STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CYCLE SPRINGS, INC. and )

AMERICAN SUZUKI MOTOR )

CORPORATION, )

)

Petitioners, )

)

vs. ) CASE NO. 93-0369

)

JONES & DABNEY, INC. d/b/a )

TRI CITY HONDA SUZUKI, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, final hearing in the above-styled case was held in Tallahassee, Florida, on May 11, 1993, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

The parties were represented at the hearing as follows: For Petitioners: Dean Bunch

Cabaniss, Burke & Wagner 851 East Park Avenue Tallahassee, Florida 32301

For Respondent: Philip L. Jones

Jones & Dabney, Inc. 14996 US Route 19 North

Clearwater, Florida 34624 STATEMENT OF THE ISSUE

The issue in this case is whether American Suzuki Motor Corporation is entitled to establish a Suzuki motorcycle dealership in north Pinellas County at the location of Cycle Springs, Inc.

PRELIMINARY STATEMENT

By Petition or Complaint Protesting Establishment of Dealership filed January 15, 1993, Jones & Dabney, Inc. protested the proposed placement of a Suzuki motorcycle dealership in north Pinellas County. The petition alleges that Jones & Dabney, Inc. adequately represents Suzuki in the affected area.

At the final hearing, American Suzuki Motor Corporation called one witness and offered into evidence 20 exhibits. Jones & Dabney called no witnesses and offered into evidence four exhibits. All exhibits were admitted.

The parties have informed the undersigned that they do not intend to file proposed recommended orders.

FINDINGS OF FACT

1. By stipulation, Jones & Dabney, Inc. has standing. Jones & Dabney, Inc. does business as Tri City Honda Suzuki (Tri City). Tri City sells Honda and Suzuki motorcycles at a dealership located at 14996 US Rte. 19 North. The location, which is in the south-central part of Pinellas County, is east of Largo, southeast of Clearwater, and northwest of St. Petersburg.

   
   

2. Tri City formerly sold and serviced only Honda motorcycles. American Suzuki Motor Corporation (American Suzuki) approved Tri City's application for a Suzuki franchise on April 1, 1991.

   
   

3. Tri City used its existing Honda location for the Suzuki dealership. Tri City spent $3000 in non-resale items, with nearly half of that amount for special Suzuki tools. Tri City also spent about $12,500 for parts. The initial non-vehicle expenditure of about $15,500 is about $3000 less than usual because American Suzuki allowed Tri City to use existing Honda equipment, such as video equipment, where possible.

   
   

4. At the time of the application and approval process, Mr. Jones of Tri City and representatives of American Suzuki discussed the fact that American Suzuki would need a dealer for Pasco and north Pinellas counties. Mr. Jones said that he might be interested in moving his dealership into north Pinellas County. American Suzuki representatives indicated that they would listen to any proposal that Mr. Jones might like to make. However, he never raised the issue after he was awarded the Suzuki franchise.

   
   

5. American Suzuki is represented presently in the area of Pinellas, Hillsborough, and Pasco counties by Tri City, a multiline dealer in Tampa (handling Suzuki, Honda, and Kawaski) and a multiline dealer in Zephyrhills, which is in eastern Pasco County (handling Suzuki and Kawaski).

   
   

6. Previously, Suzukis were sold and serviced in south Pinellas County by a long-term dealer in Pinellas Park about 4.3 miles south of Tri City's location. The Pinellas Park dealer retired and sold the business, which shortly thereafter failed on January 2, 1991.

   
   

7. American Suzuki was also represented in Pasco County and north Pinellas County by a dealer located in Holiday. The Holiday dealership was on US Rte. 19 about one-quarter mile north of the Pasco-Pinellas county line.

   
   

8. At one time the fourth largest single-line Suzuki dealer in Florida, the Holiday dealer diversified, lost interest in the Suzuki motorcycle line, and closed the Suzuki dealership on March 2, 1990. The application to which Tri City objects was made more than one year following the closing of the Holiday dealership, so Tri City has a right to protest the establishment of the new dealer.

   
   

9. The present case involves the decision of American Suzuki to award a Suzuki franchise to Cycle Springs, Inc. Cycle Springs, is currently a Yamaha dealer located at 37182 US Rte. 19, Palm Harbor. The location is in north Pinellas County just south of Tarpon Springs. Cycle Springs is located about 4 miles south of the former Holiday dealer.

10. The distance between the Cycle Springs and Tri City locations is about

    13 miles. It takes about 30 minutes to drive the distance during rush hour.

    
    

11. American Suzuki's market share has been slipping in Pasco and Pinellas counties. In 1987, American Suzuki's market share in the national, Florida, Pasco County, and Pinellas County markets was, respectively, 11.57 percent,

    12.75 percent, 21.66 percent, and 15.59 percent. By 1990, the manufacturer's market shares had risen to 14.65 percent nationally and remained about the same in Florida at 12.78 percent. But the shares for Pasco and Pinellas counties had fallen to 9.52 percent and 9.91 percent, respectively.

    
    

12. In 1991, American Suzuki's market shares climbed in the

    country to 16.34 percent, in the state to 14.3 percent, and in Pasco County to

    13.82 percent. The market share for Pinellas County remained roughly unchanged at 9.88 percent.

    
    

13. In 1992, slight changes in market share for the country and Florida (to 15.92 percent and 14.62 percent, respectively) were accompanied by a decline of market share in Pasco County (to 12.2 percent) and an increase in market share in Pinellas County (to 14.44 percent).

    
    

14. Market penetration in Pinellas County has improved compared to market penetration in Pasco County, which remains only 56 percent of what it was in 1987. However, even in Pinellas County market penetration is slightly less than it should be. It is about 1.5 percentage points less than it was in 1987 and almost three percentage points less than the average market penetration for American Suzuki in comparable Florida urban markets.

    
    

15. Market penetration is based on motorcycle registrations, which, in Florida, exclude a large number of motorcross-type dirt and racing motorcycles and almost all all- terrain vehicles. Market penetration reflects the county in which vehicles are registered, not the location of dealers making sales. Thus, market penetration figures do not precisely reflect actual sales by dealers.

    
    

16. However, the sales figures also indicate that Pinellas and Pasco counties are underperforming in terms of Suzuki sales. For 1992, for example, American Suzuki sold only 35 percent of expected sales in Pasco County and Pinellas County. By contrast, in 1988, American Suzuki sold 98 percent of expected sales in Pasco County, but only 39 percent of expected sales in Pinellas County, which suggests that the expected sales in Pasco County is realistic, but the expected sales in Pinellas County--due to demographic reasons-- is not realistic.

    
    

17. American Suzuki has given Tri City a reasonable opportunity to increase Suzuki market share in the area. Tri City's initial order of vehicles has been sold except for one 250 cc dirt bike and one 350 cc dirt bike, which Mr. Jones chose to order with guidance from an American Suzuki representative, and two 80 cc motorcycles, which Mr. Jones ordered at the request of the American Suzuki representative in order to obtain these small, relatively inexpensive bikes for another dealer, who unfortunately reneged on his agreement to buy the bikes from Tri City.

    
    

18. As of May 3, 1993, a total of 12 vehicles in Tri City's 55-vehicle inventory remain from 1991 orders, including the four described in the preceding paragraph. Except for three vehicles ordered in 1993, the rest of the inventory was purchased in 1992.

19. From May, 1992, to April, 1993, Tri City has worked down its inventory of Suzukis from 90 to 55 vehicles. This corresponds to Tri City's initial order of 58 vehicles. In reducing its inventory during 1992, when Tri City took 77 vehicles from Suzuki, Tri City took only 27 vehicles in 1993, including only 18 of the 31 motorcycles allocated to it.

    
    

20. American Suzuki has given Tri City a reasonable

    opportunity to increase market share and sales. Tri City has generally not been out of the better-selling Suzukis, but apparently has elected to reduce inventory, rather than try to increase sales, in order to sustain a more comfortable ratio of inventory to vehicles than the ratio that prevailed in 1992. At present, Tri City does not appear well-situated to increase sales in Pinellas County or Pasco County, and the failure to do so, especially in Pasco County where American Suzuki has lost considerable sales and market share, tends to demonstrate inadequate representation.

    
    

21. Tri City and Cycle Springs are about eight miles, or 38 percent, closer than the former Holiday and Pinellas Park Suzuki dealers. While greater geographic spread might be optimal, American Suzuki attempted to fill the Pasco County location for some time without success. Due to the reduced profitability of motorcycle dealerships, when compared to many automobile dealerships, it is often necessary to obtain an existing dealer or to convert a small retail operation, such as a lawnmower store. In this case, American Suzuki investigated the available possibilities and Cycle Springs appears to have emerged as the lone suitable applicant that was interested in taking on the Suzuki line.

    
    

22. Analysis of recent Suzuki sales by Tri City, recent Yamaha sales by Cycle Springs, and older Suzuki sales by the former Holiday dealer discloses that Tri City would not likely lose Suzuki sales to Cycle Springs. Tri City sales will likely concentrate in north-central Pinellas County, and Cycle Springs sales will predominate in Pasco and north Pinellas counties. The availability of another Suzuki dealer for sales and service may increase Tri City's Suzuki sales as potential customers perceive competitive advantages in the pricing and availability of products and service.

    
    

23. For the reasons set forth above, American Suzuki has proved that Suzuki is inadequately represented in the relevant market and that the establishment of Cycle Springs as a new Suzuki dealer is justified.

    
    

24. There is no evidence that Tri City's investment in American Suzuki products is excessive. American Suzuki has not denied Tri City the opportunity for reasonable growth and market expansion. There is no evidence that the establishment of the new dealership would seriously jeopardize the investment in Suzuki products and equipment already made by Tri City. The availability of another Suzuki sales and service location may enhance sales and service for both dealers and will favorably impact consumers and the public interest.

    
    

    CONCLUSIONS OF LAW

    
    

25. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes.)

    
    

26. Tri City has standing to protest the proposed establishment of the Suzuki dealership at Cycle Springs. Section

    320.642(3).

27. American Suzuki bears the burden of proving inadequate representation so as to justify the establishment of the new Suzuki dealership. Section 320.642(2)(a)2.

    
    

28. Under Section 320.642(2)(b), relevant factors that may be considered in determining whether the manufacturer has shown inadequate representation include:

    
    

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

       . . .

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

    3. 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.

    4. Any actions by the licensee in denying its existing dealer . . . of the same line- make the opportunity for reasonable growth, market expansion, or relocation, including the availability of line-make vehicles in keeping with the reasonable expectations of the licensee in providing an adequate number of dealers in the community or territory.

       * * *

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

       2. Whether benefits to consumers will likely occur from the establishment or relocation of the dealership which the protesting dealer ... prove cannot be obtained by other geographic or demographic changes or expected changes in the community or territory.

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

       4. Whether there is adequate inter-brand and intra-brand competition with respect to said line-make in the community or territory and

          adequately convenient consumer care for the motor vehicles of the same line-make, including the adequacy of sales and service facilities.

       5. 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.

       6. The volume of registrations and service business transacted by the existing dealer ... of the same line-make in the relevant community or territory of the proposed dealership.

       
       

29. For the reasons stated in the findings of fact, American Suzuki has proved the inadequacy of its current representation and has thus justified the establishment of a Suzuki dealer at Cycle Springs, 37182 US Rte. 19 North, in Pinellas County.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that the Department of Highway Safety and Motor Vehicles enter a final order dismissing the protest of Jones & Dabney, Inc. to the proposed establishment by American Suzuki Motor Corporation of a Suzuki dealership at Cycle Springs, Inc., 37182 US Rte. 19 North, Palm Harbor, Florida.

ENTERED on May 19, 1993, in Tallahassee, Florida.

ROBERT E. MEALE

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 on May 19, 1993.

COPIES FURNISHED:

Charles J. Brantley, Director Division of Motor Vehicles

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

Enoch Jon Whitney, General Counsel

Department of Highway Safety and Motor Vehicles Neil Kirkman Building

Tallahassee, Florida 32399-0500

Dean Bunch

Cabaniss, Burke & Wagner 851 East Park Ave.

Tallahassee, Florida 32301

Philip L. Jones Jones & Dabney, Inc.

14996 US Rte. 19 North

Clearwater, Florida 34624

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: 93-000369

Orders for Case No: 93-000369