeded the statewide average sales per dealership in 1984, continued to exist.

         
         

         1. Recognizing that not every person is a potential purchaser of a motor cycle, motor scooter or all- terrain-vehicle, the "target" population of males between the ages of 14 and 64 has been identified. In 1984 there was an estimated "target" population in Broward County of approximately 327,783 people.

      Assuming unit sales to this "target" group occurred in Broward County at the same rate as they occurred statewide, there was an unmet need in 1984 of approximately 572 units which is just slightly below the average unit sales for all American Honda dealerships in the state of 585.

      
      

      1. Broward County's population is projected to grow from approximately 1,149,000 in 1985 to 1,591,700 by the year 2000, which is almost a 39% growth in population, or an annual growth of 2.6%. This exceeds the rate of population growth projected for the state as a whole.

         
         

      2. Broward County is an economically viable

      market, ranking second among all counties in such things as total and per capita Effective Buying Income, Buying Power Index, and total per capital Retail Sales. Additionally, Broward County has shown substantial growth in these figures from 1980 to 1984. These are economic indices typically used to gauge the vitality of a market.

      
      

4. Based upon the testimony of Surg Soni, general manager of Petitioner Satnam Enterprises, Inc., it is evident that his sales in 1985 have declined approximately 28% from their level in 1984. Most of his potential customers feel that proximity to a dealership is unimportant, and have therefore been willing to travel to other dealerships to make their purchases. Pablo Canseco, general manager of Petitioner International Cycles, Inc., also indicated his sales for 1985 have declined from 1984. However, this decline in sales is consistent with a flattening of sales expected nationally for the motor cycle industry. They, as well as Ron Lipack, owner of R.B.L. Cycles, pointed out that factors other than dealer performance may result in a deficient market share or penetration level such as: the timing of product releases by the manufacturer; pricing policies of the manufactures; the quantity and type of units made available to dealers to sell; the availability of consumer retail financing programs: the existence of manufacturer advertising campaigns, insurance rates in the area. While these additional factors may contribute to a lack of representation in a particular territory or community, the weight of the evidence in this case does not establish that any one, or combination of these factors, is any more significant than overall dealer performance in explaining the lack of representation which has been demonstrated by Intervenor American Honda Motor Company.

   
   

5. Broward County is found to be the relevant market area, community or territory under consideration in this case. Petitioners and Intervenor R.B.L. Cycles are found to be existing dealers serving this territory or community to be served by Respondent Silverman due to the proximity of Silverman's proposed location to these dealers, the record of sales by Petitioners and Intervenor R.B.L. Cycles to Broward County residents, and transportation patterns and roadways in the area.

6. "Market share" and sales "penetration" are reliable measures of dealer representation. "Market share" measures a manufacturer's percentage of a given market based upon registration data reported by R. L. Polk. All- terrain-vehicle sales are not reflected in R. L. Polk data since they are generally not used on roads and highways and therefore are not registered. "Penetration" measures actual unit sales compared with total sales potential using manufacturer warranty data, whether or not the vehicle purchased is registered.

   
   

   CONCLUSIONS OF LAW

   
   

7. The Division of Administrative Hearings has jurisdiction over the subject matter and parties in this cause. Section 120.57(1), Florida Statutes. Section 320.642, Florida Statutes, provides:

   
   

   Dealer licenses in areas previously served. The department shall deny an application for a motor vehicle dealer license in any community or territory where the licensee's presently licensed franchised motor vehicle dealer or dealers have complied with licensee's agreements and are providing adequate representation in the community or territory for such licensee. The burden of proof in showing inadequate representation shall be on the licensee.

   
   

   The purpose of this statute is not to prevent competition for existing dealers which is reasonably justified by market potential, but is to prevent additional dealerships when existing dealers are adequately representing the manufacturer's product in the territory or community.

   Local standards do not determine if there is adequate representation; rather, the degree of representation in a community or territory should be compared to state or national standards in determining its adequacy. See Bill Kelly Chevrolet, Inc. v. Calvin, 322 So. 2d 50 (Fla. 1st DCA 1975). If a manufacturer's sales in a particular market lag behind statewide market share and penetration, an inference may reasonably be drawn that presently licensed dealers are providing inadequate representation in that community or territory. Dave

   Zinn Toyota, Inc. v. Department of Highway Safety and Motor Vehicles, 432 So. 2d 1320 (Fla. 3rd DCA 1983).

   
   

8. The evidence presented in this case clearly establishes that American Honda Motor Company is inadequately represented in the community or territory to be served by Respondent Silverman's proposed dealership. The three existing dealers in this area argue that this inadequacy is explained, partly, by American Honda's policies on timing of releases, pricing and allotments. They do not appear to dispute the inadequacy of representation, but seek to explain it based on policies of the manufacturer, insurance rates in the area, and local demographics. Yet, the court in Dave Zinn Toyota rejected a similar argument in holding that the fact a manufacturer restricted the number of cars allotted to the existing dealers did not preclude a showing of inadequate representation, even if the existing dealers sold their allotted number.

   
   

9. The issue in this case is the adequacy of representation in the community or territory, and Intervenor American Honda Motor Company has sustained its burden of proof by a preponderance of the evidence. Petitioners and Intervenor R.B.L. Cycles have, to a degree, explained some of the reasons for the inadequacy, and have testified about the economic consequences they feel they will suffer if another dealership is approved, but they have not rebutted the facts established by American Honda and Respondent Silverman, or otherwise shown that this application does not meet the requirements of Chapter 320, Florida Statutes.

RECOMMENDATION

Based upon the foregoing, it is recommended that the Department of Highway Safety and Motor Vehicles issue a Final Order approving Respondent Silverman's application for a motor vehicle dealership.

DONE and ENTERED this 13th day of November, 1985, at Tallahassee, Florida.

_

DONALD D. CONN, 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 13th day of November, 1985.

APPENDIX

Rulings on Petitioners' and Intervenor R.B.L. Cycles' Proposed Findings of Fact are as follows: (Unnumbered paragraphs have been consecutively numbered for identification beginning with the last paragraph on page 2)

1,2 Rejected based upon Findings of Fact 3,6.

3 Rejected based upon Finding of Fact 3(c)-(g),(i)(j) and 6.

4-8 Rejected as argumentative characterizations of testimony which are not appropriate proposed findings of fact. Otherwise, rejected as irrelevant, immaterial and not based upon competent substantial evidence in the record.

1. Rejected based upon Findings of Fact 2,5.

   
   

2. Adopted in part in Finding of Fact 4, but otherwise rejected as not based on competent substantial evidence.

   
   

3. Rejected based on Finding of Fact 6.

   
   

4. Rejected based on Finding of fact 6, and otherwise as not based on competent substantial evidence.

   
   

5. Rejected as irrelevant and immaterial.

   
   

6. Rejected as irrelevant, immaterial and not based upon competent substantial evidence.

   
   

7. Rejected based upon Findings of Fact 3,4,6. It is

   evident that "market share" is not the sole basis for the finding of inadequate representation, but it is a significant factor.

   
   

8. Adopted in part in Finding of Fact 3(a).

17-19 Rejected as contrary to competent substantial evidence in the record.

20,21 Rejected based upon Finding of Fact 3(i) and otherwise rejected as not based upon competent substantial evidence.

1. Rejected as irrelevant and immaterial.

   
   

2. Rejected based upon Finding of Fact 3 and otherwise irrelevant, immaterial and not based on competent substantial evidence.

24,25 Rejected generally based on Finding of Fact 5. However, the reference in paragraph 25 to the Petitioners' and Intervenor R.B.L. Cycles' sales performance in 1984 is adopted in Finding of Fact 3(h).

1. Adopted in Findings of Fact 2,5.

   
   

2. Rejected based upon Findings of Fact 3,4.

   
   

3. Rejected based upon Findings of Fact 3,4,6.

   
   

4. Rejected based upon Findings of Fact 3,4.

Rulings on Respondent Silverman's Proposed Findings of Fact: (Unnumbered paragraphs have been consecutively numbered for identification beginning with the last paragraph on page 1)

1,2 Adopted in Finding of Fact 3.

3,4 Rejected as irrelevant and unnecessary.

1. Adopted in Finding of Fact 3.

   
   

2. Rejected as cumulative and unnecessary.

   
   

3. Rejected as cumulative and unnecessary.

8-16 Rejected as irrelevant and unnecessary. These paragraphs largely set forth argument based on the evidence and do not succinctly set forth relevant proposed findings of fact.

Rulings of Intervenor American Honda's Proposed Findings of Fact.

1 Adopted in Finding of Fact 1.

2, 3 Adopted in Finding of Fact 2.

1. Rejected as irrelevant and unnecessary.

   
   

2. Adopted in part in Finding of Fact 1.

   
   

3. Adopted in part in Findings of Fact 1, 2.

   
   

4. Adopted in part in Finding of Fact 5.

   
   

5. Rejected as irrelevant and unnecessary.

9,10 Adopted in Finding of Fact 3(a).

16 Rejected as simply a summary of, and argument on, testimony presented.

17-19. Adopted in part in Finding of Fact 3. 20-21 Rejected as irrelevant and unnecessary.

22. Adopted in part in Finding of Fact 4.

COPIES FURNISHED:

N. Sandy Konigsberg, Esquire 2310 Hollywood Boulevard Hollywood, FL 33020

Michael J. Alderman, Esquire Department of Highway Safety

and Motor Vehicles Neil Kirkman Building Tallahassee, FL 32301

Julia Sullivan-Waters, Esquire Dennis R. Ferguson, Esquire Post Office Box 1288

Tampa, FL 33601

Elizabeth J. Du Fresne, Esquire Gerald McBride, Esquire

2950 S.W. 27th Avenue Suite 310

Coconut Grove, FL 33133

Robert W. Dickerson, Esquire 611 West Sixth Street

34th Floor

Los Angeles, CA 90017

Leonard R. Mellon, Executive Director Department of Highway Safety

and Motor Vehicles Neil Kirkman Building Tallahassee, FL 32301

Docket for Case No: 85-000836

Orders for Case No: 85-000836