State of Florida Division of Administrative Hearings

STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS

LCA ACQUISITION CORPORATION, d/b/a SOUTH MOTORS INFINITI,

Petitioner, Case Nos. 14-2069 vs. 14-2070

NISSAN NORTH AMERICA, INC. AND M10 MOTORS, INC., d/b/a INFINITI OF CORAL GABLES, INC.

Respondents. ______/

RECOMMENDED ORDER

A hearing was conducted in this case pursuant to sections 120.569 and 120.57(1), Florida Statutes,1/ before

Cathy M. Sellers, an Administrative Law Judge of the Division of Administrative Hearings ("DOAH"), on November 17 through 20,

24, and 25, and December 1 and 2, 2014, in Tallahassee, Florida.

APPEARANCES

For Petitioner: John W. Forehand, Esquire South Motors Automotive Group 16165 South Dixie Highway Miami, Florida 33157

Christopher M. DeVito, Esquire Morganstern, MacAdams, and DeVito, Company, L.P.A. 623 West Saint Clair Avenue Cleveland, Ohio 44113-1204

For Respondents: S. Keith Hutto, Esquire Christopher C. Genovese, Esquire Steven B. MacFarland, Esquire Nelson Mullins Riley & Scarborough, LLP 1320 Main Street Columbia, South Carolina 29201

STATEMENT OF THE ISSUE

The issue in this case is whether the existing franchised

Infiniti dealers who register new motor vehicle retail sales or leases are not providing adequate representation of the Infiniti line-make in the community or territory in which Respondent

Nissan North American, Inc. ("Infiniti"), intends to establish

Respondent M10 Motors, Inc., d/b/a Infiniti of Coral Gables,

Inc. ("M10"), as a dealer for the sale and service of Infiniti vehicles, such that the license granting approval to establish

M10 should be granted.

PRELIMINARY STATEMENT

On April 4, 2014, the Department of Highway Safety and

Motor Vehicles ("DHSMV") published notices in the Florida

Administrative Register giving notice of Infiniti's intent to allow the establishment of M10 as a dealership for the sale and service of Infiniti vehicles at 2701 Le Jeune Road, Coral

Gables, Florida, and to allow the establishment of M10 as an Infiniti dealership with additional service facilities at

4001 Ponce de Leon Boulevard, Coral Gables, Florida. The notice

2 for the service facility at the Ponce de Leon Boulevard location stated that that facility was not being established independent of the sale and service facility at the Le Jeune Road location, but was being established only in conjunction with and subject to the approval of that sale and service facility.

Petitioner LCA Acquisition Corporation, d/b/a South Motors

Infiniti ("South Motors") timely filed protests with DHSMV challenging the approval of the M10 Motors dealership's sales and service location and its additional service location, and the protests were referred to DOAH for conducting administrative hearings pursuant to sections 120.569 and 120.57(1). Pursuant to motion by Infiniti and M10, the challenges were consolidated and the final hearing was scheduled for November 17 through 20,

24, and 25, and December 1 through 3, 2014. The final hearing was conducted as scheduled and concluded on December 2, 2014.

At the final hearing, Respondents presented the testimony of Jack Wilkerson, Robert Jennings, Jeffrey Harris, Bernardo

Moreno, and Sharif Farhat, and the deposition testimony of Kevin

Baumann was admitted into evidence. Respondent's Exhibits 10,

11, 29, 34, 35, 37, 38, 40, 44, 47, 48, 52, 56, 58, 63, 66, 68,

69, 73, 79 through 81, 84, 87, 89, 92, 93, 96, 101, 104, 111,

113 (excluding pages R-2, R-3, R-APP 3, R-APP 4, and R-APP 5),

114, 116, 117, and 13-7A, and Rebuttal Exhibits 4 through 11 were admitted into evidence without objection, and Respondent's

Exhibits 42 (excluding Bates-stamped page 02291) and 112 were admitted into evidence over objection.

At the final hearing, Petitioner presented the testimony of

Oliver Mayoral, Alexander Sanchez, Jonathan Chariff, and Joseph

Roesner, and the deposition testimony of John Hilton, Warren

Zinn, and Andy Delbruek was admitted into evidence without objection as Petitioner's Exhibits 53, 54, and 57, respectively.

Petitioner's Exhibits 1, 6 through 13, 15 through 22, 25, 26, 28 through 31, 33, 36 through 38, 40, 41, 43 through 46, 52, 56, and 112 were admitted into evidence without objection.

The 13-volume Transcript was filed on January 12, 2015, and pursuant to the parties' joint motion, the time for submitting proposed recommended orders was extended to February 13, 2015.

The parties timely filed Proposed Recommended Orders, which were duly considered in preparing this Recommended Order.

FINDINGS OF FACT

I. The Parties, Notice, and Standing

1. Respondent Infiniti is a distributor of Infiniti brand vehicles and products2/ and is a "licensee" as defined in section 320.60(8).

2. Respondent M10 is the proposed Infiniti brand motor vehicle dealership whose establishment in Coral Gables, Florida, is at issue in this case.

3. Petitioner South Motors is a "motor vehicle dealer"3/ as that term is defined in section 320.60(11)(a). South Motors is engaged in the business of selling Infiniti brand vehicles and products from its dealership facility located at 16195 South

Dixie Highway, Palmetto Bay, Florida.

4. On April 4, 2014, the DHSMV published two notices in the Florida Administrative Register, one announcing Infiniti's intent to allow the establishment of M10 as an Infiniti dealership with additional service facilities at 4001 Ponce de Leon Boulevard, Coral Gables, Miami-Dade County, Florida

("14-2069 Notice"); and the other announcing Infiniti's intent to allow the establishment of M10 as a dealership for the sale and service of Infiniti vehicles at 2701 Le Jeune Road, Coral

Gables, Miami-Dade County, Florida ("14-2070 Notice").

5. As more fully discussed below, the language of these notices makes abundantly clear that M10 is not seeking to establish an independent service-only dealership on Ponce de

Leon Boulevard, but is instead proposing to establish a service location to be operated in conjunction with the sale and service intake facility to be located on Le Jeune Road.4/

6. South Motors is located within 12.5 miles of both the proposed M10 sales and service dealership location at 2701 Le

Jeune Road and the proposed service location at 4001 Ponce de

Leon Boulevard.

II. The Existing Dealerships in Southeast Florida

7. South Motors and Warren Henry Infiniti ("Warren Henry") currently are the only Infiniti dealers in Miami-Dade County.

8. Warren Henry is located at 20850 Northwest 2nd Avenue,

Miami, in northeastern Miami-Dade County near the Broward County line. It opened in 1989 and has been in business at its current location for over 25 years. Warren Henry has not protested the proposed establishment of M10.

9. South Motors5/ is located in Palmetto Bay, in southern

Miami-Dade County. It opened shortly after Warren Henry, and has been in business at its current location for approximately

25 years.

10. Warren Henry and South Motors are approximately 26 air miles and 28.5 drive miles apart. The area between Warren Henry and South Motors is urban, heavily populated, and characterized by heavy traffic congestion. Miami Gardens, North Miami Beach,

Miami Beach, Miami, Coral Gables, Cutler Bay, and Kendall are among the communities located between Warren Henry and South

Motors. There is no Infiniti dealership located between Warren

Henry and South Motors.

11. Recent data show that there are approximately 18,000 competitive luxury vehicle registrations6/ per year in the Coral

Gables area. This is approximately three times the number of competitive registrations in the average primary market area

("PMA")7/ throughout the U.S., making the Coral Gables area one of the top three luxury vehicle markets in the United States.

12. At approximately 10.6 air miles and 11.2 drive miles away, South Motors would be the closest existing Infiniti dealership to the proposed M10 dealership. At approximately

15.6 air miles and 17.3 drive miles away from the proposed M10 dealership, Warren Henry would be the next closest existing dealership to the M10 dealership.

13. In March 2013, notice was published that Infiniti intended to relocate Warren Henry approximately five miles to the southeast of its current location, still within its own

PMA. That proposed relocation has not been withdrawn, but as of the final hearing in this proceeding, Warren Henry had not secured a lease on the property at the site of the proposed relocation, and the status of its relocation remains uncertain.8/

14. There are three Infiniti dealerships in Broward

County: Lauderdale Infiniti, Sawgrass Infiniti, and Infiniti of Coconut Creek. Lauderdale Infiniti and Sawgrass Infiniti are 10.7 air miles and 18.7 drive miles apart; Lauderdale

Infiniti and Infiniti of Coconut Creek are 10.3 air miles and

13.3 drive miles apart; and Sawgrass Infiniti and Infiniti of

Coconut Creek are 8.0 air miles and 10.5 drive miles apart.

15. Lauderdale Infiniti is approximately 28.1 air miles and 31.5 drive miles from the proposed M10 dealership.9/

Sawgrass Infiniti is approximately 31.0 air miles and 38.6 drive miles from the proposed M10 dealership. Infiniti of Coconut

Creek is approximately 36.6 air miles and 38.4 drive miles from the proposed M10 dealership.

III. The Community or Territory

16. Before determining whether the existing franchised

Infiniti dealers are not providing adequate representation of the Infiniti line-make,10/ the pertinent community or territory

("comm/terr")——that is, the relevant geographic area for purposes of such determination——must be identified.

17. The term "community or territory" is not defined in

Florida Statutes, so the comm/terr particular to establishing the dealership at issue must be determined on a case-by-case basis.

18. In determining the boundaries of the comm/terr, one factor considered is a dealer's area of responsibility designated in the manufacturer's franchise agreement.

19. Specifically, Infiniti enters into a franchise agreement with each motor vehicle dealer of the Infiniti line- make. Pursuant to this agreement, which is titled the "Dealer

Sales and Service Agreement" ("Dealer Agreement"), Infiniti designates a geographical area, the "PMA," for the particular dealer. Under the Dealer Agreement, the PMA is the "geographic area which is designated as the Dealer's sales and service

8 responsibility for Infiniti Products in a Notice of Primary

Market Area issued by the Seller [Infiniti] to the Dealer."

20. A dealer's PMA is the area, consisting of census tracts, in which that dealer generally is physically closer to customers, so has a geographic advantage over other dealers for sales and service.

21. Under the Dealer Agreement, the dealer is expected to actively and effectively promote, through its own advertising and sales promotion activities, the retail sale of Infiniti line-make vehicles to customers within its PMA. Infiniti uses the PMA as a tool to evaluate the dealer's performance of its sales obligations under the Dealer Agreement. Infiniti expects each dealer to provide adequate representation of the Infiniti line-make within its own PMA.

22. The PMA is not an exclusive sales territory, and dealers are free to sell and service Infiniti products to customers anywhere in the U.S., including in other dealerships'

PMAs.

23. Here, Infiniti takes the position that the appropriate comm/terr consists of the so-called "Miami-Dade PMAs," which it collectively refers to as the "Miami-Dade Comm/Terr." The

Miami-Dade Comm/Terr consists of the designated PMAs for South

Motors Infiniti, Warren Henry Infiniti, and the proposed Coral

Gables PMA11/ that will be established for M10. These three PMAs effectively cover the Miami-Dade County area.12/

24. In support of this position, Infiniti presented the testimony of its expert witness, Sharif Farhat, Vice President of Expert Services for Urban Science Applications, Inc. ("Urban

Science"), an automotive industry performance and marketing consulting company. As part of his marketing and performance analysis regarding the Coral Gables open point, Farhat thoroughly researched the sales and customer shopping patterns in the Southeast Florida metropolitan area, which includes

Palm Beach, Broward, and Miami-Dade counties.

25. Based on his research and his experience with vehicle markets in the Southeast Florida area, Farhat opined that Miami-

Dade County and Broward County constitute separate Infiniti sales markets and that, with only occasional exception, customers in each county shop for vehicles within their own county.

26. Farhat's opinion was based on empirical data showing that South Motors made 96.4 percent of its sales within the

Miami-Dade PMAs and Warren Henry made 83.5 percent of its sales within the Miami-Dade PMAs. Further, the data showed that the three Infiniti dealers in Broward County made significantly smaller percentages of their vehicle sales in Miami-Dade County than they did in Broward County. Specifically, Infiniti of

Coconut Creek made 10.4 percent of its sales in the Miami-Dade

PMAs, Sawgrass Infiniti made 29.5 percent of its sales in the

Miami-Dade PMAs, and Lauderdale Infiniti made 33.7 percent of its sales in the Miami-Dade Comm/Terr. Within the Coral Gables

PMA, in-selling by the Infiniti dealers in Broward County amounted to less than 9 percent of each dealer's nationwide sales. The data also show that only very small percentages of customers within Broward County purchase Infiniti vehicles from the Miami-Dade County dealers.

27. From this information, Farhat opined that there is little connectivity between Broward County and the Miami-Dade

PMAs, and Broward County and Miami-Dade County comprise separate and distinct motor vehicle sales markets. This is because

Broward County and Miami-Dade County are large, congested urban areas, with the dealerships in one county generally separated by considerable distance from those in the other county.

28. Connectivity between customer base and the dealerships is a key factor in determining the comm/terr. Lack of connectivity indicates a separate market area and customer base.

29. Here, Farhat's research showed a lack of connectivity between the customer base in Broward County and the dealerships in Miami-Dade County, due to the considerable drive distances and congested traffic conditions that exist between Broward and

Miami-Dade counties. Under these circumstances, it is not

11 reasonable to expect that customers in Broward County would travel substantial distances into Miami-Dade County for vehicle purchase and service, particularly when there are three Infiniti dealerships in Broward County. Likewise, it is not reasonable to expect customers in Miami-Dade County to travel north to

Broward County for vehicle purchase and service. It also would be unreasonable for Infiniti to expect its dealers in Miami-Dade and Broward counties to adequately cover and represent the

Infiniti brand throughout both counties. These conditions indicate that the Broward County dealerships and Miami-Dade

County dealerships are in separate customer markets, and support the conclusion that the Miami-Dade Comm/Terr is the appropriate comm/terr in this proceeding.

30. South Motors takes the position that the applicable comm/terr is the so-called "Southeast Florida Metro" market, which consists of Miami-Dade County, Broward County, and a very small part of Palm Beach County.

31. In support of this position, South Motors presented the testimony of Joseph Roesner, President of the Fontana Group,

Inc., and an expert in local retail automobile industry and dealer performance analysis.

32. In opining that the Southeast Florida Metro market is the appropriate comm/terr, Roesner relied heavily on provisions in the Infiniti dealer franchise agreement stating that when

12 a dealer is located in a metropolitan area in which other authorized Infiniti dealers are located, combined and individual dealer sales performance may be evaluated based on and compared to the sales of Infiniti vehicles within the metropolitan area.

He also relied on marketing studies performed by Urban Science for Infiniti in 2008 and 2013 addressing dealer performance focused on the Southeast Metro market. According to Roesner, these dealer agreement provisions and market studies indicate acknowledgement by Infiniti itself that the Southeast Florida

Metro market is the appropriate comm/terr.13/

33. However, Roesner conceded that the dealer franchise agreement is not necessarily determinative of the applicable comm/terr, that the comm/terr is not the same in every case, and that buyer behavior and distance between the customer base and dealerships are relevant to determining the comm/terr.

34. Roesner noted that there is some cross-selling between the Infiniti dealerships in Broward County and customers in

Miami-Dade County. However, he recognized that there is significantly more cross-selling in the Miami-Dade County PMAs by South Motors and Warren Henry than by the Broward County dealerships. He acknowledged that this is due, at least in part, to the long distances between the Broward County dealers and the Miami-Dade PMAs. On these bases, Roesner acknowledged

13 that there is merit to considering the Miami-Dade Comm/Terr as an appropriate comm/terr in this proceeding.

35. The persuasive evidence shows that the Miami-Dade

Comm/Terr is the appropriate comm/terr in this proceeding.

IV. Adequacy of Representation of the Infiniti Line-Make in the Miami-Dade Comm/Terr

36. As previously stated, the purpose of this proceeding is to determine whether the existing franchised dealers who register new Infiniti motor vehicle retail sales or leases in the Miami-Dade Comm/Terr are not providing adequate representation of the Infiniti line-make within the Comm/Terr.

The discussion below addresses the background pertinent to this determination and addresses the statutory factors in section 320.642(2)(b) with respect to this determination.

A. Background Regarding South Motors, Coral Gables Open Point Designation, and Selection of M10 to Fill the Open Point

37. South Motors' dealership is located on several parcels of land in Palmetto Bay.14/ Its main sales and service facility is located at 16591 South Dixie Highway, and it also has an offsite non-visit service facility about half a mile from its main facility, consisting of 16 service bays and 13 vehicle lifts, where heavy mechanical repairs are performed. Additionally,

South Motors owns an off-site storage lot where it stores approximately 200 additional new inventory vehicles. South

Motors has not experienced any operational difficulties or

14 problems due to operating vehicle service and storage facilities offsite from its main dealership location on South Dixie

Highway.

38. Due to its age, South Motors' appearance is outdated and does not comply with the Infiniti Retail Environment Design

Initiative ("IREDI") standards. IREDI is an Infiniti design program that sets standards for the appearance of Infiniti dealership facilities, and its purpose is to establish a consistent luxury image that promotes the Infiniti brand to luxury vehicle customers.

39. Recently, South Motors committed to renovating its

South Dixie Highway facility to meet the IREDI standards. To that end, Infiniti has committed, pursuant to an IREDI Dealer

Participation Agreement, to provide $550,000 to South Motors to enable it to upgrade its dealership facility to IREDI standards.

40. It is reasonable to anticipate that the upgrade of

South Motors' facility to IREDI standards will enhance its competitive position in the luxury vehicle market.

41. Even though South Motors is not compliant with IREDI standards, it nonetheless currently performs relatively well when compared to other Infiniti dealers in the southeastern

U.S., with a sales effectiveness15/ of slightly over 100 percent.

42. In large measure, South Motors' current satisfactory sales effectiveness level is due to the geographic extent of its

PMA, which does not include the area comprised of the Coral

Gables area where Infiniti has created the open point.16/

43. Between 2004 and 2008, South Motors' PMA did encompass a substantial amount of the area encompassed in the Coral Gables open point. During that time, South Motors performed very poorly, with a sales effectiveness of approximately 50 percent.

This made South Motors the lowest performing dealership in the eastern U.S. and among the lowest performers in the entire country.

44. At that time, South Motors asserted that its PMA was too large, that it could not adequately serve the Coral Gables area from its Palmetto Bay location, and that it was difficult for customers in Coral Gables to drive to the dealership to purchase vehicles or have them serviced. South Motors also asserted that it would be better positioned to cover the Coral

Gables area if it were located further north.

45. Based on a market study performed by Urban Sciences during this timeframe, Infiniti recommended that South Motors relocate approximately five miles north, to the Kendall area, in order to improve its business opportunities, particularly with respect to affording proximity to potential customers in the

Coral Gables area.17/

46. Although South Motors searched for real estate in the

Kendall area, it ultimately informed Infiniti that it could not

16 locate any real estate that it considered suitable, and it did not relocate its dealership as recommended.

47. South Motors' performance did not improve, falling to less than 50 percent sales effectiveness——last in the state and the region.

48. In July 2007, Infiniti issued a Notice of Default, informing South Motors that it was in breach of the sales performance obligations under its Dealer Agreement, and giving

South Motors a 180-day cure period.

49. South Motors' performance still did not improve. In

September 2008, over a year after issuing the Notice of Default,

Infiniti sent South Motors a Notice of Termination, informing

South Motors that Infiniti intended to terminate its relationship with South Motors due to continued unsatisfactory sales performance within its PMA.

50. In response, South Motors filed a lawsuit against

Infiniti, alleging that it was in substantial compliance with its Dealer Agreement and that Infiniti had, unilaterally and without notice, changed the Dealer Agreement by expanding its

PMA, making it one of the largest in the nation. South Motors alleged, in part, that its sales effectiveness was adversely affected because the sales effectiveness determination took into account geographic areas in which it could not realistically be expected to compete.

51. South Motors acknowledges that its own PMA previously encompassed a significant portion of the area now designated as the proposed Coral Gables PMA, and that it previously asserted that it was unable to effectively compete in that area.

52. Around this time, Infiniti completed another market study to evaluate the brand's performance and representation in southeast Florida, including the area between Warren Henry and South Motors. Based on this study, Infiniti determined that the existing dealer network was not providing adequate representation of the Infiniti brand or its consumers in this area and decided to establish additional Infiniti representation, specifically in the Coral Gables area.

53. In large measure, the lack of adequate representation is due to the distance and congested traffic conditions between

Warren Henry and South Motors. Customers in the Coral Gables area must drive 30 to 45 minutes north or south to reach an

Infiniti dealership for sales or service. This substantially decreases consumers' convenient access to the Infiniti brand, and, thus, substantially reduces the likelihood that consumers in the Coral Gables area will shop for or purchase an Infiniti vehicle instead of other competing line-makes.

54. Infiniti also determined that the Coral Gables area presents a significant opportunity for additional sales and servicing of Infiniti vehicles. As previously noted, the data

18 show that there are approximately 18,000 competitive luxury registrations per year in the Coral Gables area, making it one of the top three competitive luxury vehicle markets in the U.S.

55. Other competitive luxury brands, such as Audi,

Mercedes-Benz, BMW, and Volvo have established dealerships in the Coral Gables area. Having an Infiniti dealership in Coral

Gables would afford Infiniti the opportunity to more effectively compete with these brands within this area, as well as attract luxury vehicle customers who may be cross-shopping at these dealerships.

56. Accordingly, Infiniti declared an open point and designated the Coral Gables PMA, where it now proposes to establish M10. The Coral Gables PMA is substantially comprised of census tracts previously assigned to South Motors, and includes several densely-populated areas, including downtown

Miami and the City of Coral Gables.

57. As a result of this carve-out from its PMA, South

Motors' PMA was substantially reduced in size, which had the immediate effect of doubling South Motors' sales effectiveness from 50 percent to over 100 percent. This increase was due to removing South Motors' contractual responsibility for representing the Infiniti brand within the census tracts in the Coral Gables area, not because South Motors was selling more vehicles.

58. This significant change in South Motors' sales effectiveness shows that the Coral Gables PMA contains a large number of competitive luxury registrations,18/ and it further evidences that South Motors was not adequately covering the

Coral Gables market.

59. Due to the dramatic improvement in South Motors' sales effectiveness, Infiniti rescinded its Notice of Termination.

60. Although South Motors no longer is contractually responsible under the Dealer Agreement for selling vehicles within the area that includes the proposed Coral Gables PMA, and even though South Motors' sales effectiveness immediately and substantially increased due to this area having been carved out of its PMA, South Motors takes the position that the Coral

Gables area should not be designated as an open point or assigned to any dealer, but instead should remain "unassigned."

This means that this area would not be assigned to any dealer for purposes of that dealer being contractually responsible for selling vehicles within the area.

61. The effect of keeping the Coral Gables census tracts unassigned is that no dealership would be contractually motivated or compelled to maximize sales within these areas, but any dealer could, in effect, "harvest the low hanging fruit" by selling some vehicles to customers within this heavily populated area.

62. Infiniti's Vice President for its East Region, Jeffrey

Harris, testified that the opportunity for Infiniti to compete for luxury vehicle sales in the Coral Gables area was far too significant for Infiniti to allow this area to remain unassigned.

63. When Infiniti established the Coral Gables open point,

Harris recommended that Infiniti offer the open point to South

Motors to give it the opportunity to adequately serve the Coral

Gables PMA. This would entail South Motors establishing a dealership within the Coral Gables PMA. South Motors confirmed its interest in filling the Coral Gables open point.

64. In December 2010, Infiniti sent a letter to South

Motors confirming that South Motors had been conditionally approved as the dealer candidate for the Coral Gables PMA, stating that South Motors was the exclusive appointee for the proposed dealership for 90 days, and informing South Motors that it needed to provide Infiniti a formal proposal and timeline for the proposed dealership.

65. Shortly before its presumptive appointment expired,

South Motors notified Infiniti that it had made substantial progress on a proposal for the dealership, and that it had reviewed and evaluated numerous properties in the Coral Gables area. On this basis, Infiniti extended the time period over

21 which South Motors' would remain the presumptive appointee for the Coral Gables dealership.

66. In July 2011, South Motors and Infiniti met to discuss South Motors' progress toward making a formal proposal for the Coral Gables open point. This meeting was held at

4001 Ponce de Leon Boulevard, a former Lincoln-Mercury dealership.19/ South Motors focused on purchasing this site in combination with several nearby properties at a cost of approximately $22.9 million. Infiniti suggested that South

Motors may consider reducing this cost by only acquiring the property absolutely necessary to operate the dealership.

67. Over the ensuing months, South Motors repeatedly requested Infiniti's financial assistance for property acquisition, dealership construction, and potential legal costs that may be incurred in defending against protests to the proposed dealership. Infiniti responded that it likely was willing to provide approximately $3 to $5 million in assistance, but that South Motors needed to execute a confidentiality agreement and provide a formal written proposal for the dealership so that Infiniti could evaluate the proposed investment to determine the level of financial support necessary and appropriate based on the specific proposal.

68. South Motors did not sign a form confidentiality agreement. It also did not sign a revised form Infiniti

22 provided that included language stating that South Motors' discussions regarding the proposed Coral Gables dealership could not be disclosed in any litigation, including in any protest to the addition of a dealership in Coral Gables.20/

69. South Motors did not submit a formal proposal to establish a dealership in the Coral Gables open point because it ultimately determined that such a proposal was not financially feasible for its dealership.

70. Approximately one year after first advising South

Motors that it was the preferred dealership candidate for the

Coral Gables open point, Infiniti determined that South Motors and Infiniti had reached an impasse. At that point, Infiniti began considering proposals from other interested dealership candidates; nonetheless, South Motors remained the preferred candidate and was free to submit a formal proposal that would be considered along with those submitted by other candidates.

South Motors did not submit a formal proposal for the Coral

Gables dealership.

71. Infiniti received multiple proposals for the Coral

Gables open point and initially selected a professional athlete very well-known in the Coral Gables community to open the dealership. When that candidate was unable to proceed, Infiniti selected Bernardo Moreno as its candidate for the Coral Gables dealership.

72. Moreno has personal and family ties to South Florida.

He owns the Collection Auto Group, a group of motor vehicle dealerships located primarily in the northeast and northern U.S.

He earned a degree in business administration with a marketing concentration and has worked his entire career in the automobile industry. Over the course of his career, Moreno has acquired and operated automotive and luxury motor vehicle dealerships for a range of line-makes, including Porsche, Mercedes-Benz,

Maserati, Aston-Martin, Acura, Buick/GMC, Nissan, Volkswagen,

Saab, and Infiniti. Moreno's dealership group has been very profitable and makes hundreds of millions of dollars in sales revenue per year.

73. When Moreno was selected as the dealer for the Coral

Gables open point, he and Infiniti were aware of the cost of property in downtown Coral Gables and the potential for a challenge from South Motors. Thus, Moreno requested financial assistance from Infiniti.

74. Moreno and Infiniti entered into a Framework Agreement that contained a confidentiality provision and a schedule for the provision of financial assistance by Infiniti. Pursuant to this schedule, Infiniti committed to provide M10 financial support up to a potential total of $4.4 million, starting with an initial disbursement of $200,000 in September 2014, and periodic payments of up to $120,000 each for the next seven

24 years. These payments were intended to help M10 offset the cost of this proceeding and any appeals, the cost of rent during the pendency of this proceeding and any appeals, and dealership startup costs. The periodic payments to M10 after the dealership opens are not guaranteed, and are contingent on the dealership meeting certain sales, service, and customer satisfaction benchmarks.

75. Under the Framework Agreement, Infiniti also committed to provide M10 a one-time payment of $1 million to assist with the expense of remodeling M10's sales and service intake facility, which will be located at 2701 Le Jeune Road, in the

Bacardi Building, an existing office building in Coral Gables.

M10 has entered into a long-term lease for its sales and service intake space at the Bacardi Building.

76. M10's sales and service intake facility on Le Jeune

Road will be its only contact point with its customers. Due to the high cost and limited availability of property in Coral

Gables, this sales and service intake facility will not be a typical suburban-style dealership, but instead will be similar to other luxury vehicle dealerships in Coral Gables such as the

Mercedes-Benz dealership next door, and to dealerships in other downtown urban areas, such as in Manhattan, New York.

77. The cost of remodeling the space in the Bacardi

Building to suitability for M10's sales and service intake

25 facility will approach that of constructing a new dealership building.

78. M10's sales and service intake facility will consist of the dealership's sales and service reception areas, vehicle showroom, and a range of amenities designed to appeal to luxury vehicle customers. Although the facility will have a service intake and reception area where service customers will drop off and pick up their vehicles, it will not have service bays for the performance of vehicle service onsite.

79. As its offsite service location, M10 has secured a site approximately 0.8 miles away, at 4001 Ponce de Leon

Boulevard, Coral Gables, a former Lincoln-Mercury dealership.

This is the same location that South Motors considered as its potential dealership site, had it proceeded to fill the Coral

Gables open point. However, rather than purchasing this property as South Motors proposed to do when exploring a Coral

Gables dealership, M10 has instead entered into a long-term lease of the site.

80. The Ponce de Leon service location will have 12 to

15 service bays for vehicle service and repair. There will be no Infiniti signage at this location and M10's customers will not visit this location. Customers will drop off and pick up their vehicles at the sales and service intake location at the

Bacardi Building and porters will drive the vehicles to and from

26 the Ponce de Leon location for service. It is not uncommon for dealerships in urban markets to have offsite service locations; indeed, South Motors itself has an offsite service location where it performs vehicle repair.

81. M10 currently is paying $71,414 per month for the

Bacardi Building and $44,000 per month for the Lincoln-Mercury facility. M10 also plans to lease an offsite vehicle storage lot.

B. Statutory Factors Regarding Adequacy of Representation

1. Impact of the Proposed M10 Dealership on Consumers, Public Interest, Existing Dealers, and Infiniti

a. Impact on Consumers and the Public Interest

82. As discussed above, the Miami-Dade Comm/Terr currently is served by two Infiniti dealers, South Motors and Warren

Henry, which are located approximately 26 air miles and 28.5 drive miles apart. The area between Warren Henry and South

Motors is urban, heavily populated, and characterized by significant traffic congestion. As previously noted, Miami

Gardens, North Miami Beach, Miami Beach, Miami, Coral Gables,

Hialeah, Cutler Bay, and Kendall are among the communities located in the area between Warren Henry and South Motors.

There is no Infiniti dealership located between Warren Henry and South Motors.

83. Also as discussed above, the sales and service intake location for M10 is proposed to be located at 2701 Le Jeune

Road, in Coral Gables, and the service facility will be located approximately 0.8 miles away. At this location, M10 would be located approximately 10.6 air miles and 11.2 drive miles from

South Motors, and 15.6 air miles and 17.2 drive miles from

Warren Henry. Thus, rather than customers in the Miami-Dade

Comm/Terr driving an average of over 13 miles in congested traffic conditions to reach an Infiniti dealership, the average drive distance would be reduced to an average of approximately seven miles. This would increase convenient access to Infiniti sales and service within the Comm/Terr, and would particularly benefit service customers, who are less likely to travel significant distances for service or parts as compared to customers seeking to purchase a vehicle.

84. The proposed dealership would have extended service hours and would be open for service seven days a week. Its service department would be open overnight, which would allow customers to drop their vehicle off for service, receive a loaner vehicle, and pick up their fully-serviced vehicle the following morning.

85. South Motors claims that the new dealership would not have sufficient parking or onsite inventory storage, so would not enhance customer convenience. Pursuant to lease agreements,

M10 has secured 124 parking spaces onsite at the Bacardi

Building for the dealership, and pursuant to lease terms, has an option to negotiate the lease of additional spaces within the

Bacardi Building. Additionally, if the dealership is approved, M10 intends to secure an offsite storage lot where it can maintain additional inventory, albeit, it is possible that the lot may be some distance from the dealership.

Infiniti and M10 acknowledge that it would be preferable for the dealership to have more onsite parking spaces, but it is common for dealerships in downtown areas to have limited onsite parking with additional offsite inventory storage capacity. The evidence establishes that M10 will take the necessary business and operational steps to secure additional parking so that the dealership can operate smoothly, and has plans in place to do so if the dealership is approved. The evidence does not show that the purported shortage of onsite parking spaces significantly detracts from the substantial convenience to customers of having another Infiniti dealership within the Comm/Terr——particularly at a location that will obviate the need to travel an average of

13 miles under heavily congested conditions for Infiniti sales and service.

86. The new dealership also would benefit the public. M10 anticipates hiring approximately 80 full-time and 15 part-time employees, thus increasing employment in the Coral Gables area.

M10 would occupy and substantially renovate two facilities that currently are vacant, increasing local tax revenue and improving the community character in the vicinity of the dealership.

87. South Motors asserts, based on an analysis of M10's pro forma, that given the high cost of real estate in Coral

Gables, it is unlikely that M10 will be able to operate profitably,21/ and that adding M10 will result in the two existing profitable dealerships also becoming unprofitable.

Thus, South Motors reasons, consumers, the existing dealers, and

Infiniti all will be negatively affected by the establishment of

M10. South Motors' analysis, which projected a loss of between

$25,000 and $168,000 in M10's first year of operation, was based on a projection of sales only in the Miami/Dade Comm Terr, not on projected nationwide sales. Further, it assumes a substantially lower profit per vehicle sale than South Motors currently makes, and assumes an owner's salary of $390,000.

However, many operating variables, including owner's salary, can be adjusted to enable M10 to operate profitably its first year and still pay an owner's salary of $220,000. Additionally, M10 would be part of Mr. Moreno's highly profitable dealership group, which earns approximately $15 million per year in profit and makes hundreds of millions of dollars in sales revenue each year. Given Mr. Moreno's history of operating successful, profitable dealerships in highly competitive markets for a

30 number of years, it is reasonable to infer that M10 also will operate as a profitable dealership.

b. Impact on Intrabrand and Interbrand Competition

88. The new dealership would enhance intrabrand competition by providing customers an additional competitive option for Infiniti sales and service within the Miami-Dade

Comm/Terr. It also would enhance interbrand competition by adding an Infiniti dealership at a Coral Gables location where many of Infiniti's line-make and model competitors, such as

Mercedes-Benz, BMW, Lexus, Audi, and Volvo, currently operate dealerships in close proximity. The new dealership would add

Infiniti as a competitive choice in this area and would provide customers the opportunity to cross-shop Infiniti with these competing brands.

c. Impact on Existing Dealers, Including Financial Impact to South Motors, and on Infiniti

89. In determining the impact of the proposed new dealership on existing dealerships in the comm/terr, a key inquiry is the amount of opportunity that exists for the new dealership to capture sales and service without materially affecting the existing Infiniti dealers.

90. As previously noted, the Coral Gables area is one of the top three luxury vehicle markets in the U.S. The 18,000 competitive luxury registrations per year in this area is three

31 times the number of competitive registrations in the average

Infiniti PMA in the U.S.

91. One source of opportunity exists in the shortfall in expected Infiniti sales as compared to other competitive line- make sales within the Miami-Dade Comm/Terr. As discussed in greater detail below, in the Miami-Dade Comm/Terr, Infiniti's recent sales performance22/ is at approximately 65 percent of average and in the Coral Gables PMA that number drops to approximately 56 percent of average. If Infiniti's sales performance was raised to average through gaining sales that currently are lost to interbrand competition, this would translate into approximately 1,069 sales of Infiniti vehicles that could be captured by another dealer.23/

92. Capturing sales lost to Infiniti dealers outside the Miami-Dade Comm/Terr represents another source of business opportunity. These in-sells into the Miami-Dade Comm/Terr currently are made by more distant and less convenient Infiniti dealerships, and likely could be captured with increased marketing, inventory selection, and competition in the

Comm/Terr. In 2013, Infiniti dealers outside the Miami-Dade

Comm/Terr made 651 sales into the Comm/Terr. When these in- sells are added to the 1,069 sales that would be added through successful interbrand competition if Infiniti's performance in the Miami-Dade Comm/Terr was raised to average, this yields an

32 additional 1,720 sales of Infiniti vehicles available to another

Infiniti dealer.

93. To that point, the persuasive evidence shows that had

M10 been in business in 2013 and had performed at an average level, it would have made 1,283 sales in the Miami-Dade

Comm/Terr alone.24/ This estimate does not take into account sales made outside the Comm/Terr.25/ This evidences that the market in the Miami-Dade Comm/Terr, and particularly in the

Coral Gables PMA, can support another Infiniti dealer without significant negative impact on the existing dealers in the

Comm/Terr.

94. Proximity is an important factor in a customer's choice of dealership.26/

95. South Motors derives over 40 percent of its sales from the area included in the Coral Gables PMA. In part, that is due to South Motors' location in southern Miami-Dade County, with the Atlantic Ocean in relatively close proximity to the east and the Everglades in relatively close proximity to the west. The population center in this part of Miami-Dade County is largely north of South Motors, with a particularly large concentration in the Coral Gables area.

96. Historically, approximately half of South Motors' sales and service business has been derived from customers who

33 reside closer to the location of the proposed new dealership than to South Motors.

97. Based on a proximity analysis performed by its expert,

Joseph Roesner, South Motors takes the position that its historic proximity advantage for sales and service necessarily dictates that its future performance will suffer with the addition of the new dealership. Essentially, South Motors asserts that if the new dealership is approved, it will lose its proximity advantage for a substantial portion of its customers, and that as a result, it stands to lose between 20 percent and

40 percent of its business.27/

98. However, this position erroneously assumes that the number of new vehicle sales is a "fixed pie" and fails to take into account the amount of business opportunity available in the market that currently is not being captured. Mr. Roesner acknowledged that South Motors currently is capturing only 50 percent of the sales available in the Coral Gables area.28/ If capture rate is increased, new vehicle sales would increase, indicating that the "pie" of new vehicle sales business is not fixed.

99. South Motors historically has made over $1 million in annual net profit. Roesner estimated, based on his projected

20 to 40 percent decline in business, that South Motors stands

34 to lose between $1 million and $2 million per year in business and may become unprofitable if the new dealership is approved.

100. Roesner arrived at his estimated 20 to 40 percent decline in South Motors' business based on an analysis of other instances in Florida involving the addition of an Infiniti dealership to an existing dealership network since 2009. He assumed that the existing dealership would capture the same percentage of existing sales after the new dealership is added as it did before the new dealer is added. He then compared the amount of sales the existing dealership made to expected sales before and after addition of the new dealership. Pursuant to this methodology, Roesner determined that the new dealership increased Infiniti's sales in the luxury vehicle market but that some of the new dealership's sales came at the expense of the existing dealerships, and that in each case, the addition of a new dealership reduced the existing dealerships' sales between

7.53 percent and 22.3 percent. Applying this methodology to

South Motors, he projected a 23.42 percent decline in sales as a result of adding M10.

101. However, South Motors' projection is based on the flawed assumption, discussed above, that existing dealerships maintain the exact same level of sales performance after the addition of a new dealership as before the addition of that dealership. Roesner acknowledged that a dealership's sales

35 effectiveness can change from year to year, and he did not evaluate how the existing dealerships' sales performance had been trending in prior years.

102. The persuasive evidence showed that in each instance where an existing dealership's sales performance declined after a new dealer was added, the existing dealership's performance already was trending downward due to other factors in the market, before the new dealership was added. Thus, it was erroneous to assume that the decrease in existing dealerships' sales performance projected by South Motors was caused solely by the addition of a new dealership.

103. The persuasive evidence shows that the addition of a new dealership causes, at most, a relatively small decline in existing dealerships' sales performance, and that adding an

Infiniti dealership increases brand awareness and performance, even in markets where the Infiniti already performs above average. Again, this evidences that new vehicle sales are not a "fixed pie" in terms of amount available in the market.

104. Thus, South Motors' projection that it stands to lose

20 to 40 percent across all aspects of its business is based on flawed assumptions. In fact, South Motors itself projected a potential 23.42 percent loss in new sales based on these flawed assumptions, and it did not persuasively establish that it will

36 suffer a significant impact to its service or wholesale parts business.

105. Losses to used vehicle or customer pay service that

South Motors posits it will experience are not statutorily cognizable in this proceeding, so are not properly counted toward South Motors' asserted loss.

106. Thus, South Motors' projection, based on erroneous assumptions, that it stands to lose $1 million to $2 million in business and likely become unprofitable as a result of the establishment of M10, is not reliable or persuasive.

107. South Motors is part of a large, successful vehicle dealership group in south Florida that has a net working capital and net cash worth of over $8 million, sells approximately

20,000 vehicles, generates nearly a billion dollars in gross revenue per year, and earns between $800,000 and $1.5 million in profit per year. South Motors' Executive Vice President,

Jonathan Chariff, testified that South Motors is in a very sound and financially stable position.

108. In sum, the persuasive evidence establishes that because there is sufficient business opportunity in the Miami-

Dade PMA, establishment of the new Infiniti dealership is not likely to have a significant negative impact on the existing

Miami-Dade Infiniti dealers, including South Motors.

109. The persuasive evidence also shows, based on an analysis of all instances in Florida since 2009 in which a new dealership was added to an existing dealer network, that the new dealership is likely to stimulate the market and result in additional sales for the Infiniti line-make, with relatively little to no negative impact to the existing dealers in the

Miami-Dade Comm/Terr.

2. Reasonably Expected Market Penetration in the Comm/Terr

110. Market penetration is a measure of the share of the retail motor vehicle market that a particular line-make achieves during a defined period of time in a particular geographic area.

a. Establishing an Appropriate Benchmark

111. To determine if the Infiniti brand is adequately performing with respect to sales in the Miami-Dade Comm/Terr, a standard for measuring the brand's representation within that area must be identified. This entails identifying an appropriate geographic area in which to assess brand performance for purposes of comparison to Infiniti's performance in the

Comm/Terr.

112. Here, Infiniti posits that the appropriate geographic area consists of Florida areas that currently are represented by an Infiniti dealer. This geographic area is proposed because when determining whether the Infiniti brand is adequately represented in the Miami-Dade Comm/Terr, the brand's sales

38 performance should be compared to other areas where Infiniti is actually represented by a dealer.29/

113. The performance benchmark derived from this geographic area is the "Florida Represented Standard," which is the average performance of the Infiniti brand in the PMAs currently being represented by a dealer in Florida, minus the

Miami-Dade Comm/Terr.30/

114. The Florida Represented Standard benchmark is a local standard that more precisely reflects Infiniti's level of brand representation in the Miami-Dade Comm/Terr than do other broader benchmarks, such as average Infiniti brand performance for the eastern U.S. or the entire country.31/

115. South Motors' expert, Mr. Roesner, examined more than one benchmark for purposes of determining Infiniti sales performance, specifically, the Florida Represented Standard; all of Florida, including unassigned areas, minus the Southeast

Florida Metro market (which consists of Miami-Dade and Broward counties and a small portion of Palm Beach County); and the

Florida Represented Standard minus the Southeast Florida Metro market.

116. As discussed above, it has been determined that the

Miami-Dade Comm/Terr is the appropriate comm/terr for this proceeding. Thus, the benchmark for determining average brand performance must be selected to enable a comparison to the

Miami-Dade Comm/Terr. Of the comparison areas proposed in this proceeding, only the Florida Represented Standard meets that requirement. Thus, it is determined that the Florida

Represented Standard is the appropriate benchmark in this proceeding for determining Infiniti's brand performance.

b. Segmentation Analysis

117. Once the performance benchmark has been determined, a segmentation analysis is performed to account for any differences in consumer and product preferences between the

Miami-Dade Comm/Terr and the comparison area——here, the area comprising the Florida Represented Standard.

118. Infiniti's product lines are broken down into various vehicle types, or segments, on the basis of size, functionality, price point, and "second choice" data.

119. Segmentation analysis evaluates the specific types of vehicles being purchased by consumers in a particular area and accounts for all consumer and product variables in the market, so that no other adjustments to account for demographic characteristics such as ethnicity, income, or education are necessary. Thus, segmentation analysis eliminates the need to speculate regarding consumer preferences across vehicle types based on the range of demographic factors, including ethnicity.

120. Infiniti has identified seven different "segments," or vehicle types, within its brand for purposes of analyzing

40 brand performance. These segments are: Luxury Coupe, Mid

Luxury, Near Luxury, Luxury Compact SUV, Luxury Midsize SUV,

Luxury Fullsize SUV, and Luxury Large SUV. Infiniti also has identified the specific Infiniti models within each segment, as well as the specific models of other line-makes that compete with the Infiniti models within each segment.

121. The penetration rate in the Miami-Dade Comm/Terr for

Infiniti for a particular segment is determined by dividing the number of Infiniti registrations for that segment by the total number of competitive registrations for that segment.

122. The expected penetration rate for a particular segment of the Infiniti brand is determined by comparing the total number of competitive registrations for that segment to the Florida Represented Standard. This expected penetration rate per segment can then be compared to the actual sales of

Infiniti vehicles for that segment.

123. Based on the Florida Represented Standard, for the year 2012-2013, the expected penetration rate for Infiniti vehicles across all segments is 8.42 percent. During this period, Infiniti achieved an actual penetration rate of 6.51 percent across all vehicle segments in the Miami-Dade Comm/Terr, showing a shortfall between expected and actual sales of

Infiniti vehicles in the Comm/Terr.

124. Registration effectiveness, which compares actual brand penetration to expected brand penetration,32/ is the calculated measure that is used to gauge brand performance.

Here, comparing the expected 8.42 percent Infiniti penetration rate to the actual 6.51 percent Infiniti penetration rate yields a registration effectiveness for the Infiniti brand of 77.3 percent for the Miami-Dade Comm/Terr for 2013.

c. Confirmation of the Benchmark as Reasonable

125. Once the benchmark has been selected and adjusted using segmentation analysis, it must be evaluated by determining if it is achievable and has been achieved in the Florida

Represented Standard area.

126. Here, the persuasive evidence consistently showed, across a range of represented PMAs in Florida, that with little exception, the dealers are meeting the benchmark of 100 percent registration effectiveness, which is average performance. This confirms that the Florida Represented Standard is a reasonable benchmark to use in evaluating Infiniti's brand sales performance in the Miami-Dade Comm/Terr.

d. Measuring Infiniti's Brand Performance in the Comm/Terr

127. The persuasive evidence shows that in comparison to the Florida Represented Standard benchmark, the Infiniti's sales performance in the Miami-Dade Comm/Terr is below average.

Between 2011 and 2013, Infiniti's sales performance in the

Miami-Dade Comm/Terr ranged between 77 and 80 percent of average. However, by March 2014, its performance had fallen to approximately 65 percent of average. In 2013, the existing

Infiniti dealer network in the Miami-Dade Comm/Terr made

737 fewer vehicle sales than expected and it was projected to make 1,284 fewer vehicle sales than expected through 2014.

128. This shows that customers are purchasing Infiniti vehicles in the Miami-Dade Comm/Terr at significantly lower levels than in the rest of the represented markets in Florida.

This indicates that the Infiniti brand is not being adequately represented by the existing dealer network in the Miami-Dade

Comm/Terr.

129. This inadequacy is even more pronounced when

Infiniti's sales performance is evaluated in the area encompassed within the Coral Gables PMA. Between 2011 and

March 2014, Infiniti's sales performance fell from 67.9 percent of average to 56.1 percent of average. In 2013, the existing dealer network made 543 fewer Infiniti sales than expected within the area in the Coral Gables PMA, and it was on pace to make 720 fewer sales than expected in 2014——making it the worst-performing PMA in Florida.

130. In 2011, South Motors accounted for 30.1 percent of the brand's registration effectiveness within the Coral

Gables PMA, and other dealers accounted for 37.8 percent.

In 2012, those numbers were 31.1 percent and 34.4 percent, respectively; in 2013, those numbers were 25.0 percent and

38.0 percent, respectively; and as of March 2014, those numbers were 27.1 percent and 29.0 percent, respectively.

131. This information shows that the existing Infiniti dealer network is not providing adequate representation or sufficiently cultivating existing sales potential in the area encompassed within the Coral Gables PMA.

132. South Motors' expert, Mr. Roesner, evaluated

Infiniti's brand performance within the Southeast Florida Metro area, but did not specifically evaluate Infiniti brand performance within the Miami-Dade Comm/Terr or the Coral Gables

PMA. Based on his analysis of Infiniti's sales performance in the Southeast Florida Metro market, Roesner found that the

Infiniti brand was performing between approximately 85 percent and 90 percent of average in that area. He described this performance as "a reasonable level. It's not a superior performance, but neither is it inadequate."

133. Because Roesner's analysis was keyed to the Southeast

Florida Metro market, it necessarily included Infiniti's performance in Broward County north of Warren Henry. In Broward

County, the Infiniti brand is represented by three dealerships located in close proximity to each other, and the brand performs relatively well. By contrast, there are only two Infiniti

44 dealerships in Miami-Dade County, separated by 26 miles of urban development and congested traffic conditions. By including

Broward County, Roesner's analysis shows Infiniti performing at a significantly higher level than in the Miami-Dade Comm/Terr or

Coral Gables PMA.

134. The inclusion of Broward County in Infiniti's sales performance analysis positively skews the performance numbers, but does not accurately portray the brand's sales performance specifically in the Miami-Dade Comm/Terr, which is the geographic area relevant to this proceeding.33/

135. Roesner acknowledged that there is little interaction between the Broward County dealerships and customers in the

Coral Gables area, with each Broward County dealership making less than nine percent of its nationwide sales within the Coral

Gables area. He further acknowledged that this is due, at least in part, to the significant drive distances between those dealerships and the Coral Gables area.

136. Roesner posited that because existing dealers are making some sales into the Coral Gables PMA, it is being

"cultivated." However, he acknowledged that this did not necessarily mean that this area was being adequately represented by the existing dealers. He further acknowledged that

Infiniti's brand performance in the Coral Gables PMA is worst in

45 the state and that there is opportunity for additional sales within that area.

137. In sum, the persuasive evidence demonstrates that the

Infiniti brand is not being adequately represented for new vehicle sales in the Miami-Dade Comm/Terr, and that the brand performs particularly poorly in the Coral Gables PMA.

138. Infiniti's service performance also was analyzed to determine if it is being adequately represented within the

Miami-Dade Comm/Terr and in the Coral Gables PMA. First, the number of Infiniti Units in Operation ("UIO") within the Miami-

Dade Comm/Terr and Coral Gables PMA was determined. This number is a measure of service opportunity for Infiniti in this geographic area. Infiniti uses a seven-year UIO measurement, which reflects the number of Infiniti vehicles within the most recent seven model years. Once the amount of UIO was determined, this number was then compared to Infiniti repair orders for warranty service, extended service contracts, goodwill repairs, and service campaign repairs.34/ This enabled determination of the "capture rate" or percentage of UIO that were matched to a qualifying repair order. Because Infiniti's initial warranty covers four years, this analysis is not limited to warranty repair and includes all types of repair work for which Infiniti reimburses the dealer to perform. This analysis showed that South Motors is capturing 67.2 percent of the UIO in

46 its PMA. However, its UIO capture in the Miami-Dade Comm/Terr as a whole and in the Coral Gables PMA were substantially lower, at 46.8 percent and 46.7 percent, respectively. The significant difference between Infiniti's service performance within South

Motors' PMA compared to the Miami-Dade Comm/Terr as a whole and to the Coral Gables PMA demonstrates that the existing dealer network is not providing adequate representation for service within the Miami-Dade Comm/Terr and the Coral Gables PMA.

e. Factors Affecting Infiniti's Market Penetration in the Comm/Terr

139. The statutory "market penetration" factor requires, in addition to an analysis of how existing dealers are penetrating the market, "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 in the community or territory." § 320.642(2)(b)3., Fla. Stat. The factors germane to this proceeding are addressed below.

140. Population and household trends in the Miami-Dade

Comm/Terr are indicators of market opportunity. The Miami-Dade

Comm/Terr is a very densely populated area that has over three million people and one million households, so presents a substantial market opportunity.

141. With approximately 1.2 million people and growing, the Coral Gables area is a particularly densely populated, heavily congested area within the Miami-Dade Comm/Terr. This means that consumers in this area seeking access to an Infiniti dealership have to work their way through heavy traffic to access a dealer located substantially to the north or south.

These population and household numbers are expected to increase in the future, increasing both the demand for vehicles sales and service and the congestion that must be negotiated to obtain access to an Infiniti dealer in the Miami-Dade Comm/Terr.

142. These factors indicate that Infiniti's underperformance in the Miami-Dade Comm/Terr is due to an inadequate number of Infiniti dealers, and that this performance shortfall will become more pronounced in the future under the existing dealer network.

143. Household income and employment are indicators of consumers who are in the market to purchase a vehicle.

Employment in the Miami-Dade Comm/Terr has been growing since reaching a low point in 2009, indicating good economic conditions for the vehicle retail business. There are over

380,000 households with an annual income of between $50,000 and

$150,000, and an additional 75,000 households having an annual income of over $150,000. These conditions indicate a

48 significant number of households in this area that are in the target range for the Infiniti brand.

144. A statistical regression analysis was performed to determine whether Infiniti brand performance in the Miami-Dade

Comm/Terr may be significantly related to the high Hispanic population in the area. This analysis identified several areas in Florida having a high Hispanic population where the brand is performing well, indicating no significant relationship between the percentage of Hispanic population and Infiniti's brand performance. Thus, this factor is not adversely affecting the brand's performance in the Miami-Dade Comm/Terr.

145. The competitive registration patterns in the Miami-

Dade Comm/Terr show a significant concentration of consumers who are purchasing vehicles of competitive line-makes and models in

Coral Gables, in and around the location of the proposed M10 dealership. In fact, many dealers who sell vehicles that compete with Infiniti have dealerships close to this location.

This indicates that dealership convenience and accessibility are important to customers in this area, and that the lack of an

Infiniti dealership in this area indicates a lack of convenience and accessibility for customers of the Infiniti brand. This area has experienced steady growth in competitive registrations over the past few years and that trend is anticipated to continue into the future. This shows that the Miami-Dade

Comm/Terr and the Coral Gables PMA present a consistent and growing opportunity for Infiniti sales, and that the current shortfall in Infiniti sales is not due to lack of sales opportunity in these areas.

146. The evidence shows that the sales opportunity for

Infiniti dealers within the Miami-Dade Comm/Terr is the largest per dealer of any market in Florida, and that even if a third dealer were added in the Coral Gables area, the Miami-Dade

Comm/Terr still would have the largest sales opportunity per dealer in the state. This indicates that the Miami-Dade

Comm/Terr is too large a market to be adequately served by the two existing Infiniti dealers.

147. The evidence similarly shows that the Miami-Dade

Comm/Terr also has the largest service opportunity (in terms of

UIO) per dealership of any market in Florida——again, suggesting that the Miami-Dade Comm/Terr is too large a service market for the two existing dealers to adequately serve.

148. Addition of a third dealership in the Miami-Dade

Comm/Terr would slightly reduce the UIO per dealership, but the Comm/Terr still would constitute the third largest service market in Florida. The reduction in UIO per dealership is related to the number of units (vehicles) in operation in the area and Infiniti's sales performance in the area. Because the

Infiniti brand's sales performance has fallen below the expected

50 level in the Miami-Dade Comm/Terr, there are fewer units in operation than if the brand performed at expected levels for sales performance. With higher sales performance, the number of units in operation in this market——and, thus, service opportunity——would increase due to the additional vehicle sales being made into the market. Thus, as the Infiniti brand experiences better sales performance in the Miami-Dade

Comm/Terr, service opportunity will increase. The evidence shows a significant existing level of service opportunity in the

Miami-Dade Comm/Terr that is anticipated to increase with increased sales performance.

149. Infiniti dealers are able to capture a larger percentage of sales closer to their dealership and are less effective at capturing sales to customers further away from the dealership. With respect to the existing Infiniti dealer network, South Motors currently captures 72.2 percent of the expected sales within four miles of its dealership. However, this capture percentage significantly decreases at greater distances; South Motors captures only an estimated 45.8 percent of expected sales at 10 to 12 miles from its dealership. Warren

Henry exhibits a similar pattern, capturing 73.3 percent of expected sales within four miles of its dealership, but the drop-off is more dramatic with distance. Warren Henry captures only 28.3 percent of expected sales at 10 to 12 miles from its

51 dealership and only 17.9 percent at 12 to 16 miles from its dealership. The proposed M10 dealership in Coral Gables is more than 10 miles from South Motors and more than 15 miles from

Warren Henry. These data show that South Motors and Warren

Henry both are too far from the Coral Gables area for either of them to adequately represent the area for vehicle sales.

150. Customer convenience is gauged by determining the average drive distance consumers in the Coral Gables PMA must travel to reach an Infiniti dealership. With the 26-mile gap between the existing dealers in Miami-Dade County, customers in the Coral Gables PMA must drive an average of 13.2 miles, through congested conditions, to reach the nearest Infiniti dealer. This distance is significantly further than customers in the Coral Gables area must travel to reach other dealerships that sell competitive line-makes and models, including Mercedes-

Benz, Audi, Cadillac, BMW, Lexis, Acura, and others. The lack of convenient sales and service access places Infiniti at a significant competitive disadvantage relative to other brands, and is a key reason for Infiniti's underperformance as a brand, both in the Coral Gables PMA and in the rest of the Miami-Dade

Comm/Terr.

151. An analysis of the number of competitors per dealer further evidences that Infiniti is inadequately represented, in terms of number of dealers, within the Miami-Dade Comm/Terr.

There are 51 competitive motor vehicle franchises in the Miami-

Dade Comm/Terr, two of which are the existing Infiniti dealerships, South Motors and Warren Henry. Thus, the Infiniti brand has 3.9 percent of the "shelf space," or share, of the competitive franchises within the Miami-Dade Comm/Terr. By contrast, the Florida Represented Standard enjoys 4.7 percent of the competitive "shelf space." This shows that Infiniti is underrepresented in the Miami-Dade Comm/Terr and would need to add 2.4 Infiniti dealers to have the same competitive "shelf space" as the other Infiniti franchises comprising the Florida

Represented Standard. This evidences that the Infiniti brand is performing poorly in the Miami-Dade Comm/Terr due to having too few dealerships in the Comm/Terr.

152. These factors support the conclusion that the causes of Infiniti's inadequate sales and service performance in the

Miami-Dade Comm/Terr, and particularly in the Coral Gables PMA, are the lack of convenient access to the Infiniti brand relative to its competitors and underrepresentation by having too few

Infiniti dealers.

3. Size and Permanency of Reasonable Investments and Obligations Incurred by Existing Dealers to Perform Under Dealer Agreements

153. South Motors has invested over $25 million in its dealership operations. This investment includes significant

53 investments in purchasing and leasing property, as well as investing in the facilities from which South Motors operates.

154. South Motors also has committed to upgrade its sales facility to IREDI standards, which will entail a substantial investment. As previously noted, Infiniti has committed to provide South Motors $550,000 to upgrade to IREDI standards.

4. Actions by Licensee Denying Existing Dealers Opportunity for Reasonable Growth or Market Expansion

155. The evidence does not establish that Infiniti has taken any actions to deny existing dealers the opportunity for reasonable growth or market expansion.

156. South Motors asserts that Infiniti's provision of

$4.4 million of financial support to M10 gives it an unfair competitive advantage, which effectively denies it and other existing dealers the opportunity for reasonable growth or market expansion. However, South Motors did not provide any specific, persuasive evidence substantiating this assertion.

157. The evidence shows that the financial assistance

Infiniti has proposed to provide M10 is to help cover the costs of this proceeding and any subsequent appeals, the rent costs during the pendency of this proceeding and appeals, and start-up costs. This assistance is intended to help M10 break even, not gain any competitive advantage over the existing dealers.

158. As it is, Infiniti is providing South Motors $550,000 toward renovating its existing dealership to meet IREDI standards, with the aim of helping make it a more competitive dealership in the luxury vehicle market.

159. Further, the persuasive evidence establishes that had

South Motors, as the initial preferred candidate, provided a formal proposal and signed a confidentiality agreement regarding a Coral Gables dealership, Infiniti likely was prepared to provide South Motors between $3 million and $5 million to open an Infiniti dealership in the Coral Gables open point.

5. Attempts by Licensee to Coerce Existing Dealers

160. There is no evidence that Infiniti attempted to coerce South Motors, Warren Henry, or any other existing

Infiniti dealers to consent to the proposed Coral Gables dealership.

6. Distance, Travel Time, Traffic Patterns, and Accessibility between Existing Infiniti Dealers and Location of the Proposed Dealership

161. As previously discussed, the South Motors and Warren

Henry dealerships are approximately 26 air miles and 28.5 drive miles apart.

162. M10 will be located in downtown Coral Gables, approximately 10.6 air miles and 11.2 drive miles from South

Motors, and approximately 15.6 air miles and 17.3 drive miles from Warren Henry.

163. As previously discussed, several populous communities in Miami-Dade County are located in the stretch between South

Motors and Warren Henry. Traffic conditions between South

Motors and Warren Henry are heavily congested, and customers in these communities, including in Coral Gables, who wish to purchase a vehicle or have a vehicle serviced at either existing

Infiniti dealership must negotiate very congested traffic conditions to get to the dealership——a trip that may take between 30 and 45 minutes of drive time, depending on traffic conditions.

164. A prime reason Infiniti is seeking approval to add

M10 in Coral Gables is to increase convenience to luxury vehicle customers in this area which, as previously noted, is one of the top three luxury vehicle markets in the country. The evidence shows that convenience is a key consideration for luxury vehicle customers when choosing a dealership for purchase or servicing a vehicle. Due to M10's location proximate to a large luxury vehicle customer base, Infiniti anticipates that its sales and service performance in the Miami-Dade Comm/Terr, and particularly in the Coral Gables area, will improve.

165. The evidence shows that the establishment of M10 will reduce the average drive distance to the nearest Infiniti dealer for customers in the Miami-Dade Comm/Terr. It is thus reasonable to infer that adding the M10 dealership in Coral

Gables also will reduce the drive time for Infiniti customers to reach the nearest Infiniti dealership.

7. Likelihood of Benefits to Consumers due to Establishment of New Dealership that Cannot be Obtained by other Geographic or Demographic Changes or Expected Changes within the Comm/Terr

166. As previously discussed, the evidence shows that the establishment of M10 likely will benefit consumers in the Miami-

Dade Comm/Terr due to increased convenience in accessing an

Infiniti dealership for sales and service and increased intrabrand and interbrand competition. Also as discussed, M10 is anticipated to be profitable and is not anticipated to significantly negatively affect South Motors. Thus, customers in the Miami-Dade Comm/Terr will benefit from M10's establishment.

8. Whether the Protesting Dealer is in Substantial Compliance with its Dealer Agreement

167. South Motors currently is in compliance with its

Dealer Agreement.

168. South Motors' dealership facility is older and outdated in some respects and does not comply with Infiniti's

IREDI standards. However, South Motors has committed to renovating its facility to comply with IREDI standards.

169. Historically, South Motors' performance was inadequate, but it has performed well since 2009, when the area

57 now included in the Coral Gables open point was removed from its

PMA. South Motors has won Infiniti's Award of Excellence.

170. Infiniti is not claiming that South Motors is a bad dealer, only that, for a variety of reasons addressed herein, additional representation of Infiniti in the Miami-Dade

Comm/Terr, and particularly in the Coral Gables area, is warranted.

9. Whether there is Adequate Interbrand or Intrabrand Competition in the Comm/Terr and Adequately Convenient Customer Care, Including Sales and Service Facilities Adequacy

171. As previously addressed, Infiniti's below-average brand performance in the Miami-Dade Comm/Terr indicates that there currently is not adequate intrabrand or interbrand competition for the Infiniti brand, largely due to underrepresentation by having only two dealerships in a large, heavily populated, congested area.

172. South Motors engages in an aggressive advertising program and performs well for sales and service within its own

PMA. However, the evidence shows that due to an inadequate number of Infiniti dealers in the Miami-Dade Comm/Terr, the

Infiniti brand does not compete particularly well against other luxury vehicle brands in the Comm/Terr.

173. Also as previously discussed, the evidence shows that another substantial reason for Infiniti's brand underperformance

58 in the Miami-Dade Comm/Terr is that for a large number of customers in the Comm/Terr, including those in the Coral Gables area, convenient access to Infiniti sales and service facilities is lacking. The bulk of customers in the Miami-Dade Comm/Terr seeking an Infiniti sales or service dealership must travel, in congested conditions, a substantial distance north, almost to

Broward County, or a substantial distance south, below Kendall, to reach a dealership.35/ At the same time, Infiniti's competitors have dealerships located in more convenient areas of the Comm/Terr, including in Coral Gables, which helps them outcompete Infiniti for luxury vehicle sales.

174. The evidence shows that establishing M10 at its proposed location will enhance interbrand and intrabrand competition, and also will enhance customer convenience with respect to drive distance and drive time to an Infiniti sales and service facility.

10. Whether Establishment of Proposed Dealership is Warranted and Justified Based on Economic and Marketing Conditions Pertinent to Dealers Competing in the Comm/Terr

175. As previously discussed, in the Miami-Dade Comm/Terr, the Infiniti line-make historically has performed below average, and its performance is declining. In March 2014, Infiniti's sales performance in the Miami-Dade Comm/Terr was approximately

65 percent of average based on the Florida Represented Standard

59 benchmark. In Coral Gables, Infiniti's performance fared worse, with a sales performance of 56.1 percent of benchmark average.

176. As previously noted, the data show that there are approximately 18,000 competitive luxury vehicle registrations per year in the Coral Gables area alone, making it the third largest luxury car market in the country.

177. Employment in the Miami-Dade Comm/Terr has steadily grown over the past five to six years, and the economic conditions are favorable for the motor vehicle business.

178. The evidence shows that there is a large luxury vehicle customer base living in the Miami-Dade Comm/Terr, particularly near the location of the proposed M10 dealership.

To that point, several of Infiniti's luxury vehicle competitors have dealerships in this area.

179. As discussed in detail above, the evidence shows that the Infiniti brand, with only two existing dealerships in the

Miami-Dade Comm/Terr, is underrepresented in the Comm/Terr. The

Miami-Dade Comm/Terr currently has the largest sales opportunity per dealer of any market in Florida and if a third dealer were added in Coral Gables, the Comm/Terr still would have the largest sales opportunity per dealer in the state.

180. Also as previously discussed, the evidence shows that establishment of M10 likely will not have a significant negative

60 effect on the existing Infiniti dealerships in the Miami-Dade

Comm/Terr.

181. These economic and marketing conditions in the Miami-

Dade Comm/Terr support the establishment of M10.

11. Volume of Registrations and Service Business Transacted by Existing Dealers in the Comm/Terr

182. As discussed above, the evidence shows that since

2011, Infiniti's sales performance in the Miami-Dade Comm/Terr has been significantly below the Florida Represented Standard benchmark average, and is declining.

183. With only two Infiniti dealerships, the Miami-Dade

Comm/Terr currently presents the greatest sales opportunity per dealer among all Florida markets, and that would continue to be the case with the addition of M10.

184. The Miami-Dade Comm/Terr also currently has the largest number of Infiniti units in operation, so presents the greatest service opportunity in the state. If M10 were added, the Miami-Dade Comm/Terr no longer would have the largest units in ownership in the state, but it would be the third largest service market in Florida.

185. As previously discussed, the slight decrease in service opportunity per dealership is due to the current sales underperformance in the Miami-Dade Comm/Terr. As Infiniti sales performance increases in the future with the addition of another

61 dealership, the service opportunity available to all dealers in the Miami-Dade Comm/Terr also will increase.

186. In sum, Infiniti's current underperformance in sales and service in the Miami-Dade Comm/Terr, with projected increases in both with the addition of another dealership, supports the establishment of M10.

C. Findings of Ultimate Fact Regarding Adequate Representation in the Comm/Terr and in the Coral Gables PMA

187. The evidence establishes that the existing Infiniti dealer network in the Miami-Dade Comm/Terr is making substantially fewer new Infiniti sales than expected compared to other Infiniti dealers in Florida based on the Florida

Represented Standard, and also is capturing a significantly smaller percentage of available service opportunity in the

Comm/Terr as a whole compared to the South Motors PMA, which is a dealer-represented PMA. Infiniti's performance has declined over time, and Infiniti is losing a significant amount of business to competitors. Accordingly, the existing Infiniti dealers are not achieving the volume of sales or service business reasonably expected in the Miami-Dade Comm/Terr.

188. The evidence shows that Infiniti's inadequate sales and service performance in the Miami-Dade Comm/Terr is due to underrepresentation by an existing dealer network comprised of only two dealers 26 miles apart in a densely populated, heavily

62 congested urban area. Infiniti's inadequate brand performance is not due to deficient sales effectiveness or service level by the existing dealers within their own PMAs.

189. The Infiniti brand is performing at even lower levels in the Coral Gables PMA. In that area, the existing dealer network is making a small percentage of the expected new vehicle sales available and a very small percentage of the warranty service business captured in other represented markets in

Florida. Coral Gables is located at the approximate midpoint of a 26-mile gap in Infiniti representation in the Miami-Dade

Comm/Terr that includes downtown Miami and Coral Gables. With its current dealer network, Infiniti has the worst customer convenience of any competitive luxury vehicle brand in the Coral

Gables PMA.

190. Customers currently must drive an average of 13.2 miles to reach the nearest Infiniti dealership. The evidence indicates that the population, number of households, employment levels, number of competitive registrations, and units in operation in the Miami-Dade Comm/Terr, and particularly in Coral

Gables, are likely to grow in the coming years, so that

Infiniti's brand underperformance will not improve, but will continue to decline.

191. The establishment of M10 in Coral Gables will significantly reduce the average drive distance and drive time

63 to an Infiniti dealership for sales and service customers, thus improving customer convenience to the Infiniti brand.

192. The proposed M10 dealership will increase the awareness of Infiniti's brand in the luxury vehicle market and will promote intrabrand and interbrand competition.

193. The proposed new dealership will benefit the public interest by increasing employment in the community, contributing to positive community character, and generating tax revenue.

194. The persuasive evidence shows that M10 is not likely to have a material negative impact on South Motors. There is sufficient sales and service opportunity in the Miami-Dade

Comm/Terr and in the Coral Gables PMA to support the addition of the M10 dealership without materially affecting the existing dealers, including South Motors. Further, the evidence shows that addition of M10 will increase Infiniti's brand awareness and may generate additional business that may inure to the benefit of all Infiniti dealers in the Miami-Dade Comm/Terr.

195. The persuasive evidence establishes that any potential impact on South Motors, which is likely to be minimal at most, will be outweighed by the significant benefits to consumers, the public, and the Infiniti brand from the establishment of M10.

196. In sum, Infiniti has met its burden to demonstrate, by the preponderance of the competent substantial evidence, that

64 the existing Infiniti dealers in the Miami-Dade Comm/Terr are not providing adequate representation of the Infiniti line-make in the Comm/Terr, pursuant to the factors in section

320.642(2)(b).

197. Accordingly, Infiniti has shown that the establishment of M10 as an Infiniti dealership should be approved.

D. Relocation of Warren Henry

198. South Motors asserts that M10 cannot be established due to the potential relocation of Warren Henry Infiniti.

Specifically, South Motors asserts that Infiniti cannot be permitted to establish a dealership in Coral Gables until Warren

Henry's potential relocation has occurred and its impact on the adequacy of representation in the Miami-Dade Comm/Terr is evaluated.

199. Over the years, Warren Henry has sought to relocate its dealership several times; however, none of these efforts has come to fruition.

200. In 2012, Infiniti approved the relocation of Warren

Henry to a new location at 14995 Biscayne Boulevard in Miami, and proposed relocation was noticed in the Florida

Administrative Register in April 2013. The proposed relocation site is approximately 4.8 miles southeast of its present dealership location, 22 miles north of South Motors, and 12

65 miles from M10's proposed location. The proposed relocation site is within Warren Henry's existing PMA.

201. As with Warren Henry's previous relocation efforts, problems have developed that have hindered its ability to secure the proposed relocation site. As a result, it missed all of the deadlines agreed to with Infiniti for relocating to the new site. As of the final hearing, Warren Henry still had not secured a lease on the site of its relocated dealership.36/

202. It is uncertain whether Warren Henry Infiniti will relocate, and if it does, when that relocation will occur.

Moreover, even if Warren Henry were to eventually relocate to the proposed site, it would still be anticipated to capture only

18 percent of expected Infiniti sales in the Coral Gables area.

This shows that the relocation would not address the inconvenience in accessing the Infiniti brand for customers in that area.

203. In any event, the evidence shows that as the population in the Miami-Dade Comm/Terr increases, it will become increasingly inconvenient for customers to reach an Infiniti dealership in the existing network. The evidence shows that adding the M10 dealership will make access to an Infiniti dealer significantly more convenient for customers in the Miami-Dade

Comm/Terr, and particularly in the Coral Gables area.

204. In sum, the addition of M10 will result in benefits to consumers that would not otherwise be obtained by other geographic or demographic changes or expected changes in the

Miami-Dade Comm/Terr.

V. Identifiable Plot

205. The evidence establishes that the Infiniti brand significantly underperforms for both sales and service in the

Coral Gables PMA.

206. As previously discussed, the Infiniti brand has been performing poorly in the Coral Gables area for several years, and that performance is in decline. By early 2014, Infiniti's brand performance had fallen to 56.1 percent, with continued decline projected. This is markedly lower than Infiniti's subpar sales performance, at 65 percent of benchmark average, in the Miami-Dade Comm/Terr as a whole. The Coral Gables PMA is the worst-performing PMA for new vehicle sales in the state.

207. Infiniti's service performance in the Coral Gables

PMA, at 46.7 percent of benchmark average, also is poor, although not markedly poorer than in the Miami-Dade Comm/Terr as a whole.

208. South Motors currently performs well within its own

PMA, but captures only 50 percent of luxury vehicle sales within the Coral Gables area.

209. These data support the determination that Coral

Gables is a discrete "identifiable plot" in which Infiniti sales and service are performing more poorly than in the Miami-Dade

Comm/Terr as a whole.

VI. M10's Service Location

210. As previously noted, on April 4, 2014, DHSMV published two notices of publication for a new point, providing notice that Infiniti intended to allow the establishment of M10.

211. The 14-2070 Notice stated in pertinent part:

Pursuant to Section 320.642, Florida Statutes, notice is given that Infiniti... intends to allow the establishment of M10 Motors...as a dealership for the sale and service of Infiniti vehicles (line-make INFI) at 2701 Le Jeune Road, Coral Gables (Miami-Dade County), Florida 33134, on or after June 1, 2014.

212. The 14-2069 Notice stated in pertinent part:

Pursuant to Section 320.642, Florida Statutes, notice is given that Infiniti... intends to allow the establishment of M10 Motors...as an Infiniti dealership with additional service facilities (line-make INFI) at 4001 Ponce de Leon Boulevard, Coral Gables (Miami-Dade County), Florida 33146 ("Ponce de Leon"). This service location on Ponce de Leon Boulevard will not be established independent of the sale and service facility located at 2701 Le Jeune Road, Coral Gables, FL, but shall be established only in conjunction with and subject to the approval of the sale and service facility, which is being noticed simultaneously herewith. Further, Infiniti asserts the exemption for this additional service facility at Ponce de Leon Boulevard

as provided in Section 32[0].642(6)(b), Florida Statutes, on or after June 1, 2014.

Id. (emphasis added).

213. The publication of two separate notices by DHSMV for the establishment of M10 was driven by correspondence submitted to the agency by Infiniti's Analyst for Dealer Agreements, who sent two letters giving notice of Infiniti's intent to establish

M10. The language quoted above was taken directly from the letters submitted by Infiniti's analyst.

214. Although the correspondence submitted to DHSMV, and, consequently, the notice published for Case No. 14-2069, refers to section 320.642(6), regarding "service-only" dealerships, the notice also contains specific language, quoted above, that makes abundantly clear that the service location on Ponce de Leon

Boulevard is not a separate stand-alone dealership, but instead is a remote service performance location that is an integral part of a single M10 dealership location having a sales and service location on Le Jeune Road.

215. Further, the evidence presented at the final hearing made clear that the Ponce de Leon service location was just that——a remote location at which all of the service for M10 would be performed. The evidence did not in any manner portray the Ponce de Leon facility as a stand-alone dealership.

216. Accordingly, it is determined that this proceeding concerns the approval of one M10 Infiniti dealership, with its sales and service intake facility located at 2701 Le Jeune Road and its service performance location at 4001 Ponce de Leon

Boulevard.

CONCLUSIONS OF LAW

Jurisdiction, Standing, and Burden of Proof

217. DOAH has jurisdiction over the parties to, and subject matter of, this proceeding pursuant to sections 120.569 and 120.57(1).

218. South Motors has standing, pursuant to section 320.642(3)(b), to protest the proposed establishment of M10 in the Coral Gables open point.

219. Infiniti bears the burden in this proceeding to demonstrate, by a preponderance of the evidence, that existing franchised motor vehicle dealers who register sales or retail leases of the Infiniti line-make within the applicable comm/terr——here, the Miami-Dade Comm/Terr——are not providing adequate representation of Infiniti in the comm/terr.

§ 320.642(2)(a), Fla. Stat.

220. This proceeding requires the balancing of any deficiency in the performance of the Infiniti line-make within the Comm/Terr, the degree to which that deficiency will be addressed by the proposed addition of M10, and the impact that

70 the addition of M10 will have on consumers and on South Motors and Warren Henry. See South M.M., LLC, d/b/a South Motors Mazda v. Mazda Motor of America, Inc. and Miami Automotive Retail,

Inc., d/b/a Brickell Mazda, Case No. 13-3345 (Fla. DOAH Aug. 1,

2014; DHSMV Sept. 16, 2014); Gen. Motors Corp. v. Roger Whitley

Chevrolet, Inc., Case Nos. 03-4083 and 03-4084 (Fla. DOAH

Feb. 16, 2005; DHSMV May 9, 2005).

221. That the Infiniti line-make may be better represented in the Comm/Terr if the proposed additional dealership is established is not dispositive of whether that dealership should be approved. See South Motors Mazda, at 52, ¶ 175; BMW of North

America, LLC v. Pompano Imports, Inc., Case Nos. 08-1160, 08-

1161, 08-1295, and 08-1321 (Fla. DOAH Apr. 27, 2009; DHSMV

June 18, 2009), at 68, ¶ 214.

222. Infiniti also may not satisfy its burden of proof in this proceeding simply by establishing that existing Infiniti dealers could do a better job:

In making the determination that a manufacturer is not being adequately represented in a market, it is not enough to simply conclude that the existing dealers could do a better job, or that the proposed dealer network change will improve the manufacturer's performance in the market. Hess Marine, Inc. v. Calvin, 296 So. 2d 114, 115 (Fla. 1st DCA 1974). . . . The real focus of proceedings brought under Section 320.642 is whether the existing dealers are doing enough.

General Motors Corporation v. Roger Whitley Chevrolet, Inc., Case Nos. 03-4083, 03-4084 (Fla. DOAH Feb. 16, 2005; Fla. DHSMV May 13, 2005) at 24, ¶ 55.

223. To prevail, Infiniti must establish that existing

Infiniti representation in the Comm/Terr falls short of the standard of "adequacy." Adequate representation does not equate to exceptional representation. Adequate representation refers to representation that is just barely satisfactory or sufficient. BMW of North America, at 69-70, ¶ 214; see also

United Steelworkers of Am. v. Marshall, 647 F.2d 1189, 1251

(D.C. Cir. 1980) ("'Adequately,' both in normal use and as a contemporary legal cliché, means 'suitably' or

'passably'. . . .").

Community or Territory

224. Determining the appropriate community or territory is a threshold issue. As noted above, the term "community or territory" is not defined by statute and must be determined according to the evidence presented at hearing. Anthony Abraham

Chevrolet Co. v. Collection Chevrolet, Inc., 533 So. 2d 821

(Fla. 1st DCA 1988); Gen. Motors Corp. v. Colonial Pontiac,

Inc., Case No. 89-6832 (Fla. DOAH Aug. 21, 1991; Fla. DHSMV

Jan. 30, 1992); Seacrest Cadillac, Inc. v. Larry Dimmit

Cadillac, Inc., Case No. 88-2252 (Fla. DOAH Mar. 13, 1989; Fla.

DHSMV 1989), aff'd Larry Dimmitt Cadillac, Inc. v. Seacrest

Cadillac, 558 So. 2d 136 (Fla. 1st DCA 1990)(community or territory defined according to consumer behavioral information).

225. As discussed above, South Motors takes the position that the appropriate comm/terr in this case is the Southeast

Florida Metro market pursuant to language in Infiniti's franchise agreement stating that if a dealer is in a metropolitan area where there is more than one Infiniti dealer, Infiniti may evaluate the combined performance of all

Infiniti dealers in that market and may evaluate each dealer's performance based on the proportion of sales and potential sales available in that market. South Motors asserts that the dealer franchise provision must be given "great weight" in determining the comm/terr, and that absent exceptional circumstances, which it claims do not exist here, the multiple dealer area identified in the franchise agreement must be adopted as the comm/terr.

226. Although Florida cases and administrative decisions have held that multiple dealer area provisions in franchise agreements are entitled to "great weight," these cases also have made clear that the designation of multiple dealer areas is not dispositive regarding the appropriate comm/terr. Id.; see also

BMW of North America.

227. In Larry Dimmitt, Cadillac proposed to establish a new dealership in the Tampa Bay multiple dealer area in which

73 there were three existing Cadillac dealerships. The court specifically rejected the argument that the multiple dealer area under the dealer franchise agreements was conclusive of the appropriate comm/terr, noting that the multiple dealer area had been designated many years earlier and that demographic changes had created two independent markets within the multiple dealer area. Under these circumstances, the court found that Cadillac had proved that the existence of a "real, distinct, and separate market area exists" within the multiple dealer area and that that separate market area was the statutory comm/terr. Id. at 138.

228. Since Larry Dimmitt was decided, cases have made clear that determining the geographic boundaries of the comm/terr requires consideration of customer behavior and shopping patterns——that is, "the geographic area where consumers in that area buy the majority of their new vehicles from dealers in that area, and where the dealers in that area sell the majority of their new vehicles to consumers in that area."

South M.M., LLC, at 7, ¶ 10; Mazda Motor of America, Inc. v.

Stewart Mazda, Case No. 96-0734 (Fla. DOAH May 1, 1997; Fla.

DHSMV July 1, 1997).

229. For the reasons discussed above, the persuasive evidence shows that the Miami-Dade County market is separate and distinct from the Broward County market; accordingly, the Miami-

Dade Comm/Terr is the appropriate comm/terr in this case.

Adequacy of Representation of Infiniti Line-Make by Existing Dealers

230. Once the appropriate comm/terr has been determined, the question becomes whether existing dealers of the line-make are providing adequate representation within the comm/terr.

Section 320.642(2)(b)1. through 11. sets forth eleven non- exclusive factors pertinent to this determination. These factors are:

1. The impact of the establishment of the proposed or relocated dealer on the consumers, public interest, existing dealers, and the licensee; provided, however, that financial impact may only be considered with respect to the protesting dealer or dealers.

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 licensees in denying its existing dealer or dealers of the same line-make the opportunity for reasonable growth, market expansion, or relocation,

75 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.

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

6. 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.

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

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

9. 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.

10. 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.

11. The volume of registrations and service business transacted by the existing dealer

or dealers of the same line-make in the

relevant community or territory of the proposed dealership.

Each of these factors is separately addressed below.

Factor 1

231. Factor 1 concerns the impact that a proposed new dealership will have on consumers, the public interest, existing dealers, and the licensee. For the reasons discussed above, it is concluded that M10 will benefit consumers and will be in the public interest. Consumers will benefit from an additional, conveniently located Infiniti sales and service dealership. The addition of M10 will stimulate intrabrand and interbrand luxury vehicle competition within the Comm/Terr, also benefitting consumers. The new employment opportunities and generation of tax revenues by M10 will serve to benefit the public interest.

232. The persuasive evidence further shows that the addition of M10 is unlikely to materially negatively impact the sales or service performance of the existing Infiniti dealers in the Comm/Terr, and is not likely to have a material negative impact on South Motors' financial position. In fact, the additional customer interest generated in the Infiniti brand may benefit the existing Infiniti dealers. However, even if some sales may be lost by existing dealers, Infiniti is not required to prove the absence of any financial impact on South Motors.

See Gen. Motors Corp. v. Fountain Oldsmobile-GMC Truck, Case

Nos. 03-1319 03-1320, 03-1321, 03-1322, 03-1323 (Fla. DOAH

May 27, 2004; Fla. DHSMV July 15, 2004); Chevrolet Motor Div.,

Gen. Motors Corp. v. Fred Bondesen, Case No. 98-1559 (Fla. DOAH

Feb. 1, 1999; Fla. DHSMV Mar. 22, 1999).

233. The addition of M10 also will benefit Infiniti by improving its competitive position in the luxury vehicle market in the Miami-Dade Comm/Terr.

Factor 2

234. Factor 2 addresses the reasonably expected market penetration of the line-make motor vehicle for the community or territory. Here, the reasonably expected market penetration is the Florida Represented Standard benchmark, adjusted for segment popularity and demographic factors for the Miami-Dade Comm/Terr.

The evidence shows that in the Miami-Dade Comm/Terr, the

Infiniti line-make is performing significantly below the benchmark average for both new vehicle sales and for service, and is performing even worse within the Coral Gables PMA.

235. As discussed above, the prime reasons for this underperformance are underrepresentation by the existing dealer network, which consists of only two dealers in a large, populous urban area with a significant distance separating the dealerships, and lack of convenient access to an Infiniti dealer.

236. The persuasive evidence shows that the addition of

M10 will address both causes of Infiniti's underperformance and is anticipated to increase Infiniti's market penetration in the

Miami-Dade Comm/Terr.

Factor 3

237. Factor 3 relates to the size and permanency of the existing dealers' investments and obligations incurred to comply with their respective dealer agreements. Here, there is no dispute that the existing Infiniti dealerships in the Miami-Dade

Comm/Terr have made substantial and permanent improvements in their dealerships. The persuasive evidence shows that there will be no loss to these investments as a result of adding M10 to the Infiniti dealer network.

Factor 4

238. Factor 4 addresses actions by the licensee to deny its existing dealers of the same line-make opportunity for reasonable growth, market expansion, or relocation. Here, there is no persuasive evidence that Infiniti has taken any action to deny South Motors or Warren Henry any opportunity for reasonable growth, market expansion, or relocation.

239. To the contrary, the evidence shows that Infiniti made every reasonable effort to work with South Motors to relocate its dealership to Kendall, and then to establish a dealership in Coral Gables. Further, when South Motors was

79 performing poorly and was facing termination of its dealership agreement due to what it considered a too-large PMA that included the Coral Gables area, Infiniti reduced South Motors'

PMA by carving out the Coral Gables area. This action resulted in an immediate improvement in South Motors' sales performance, which led to recision of Infiniti's Notice of Termination for

South Motors.

240. South Motors alleges that Infiniti's provision of financial assistance to M10 will give it an unfair competitive advantage over the existing dealerships in the Comm/Terr, contrary to Superior Imports of Tampa v. Stacy David, Inc., 617

So. 2d 795 (Fla. 1st DCA 1993). At issue in Stacy David was whether financial information regarding the existence of a "site control dealership" or "special incentives" provided by the manufacturer to a proposed dealer was relevant, and therefore discoverable, in a protest of a proposed motor vehicle dealership. The court held that such information was relevant and therefore discoverable, and stated, in dictum, that if such arrangements existed, they would afford the receiving dealer an unfair competitive advantage in violation of section 320.645, which prohibits a motor vehicle manufacturer from owning or operating, directly or indirectly, a motor vehicle dealership.

The court remanded the matter to DOAH to permit discovery of financial information regarding site control dealership and

80 special incentives and to determine whether the financial arrangements violated sections 320.605 or 320.645. On remand, the ALJ found that the arrangements in that case, which involved a "site control dealership" in which the manufacturer owned and leased the dealership site to the proposed dealer, did not violate these statutes. Stacy David, Inc. v. Superior Imports of Tampa, Case No. 91-2894 (Fla. DOAH Aug. 21, 1995)(on remand).

241. Here, the evidence does not show the existence of any

"site control dealership" arrangements or any other "special incentives" that would violate any provisions of chapter 320.

First, M10 has not entered into a "site control dealership" arrangement such as that at issue in Stacy David. To the contrary, here, M10 will pay rent to completely independent third-party landlords for the sales and service intake location and for the service performance location. More to the point, the financial assistance that Infiniti is providing to M10 does not amount to "special incentives" that give M10 a competitive advantage and place South Motors and Warren Henry at a competitive disadvantage, contrary to sections 320.605 and

320.645. As discussed above, Infiniti has agreed to provide financial assistance to M10 to help offset the costs of this protest and any subsequent appeals, to help cover the cost of rent on the Bacardi Building and the service performance location pending this proceeding and appeals, and to assist

81 with the start-up cost of establishing a new dealership in Coral

Gables. This assistance is necessary due to the high real estate cost in Coral Gables.

242. In fact, when South Motors itself was considering establishing a dealership in Coral Gables, it repeatedly asked

Infiniti for financial assistance due to the high cost of securing real estate, holding it during a potential protest, and establishing a dealership in Coral Gables. Infiniti indicated its willingness to provide between $3 million and $5 million in financial assistance to South Motors——an amount consistent with what it is now providing to M10——if South Motors would sign a confidentiality agreement and provide a specific proposal so that Infiniti could gauge the amount of financial assistance that was necessary and reasonable to provide to South Motors.37/

Under these circumstances, South Motors cannot credibly assert that Infiniti's provision of approximately $4 million in financial assistance to M10 constitutes a "special incentive" that gives M10 an unfair competitive advantage, rather than only that necessary to offset the high cost associated with establishing an Infiniti dealership in Coral Gables.38/

243. South Motors also asserts that Infiniti is acting unfairly by providing South Motors only $550,000 of financial assistance to upgrade its dealership to IREDI standards, while providing M10 $1 million to renovate its dealership facilities.

As discussed above, the difference between the assistance packages is based on the cost to renovate the respective facilities. South Motors is renovating an existing dealership facility to comply with Infiniti's current image standards, while M10 is proposing to construct an entirely new dealership facility within the Bacardi Building, which has no existing infrastructure and consists of raw space on top of a dirt floor.

As such, the cost of remodeling the Bacardi Building space is substantially greater than the amount needed to renovate South

Motors' dealership facility, and will approach the cost of constructing a new dealership building.

244. In sum, the evidence shows that the financial assistance being provided to M10 by Infiniti is necessary to offset the high start-up costs for the dealership, and will not afford M10 an unfair competitive advantage in violation of any provisions in chapter 320.

Factor 5

245. Factor 5 addresses attempts by the licensee to coerce existing dealers into consenting to the additional franchise.

Here, there is no claim or evidence that Infiniti has attempted to coerce either South Motors or Warren Henry into consenting to the establishment of M10.39/

Factor 6

246. Factor 6 concerns the distance, travel time, traffic patterns, and accessibility between the existing dealers and the proposed dealer. The substantial distance and drive time between the existing Infiniti dealers in the Miami-Dade

Comm/Terr; the significant customer average drive time and distance, and consequent inconvenience, for customers to reach an Infiniti dealership in the Comm/Terr; and the very congested traffic patterns in the Comm/Terr, and particularly in Coral

Gables, all support the establishment of M10 at its proposed location in Coral Gables.

Factor 7

247. Factor 7 addresses the benefits to consumers from establishment of the proposed dealership that cannot be obtained by other geographic or demographic or expected changes in the

Comm/Terr. As discussed above, the establishment of M10 will benefit consumers in the Miami-Dade Comm/Terr by substantially increasing convenience and decreasing drive distance and drive time to access an Infiniti dealer. Also as discussed, the addition of M10 will increase interbrand and intrabrand competition, benefitting consumers.

248. There is no evidence showing that these benefits would otherwise be obtained due to geographic or demographic or other expected changes in the Comm/Terr.

Factor 8

249. Factor 8 considers whether the protesting dealer is in compliance with its dealer agreement. The evidence shows that South Motors is in compliance with its dealer agreement.

Factor 9

250. Factor 9 addresses the adequacy of intrabrand and interbrand competition with respect to the line-make in the

Comm/Terr and adequately convenient consumer care, for sales and service, for motor vehicles of the line-make. As addressed above, the evidence shows that there is insufficient intrabrand and interbrand competition for the Infiniti brand within the

Comm/Terr, and that as a result, Infiniti performs below average for both sales and service in the Comm/Terr compared to the

Florida Represented Standard benchmark average.

251. Adding M10 in Coral Gables is anticipated to stimulate competition between the Infiniti dealers in the

Comm/Terr, and also will make Infiniti more competitive with other luxury vehicle brands. Consumers in the Miami-Dade

Comm/Terr will benefit from this increased competition.

Factor 10

252. Factor 10 considers whether economic and marketing conditions in the Comm/Terr justify establishment of the new dealership. For the reasons discussed above, the evidence establishes that, based on the economic and marketing conditions

85 pertinent to Infiniti dealers in the Comm/Terr, establishment of

M10 is warranted and justified.

Factor 11

253. Factor 11 considers the volume of registrations and service business transacted by the existing dealers in the

Comm/Terr. As discussed above, the evidence establishes that the Miami-Dade Comm/Terr presents a fertile market in terms of number of competitive luxury vehicle registrations per year, with the Coral Gables area alone comprising one of the top three markets in the country. Notwithstanding, the existing Infiniti dealer network in the Comm/Terr is performing below average compared to the Florida Represented Standard benchmark average, and the Coral Gables PMA performs worst in the state. The persuasive evidence showed that this underperformance is due to underrepresentation of the Infiniti brand in the Comm/Terr, resulting in a lack of convenient access for customers to an

Infiniti dealership. As a result, Infiniti does not compete well against its other luxury vehicle brands within the Miami-

Dade Comm/Terr. Further, due to Infiniti's subpar sales performance, it also does not perform well for service within the Comm/Terr.

254. For the reasons discussed above, consideration of the volume of registrations and service business currently

86 transacted by the existing dealers in the Miami-Dade Comm/Terr supports adding M10 as an Infiniti dealer in Coral Gables.

Conclusion Regarding Inadequate Representation

255. Having weighed the statutory factors set forth in section 320.642(2)(b), and in light of the facts found herein, it is determined that Respondents Infiniti and M10 have met their burden to prove, by a preponderance of the evidence, that the existing Infiniti dealers in the Miami-Dade Comm/Terr are not adequately representing the Infiniti line-make, for both sales and service, within the Comm/Terr. The persuasive, credible evidence shows that the benefits of establishing M10 in Coral Gables outweigh any potential negative impact on the existing dealerships in the Comm/Terr.

Relocation of Warren Henry

256. As previously discussed, in 2013 Infiniti published notice of its intent to allow Warren Henry Infiniti, which currently operates an Infiniti dealership in northern Miami-Dade

County, to relocate approximately four miles to the south and east. However, the dealership has experienced difficulty in securing its proposed relocation site, and as of the final hearing in this proceeding, its relocation status was uncertain.

257. South Motors asserts that because Infiniti has proposed to allow the relocation of Warren Henry Infiniti, it cannot establish M10 until the effect of Warren Henry's

87 relocation is measured and fully quantified. In support, South

Motors cites Mitsubishi Motor Sales v. King Motor, Case No. 99-

3978 (Fla. DOAH Sept. 11, 2000; Fla. DHSMV December 13, 2000) and Roger Whitley Chevrolet. However, neither of these cases requires such a result in this proceeding.

258. In Mitsubishi Motors, several Mitsubishi dealers challenged the proposed relocation of another Mitsubishi dealer

(JSL) in Broward County. One of the protesting dealers (King) had opened for business less than two years before the proposed relocation, and another protesting dealer (Seidle) had opened for business approximately two months before the final hearing challenging the proposed relocation. When Mitsubishi proposed to allow JSL to relocate, both King and Seidle already had invested over a million dollars each in their dealership facilities, and either were under construction or in the final stages of establishing their dealerships. The ALJ observed that without sufficient actual data from vehicle sales for Seidle,

"it is impossible to determine whether the relocation [of JSL] is warranted and justified based on economic and market conditions pertinent to dealers competing in the comm/terr." Id. at 14, ¶ 50. The ALJ reasoned that "[g]iven the investments of both of [King and Seidle] . . . it is reasonable to afford them more time to demonstrate the strengths of their abilities to

88 market to the western portion of the Comm/Terr." Id. at 12-13,

¶ 43. The ALJ recommended denial of JSL's proposed relocation and the DHSMV adopted this recommendation.

259. Similarly, Roger Whitley Chevrolet involved the proposed relocation of a Chevrolet dealer (Buddy Foster) into the Tampa market. Shortly before the final hearing in that case, a dealer in the comm/terr (Bill Heard) completed its relocation to a new dealership facility, and another dealer

(Roger Whitley) was purchased by a new owner who implemented several significant changes to that dealership's business.

Under those circumstances, the ALJ found, and the DHSMV's final order held, that because of the recent changes that already had occurred in the comm/terr shortly before the hearing, no party was able to precisely quantify the impact of these changes such that any determination could be made regarding the adequacy of representation provided by the existing dealer network. Id. at 29, ¶ 64. The DHSMV held that "once a manufacturer has implemented a dealer network change in a community or territory . . . the manufacturer must wait until the effect of that change on the line-make's representation can be determined before seeking to implement a second change in the dealer network within the community or territory." Id. (emphasis added).

260. Mitsubishi Motors and Roger Whitley Chevrolet both turned on the need to evaluate the effects of changes in the dealer network that already had occurred before another dealership could be added. By contrast, those circumstances are not present in this case. As of the final hearing in this proceeding, Warren Henry had not yet secured a site for its proposed relocation, much less constructed its dealership or opened for business, and the evidence shows that the status of its relocation is uncertain. Thus, unlike the dealer network changes in Mitsubishi Motors and Roger Whitley Chevrolet that already had been implemented shortly before another dealership's relocation was proposed, here, Warren Henry's relocation has not been, and may never be, implemented. Accordingly, there are no effects of Warren Henry's relocation, the determination of which warrants or requires the denial of M10's establishment pending such determination. Mitsubishi Motors and Roger Whitley

Chevrolet cannot be read to bar the addition of M10 into a market that the evidence shows is inadequately represented based on the possible future relocation of Warren Henry, which may or may not ever occur.

261. Additionally, South Motors did not present any evidence regarding any investment that Warren Henry has made toward its relocation that may be harmed by the establishment of

M10.40/ Rather, the undisputed evidence showed that Warren Henry

90 was fully apprised of Infiniti's intention to establish a dealership in Coral Gables, chose to move forward in its effort to relocate its dealership, and chose not to protest the new dealership proposed in this case.

262. Under the circumstances in this case, neither

Mitsubishi Motors nor Roger Whitley Chevrolet support South

Motors' position that M10 cannot be approved until the effects of Warren Henry's relocation are realized, measured, and fully quantified.

Identifiable Plot Not Yet Cultivated

263. Even if Infiniti had not proved that the line-make was being inadequately represented by the existing dealer network within the Miami-Dade Comm/Terr, it nonetheless has met its burden in this case by showing that the Coral Gables area is an "identifiable plot that is not yet cultivated, which could be expected to flourish if given the attention which the others in their turns receive." See Bill Kelley II, at 52.

264. In Bill Kelley II, each existing dealer in the community or territory was adequately representing the Chevrolet brand in the area proximate to its dealership, and overall performance of the existing dealer network in the community or territory was more than satisfactory.41/ However, all parts of the community or territory were not adequately served by the existing dealer network. Although several Chevrolet dealers in

91 the community or territory enjoyed business emanating from a specific area within the community or territory where Chevrolet proposed to locate a new dealership, none of them was close enough to exploit a geographic advantage to that area, so the brand performed poorly in that area. The DHSMV found that the existing dealers, individually and collectively, were unable to adequately represent the Chevrolet brand within that specific area within the community or territory. Notwithstanding that the brand had an overall satisfactory performance in the community or territory, the DHSMV found that there was "a need for a new dealer (in the Hollywood area) if Chevrolet is to be represented adequately and not lose its percentage of the market in the community." Id. at 51. On appeal, the court affirmed the DHSMV's decision, holding that a vehicle manufacturer may meet its burden of proof under section 320.642, even where the existing dealer network is providing adequate representation of the brand in the community or territory as a whole, if the manufacturer can show the existence of an "identifiable plot not yet cultivated" that could be expected to flourish if given the attention that the other areas within the community or territory receive. Id. at 51-52. The court noted that while the purpose of section 320.642 is to protect motor vehicle dealers from manufacturers overloading the market with more dealers than justified by the legitimate interests of the manufacturer and

92 its dealers, the statute was not intended to prevent the introduction of dealer competition that is reasonably justified in terms of market potential.

265. The circumstances in this case are similar to those in Bill Kelley II. As discussed above, the persuasive evidence shows that Infiniti's line-make performance is performing below average for sales and service within the Miami-Dade Comm/Terr as a whole, and it further shows that Infiniti fares particularly poorly in the Coral Gables area, with sales performance at approximately 56 percent of benchmark average and service performance at approximately 47 percent of benchmark average.

266. The evidence shows that this is largely due to the lack of convenient customer access to an Infiniti dealer in the

Coral Gables area, with customers in this area having to negotiate congested traffic conditions to reach either South

Motors, at approximately 11 drive miles away, or Warren Henry, at approximately 17 drive miles away——trips that may take 30 to

45 minutes.

267. The undisputed evidence shows that the existing

Infiniti dealers do sell Infiniti vehicles to customers in the

Coral Gables area. However, even with those sales, the Coral

Gables PMA is still the lowest-performing in the state. As previously noted, South Motors currently captures only

93 approximately 50 percent of available sales in the Coral Gables

PMA, and Warren Henry's capture rate is even lower.

268. Additionally, the evidence shows that adding M10 in

Coral Gables will likely substantially improve Infiniti's brand performance in that area.

269. Under these circumstances, it is concluded that the

Coral Gables PMA constitutes an "identifiable plot that is not yet cultivated, which could be expected to flourish if given the attention which the others in their turns receive." Id. at 52.

See also Dave Zinn Toyota v. Dep't of Highway Safety and Motor

Vehicles, 432 So. 2d 1320, 1322-23 (Fla. 3rd DCA 1983).

270. Pursuant to this case law, the establishment of M10 in the Coral Gables PMA should be approved.

Service-Only Location Argument

271. At the final hearing, South Motors asserted that this case does not involve the establishment of a single M10 dealership under section 320.642, but instead involves the establishment of two separate and distinct dealerships——a sales and service dealership located at 2701 Le Jeune Road, Coral

Gables, and a "service-only" dealership at 4001 Ponce de Leon

Boulevard.

272. South Motors argues that because Infiniti failed to provide sufficient evidence to support Infiniti's establishment of a so-called "service-only" dealership at Ponce de Leon

Boulevard, that dealership must be denied. South Motors further argues that because the Ponce de Leon Boulevard dealership cannot be approved, and no warranty service will be performed at

M10's Le Jeune Road dealership, Infiniti cannot enter into a franchise agreement with M10, so the DHSMV must disapprove

Infiniti's request to establish M10.

273. These arguments are not supported by the plain language of the 14-2070 Notice and the 14-2069 Notice or by the competent substantial evidence presented at the final hearing.

274. As discussed above, Infiniti submitted two notices to the DHSMV for the establishment of M10, one for the facility on

Le Jeune Road and one for the facility on Ponce de Leon

Boulevard. Although these two notices were provided separately to the DHSMV, they were intended to be published, and were published, simultaneously, and obviously were intended to be read together. The 14-2069 Notice expressly states: "[t]his service location . . . will not be established independent of the sale and service facility located at 2701 Le Jeune Road, but shall be established only in conjunction with and subject to the approval of the sale and service facility located at 2701 Le

Jeune Road, which is being noticed simultaneously herewith."

This language makes abundantly clear that the Le Jeune Road and

Ponce de Leon Boulevard facilities are part of a single

95 dealership and are to be operated only in conjunction with each other.

275. South Motors apparently misreads the first sentence of the 14-2069 Notice. That sentence states in pertinent part:

"[p]ursuant to section 320.642 . . . notice is given that

Infiniti . . . intends to allow the establishment of M10 . . . as an Infiniti dealership with additional service facilities at

4001 Ponce de Leon Boulevard, Coral Gables (Miami-Dade County),

Florida 33146." 14-2069 Notice (emphasis added). This sentence does not refer to an M10 service dealership, but instead refers to additional service facilities at the Ponce de Leon location.

The use of the words "service facilities," rather than "service dealership," makes clear that the Infiniti was not establishing a separate service dealership but instead was providing notice that service facilities would be located on Ponce de Leon

Boulevard, and that these facilities would be in addition to the sales and service location on Le Jeune Road. Although service will not be physically performed onsite at the Le Jeune Road location, the facility will serve as M10's service intake location. For these reasons, the undersigned concludes that the first sentence of Notice 14-2069 cannot be reasonably read as noticing the establishment of a separate service-only dealership.

276. Further, all of the evidence that Infiniti presented at the final hearing in this de novo proceeding treated M10 as a single motor vehicle dealership having two separate physical facilities——a main sales and service intake dealership location on Le Jeune Road and a separate facility on Ponce de Leon

Boulevard where the actual servicing of vehicles would be performed. There was no evidence presented by any party that reasonably could be interpreted as indicating that Infiniti had any intention other than to establish and operate a single M10 dealership having two physical facilities that will function in conjunction with each other as a single dealership, rather than as separate dealerships.

277. To the extent South Motors attempts to rely on publication of two separate notices for M10's sales and service intake location and a separate service location as somehow binding Infiniti to a representation that it applied to establish two separate dealerships, including a separate stand- alone service-only dealership, that reliance is misplaced.42/

Given that all of the evidence presented in this de novo proceeding portrays M10 as a single dealership rather than two separate dealerships, such an argument would elevate form over substance in this proceeding.

278. Further, given the clarity of the language in the

14-2069 Notice describing the operation of M10, South Motors

97 cannot reasonably claim that it is surprised by Infiniti's position that it intends to establish a single dealership having two physically separate facilities, one for sales and service intake and the other for the actual physical performance of service.

279. For these reasons, it is concluded that section

320.642(6)(c), regarding the establishment of a service-only dealership, does not apply to this proceeding. Accordingly,

South Motors' argument regarding the denial of M10's so-called

"service-only dealership" at the Ponce de Leon Boulevard location is rejected, and it necessarily follows that South

Motors' argument regarding the denial of M10's Le Jeune Road location also is rejected.43/

Conclusion

280. Infiniti has proved, by a preponderance of the competent, substantial, and persuasive evidence, that the existing dealers in the Miami-Dade Comm/Terr are not adequately representing the Infiniti line-make within the Comm/Terr.

281. Further, even if Infiniti had not met its burden to show inadequate representation by the existing dealers in the

Comm/Terr, it has shown that the Coral Gables PMA is an

"identifiable plot" that is not being adequately represented by the existing dealers and can be expected to flourish by the establishment of an additional dealership in that location.

282. Accordingly, Infiniti has met its burden of proof under section 320.642(2)(b), and the establishment of M10 at

locations on Le Jeune Road and Ponce do Leon Boulevard should be approved.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that:

The Department of Highway Safety and Motor Vehicles enter a final order granting the application of M10 Motors, Inc., d/b/a

Infiniti of Coral Gables, Inc., as a dealer for the sale and service of Infiniti line-make vehicles, with a sales and service location at 2701 Le Jeune Road, Coral Gables, Florida 33134, and a service location at 4001 Ponce de Leon Boulevard, Coral

Gables, Florida 33146.

DONE AND ENTERED this 17th day of July, 2015, in

Tallahassee, Leon County, Florida. S

CATHY M. SELLERS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 17th day of July, 2015.

ENDNOTES

1/ All references are to the 2014 version of Florida Statutes.

2/ Infiniti is the luxury motor vehicle division of Nissan.

3/ The term "motor vehicle dealer" is also referred to as "dealer" or "dealership."

4/ As discussed in greater detail below, it is determined, based on the persuasive evidence in the record, that the Ponce de Leon service facility is not a separate dealership, but instead is an offsite service facility that will be operated in conjunction with the sales and service intake facility on Le Jeune Road.

5/ South Motors is part of a larger dealership group known as the South Motors Automotive Group that operates multiple dealerships of different motor vehicle line-makes in south Florida. All references to "South Motors" herein are to its Infiniti dealership.

6/ Infiniti defines "competitive luxury registrations" based on price-point of the vehicle; thus, it competes with Mercedes- Benz, Audi, Lexus, and other line-makes based on vehicle price—— somewhere in the range of $45,000 to $50,000. Infiniti does not compete with Ferrari, Bugatti, or other very high-priced luxury vehicle line-makes, or the very high-priced models of other line-makes such as Mercedes-Benz.

7/ Primary market area is discussed in detail later herein.

8/ Infiniti's Regional Vice President for its East Region, Jeffrey Harris, noted that "we know what Warren's history with relocations is, and sometimes they happen and sometimes they don't and sometimes they take a long time."

9/ These distances are to M10's sales and service intake location.

100

10/ A "line-make" is a group of vehicles sold under a common name, trademark, service mark, or brand. § 320.60(14), Fla. Stat.

11/ Infiniti refers to the area that would constitute M10's PMA as the "Coral Gables PMA," and South Motors refers to this area as the "Coral Gables Open Point." These terms refer to the same geographic area. In this Recommended Order, this area is referred to as the "Coral Gables PMA."

12/ The PMA for Warren Henry extends slightly north of the Miami- Dade/Broward county line, so includes a small portion of Broward County.

13/ However, Sharif Farhat persuasively testified that automobile manufacturers typically designate metro markets for convenience in market analysis, not to evaluate individual dealer performance.

14/ South Motors owns some of these parcels and leases the others.

15/ Sales effectiveness is a measure that Infiniti uses to comparatively evaluate a dealership's performance. Sales effectiveness is determined by first dividing the number of retail sales made by the dealership anywhere in the country by the total number of competitive registrations made within the dealership's PMA, which yields the dealership's sales penetration. The dealership's sales penetration is then compared to the average sales penetration of all Infiniti dealers in the southeastern U.S., to yield a percent of average sales penetration. Thus, a 100 percent sales effectiveness by a dealership is "average."

16/ An "open point" is an area identified pursuant to market study in which Infiniti is not represented and in which it has determined that the market is ready to support an additional dealership.

17/ A market study is a study in which marketing experts——here, Urban Science——gathers a range of information regarding demographics, growth trends, household income, vehicle sales patterns, travel patterns, competitive facilities, and Infiniti dealership facilities, for purposes of gauging Infiniti's

101 competiveness in a particular market. Infiniti's typical practice is to conduct market studies every three to five years to gauge and assess changes to these factors.

18/ This is because in calculating sales effectiveness, the denominator——representing total competitive luxury registrations within the PMA——decreased, while the numerator——representing South Motors' sales within the PMA——remained the same.

19/ This is the same location where M10 now proposes to locate its offsite service facility as part of its proposed dealership. Rather than purchasing the site, M10 has secured a long-term lease.

20/ Jonathan Chariff, Executive Vice President of LCA Acquisition, the company that operates South Motors, acknowledged that South Motors had requested this language be included in the confidentiality agreement to prevent introduction of evidence that South Motors itself had expressed an interest in the Coral Gables open point.

21/ South Motors previously had concluded that opening a dealership in Coral Gables was not financially feasible for itself. However, South Motors has never operated a dealership in a downtown environment, and does not possess information about Mr. Moreno's rent arrangement or specific operating plans for M10. Jonathan Chariff acknowledged that dealership profitability depends on a number of factors, including the operator and real estate arrangements.

22/ The terms "sales performance," "brand performance," and "registration performance" are used interchangeably in this Recommended Order, and refer to Infiniti's line-make performance as a brand. These terms do not refer to the sales effectiveness of the individual dealers.

23/ This figure is a "gross registration loss," which takes into account all lost sales, including sales made by competitive line-makes.

24/ M10 Motors prepared a pro forma estimating that it could make up to 2,106 sales during its first year of business. This estimate includes sales inside and outside of the Miami-Dade Comm/Terr, and assumes an opening date of 2015 or later.

102

25/ Further, this estimate was for the year 2013 and does not include reasonably expected future growth in sales opportunity in the Miami-Dade Comm/Terr.

26/ South Motors asserts that proximity is not a significant factor to customers in determining which line-make a luxury customer ultimately chooses to purchase. However, the persuasive evidence shows that convenience is a significant factor to luxury vehicle customers, both in choosing a line-make and in choosing a dealership.

27/ This business consists of new and used vehicle sales, customer pay service, warranty service, wholesale parts, and every other area.

28/ Mr. Roesner acknowledged that his proximity analysis did not evaluate the amount of sales and service opportunity available in the area closest to the dealer locations, the so-called "Dealer Areas," whether South Motors is adequately capturing that opportunity, or the amount of business available in the market. Further, South Motors' Executive Manager, Oliver Mayoral, acknowledged that simply because South Motors conducts business toward and in the Coral Gables area does not mean that it is adequately serving that area or capturing the opportunity in that area.

29/ The rationale is that unassigned areas are open for any dealers in which to make sales, but these areas typically are not actively cultivated so do not perform adequately.

30/ When measuring Infiniti's performance in the Miami-Dade Comm/Terr, the comm/terr itself must be removed from the benchmark being used. This is to avoid comparing the performance within the comm/terr to itself, which would always result in the conclusion that the comm/terr is performing at the exact level of the benchmark.

31/ When measuring the sales effectiveness of dealers in this portion of Florida, Infiniti typically uses the Atlanta Area as its geographic area of comparison. With respect to determining Infiniti's average brand performance, Farhat persuasively demonstrated that there is little difference if the Atlanta Area were used instead of the Florida Represented Standard. In other words, Infiniti's average brand performance level is very similar, whether the Florida Represented Standard or the Atlanta Area is chosen as the standard.

103

32/ This is calculated by dividing the actual penetration rate by the expected penetration rate.

33/ The Miami-Dade Comm/Terr, which consists of Miami-Dade County and a very small portion of Broward County included in the Warren Henry PMA, is the relevant geographic area in this proceeding.

34/ Each of these types of service is paid for by someone other than the consumer.

35/ The 26-mile gap between Warren Henry and South Motors is the largest in South Florida. For every other Infiniti dealership in South Florida, one or more competitors are located substantially closer to the dealership. For example, the three Broward County Infiniti dealerships are all located within 11 miles of each other, and Infiniti of Coconut Creek has two Infiniti dealerships located within 13.3 miles of its dealership.

36/ Even if Warren Henry were to eventually secure the relocation site, it anticipates it would be another two years before the dealership could relocate and become operational.

37/ As discussed above, South Motors ultimately determined that it was not able to feasibly establish a dealership in Coral Gables, so Infiniti did not provide the financial assistance for the establishment of such dealership.

38/ This cost includes the cost of this proceeding, any subsequent appeals, and the cost of holding the real estate during the pendency of these proceedings.

39/ The deposition testimony of Warren Zinn, owner of Warren Henry Infiniti, was admitted into evidence without objection. Mr. Zinn testified that Warren Henry and M10 entered into a Mutual No-Protest Agreement, under which Warren Henry agreed not to protest the establishment of M10 in consideration for M10 not protesting Warren Henry's relocation. As noted above, the Notice of Relocation for Warren Henry was published in 2013, and the time for protesting that relocation has long since expired. The relocation of Warren Henry remains speculative.

40/ Any potential financial impact to Warren Henry due to the establishment of M10 is not germane to this proceeding because Warren Henry did not challenge the establishment of M10 and is not a party to this proceeding. § 320.642(2)(b)1, Fla. Stat.

104

41/ By contrast, in this case the preponderance of the evidence establishes that the existing dealer network is not performing satisfactorily. 42/ There is nothing in section 320.642 that requires a motor vehicle dealership to have all of its physical facilities located contiguously to each other, or prohibits a dealership from having its service facility remote from its sales location. Indeed, South Motors itself has separate facilities that are not located contiguously to each other.

43/ South Motors affirmatively asserts this argument as a basis for disapproving the establishment of M10. As such, it bears the burden of showing that its position is factually and legally correct. Apart from the 14-2069 Notice and 14-2070 Notice, South Motors did not present any evidence to support its assertion that Infiniti sought to establish two separate dealerships, and it has not provided persuasive legal argument supporting this position.

COPIES FURNISHED:

Terry L. Rhodes, Executive Director Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room B-443 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 (eServed)

Steve Hurm, General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-432 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 (eServed)

Jennifer Clark, Agency Clerk Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A430 2900 Apalachee Parkway, MS 61 Tallahassee, Florida 32399 (eServed)

105

John W. Forehand, Esquire South Motors Automotive Group 16165 South Dixie Highway Miami, Florida 33157 (eServed)

Sarah B. Kirkbride Nissan North America, Inc. Infiniti Division One Nissan Way Franklin, Tennessee 37067

Bernardo F. Moreno M10 Motors, Inc. 28450 Lorain Road, North North Olmstead, Ohio 44070

Richard N. Sox, Esquire Bass Sox Mercer, P.A. 2822 Remington Green Circle Tallahassee, Florida 32308 (eServed)

J. Andrew Bertron, Esquire Nelson, Mullins, Riley, and Scarborough, LLP Suite 202 3600 Maclay Boulevard, South Tallahassee, Florida 32312 (eServed)

Christopher C. Genovese, Esquire Nelson Mullins Riley & Scarborough, LLP 1320 Main Street, 17th Floor Post Office Box 11070 Columbia, South Carolina 29211 (eServed)

Steven B. McFarland, Esquire Nelson Mullins Riley & Scarborough, LLP 1320 Main Street, 17th Floor Post Office Box 11070 Columbia, South Carolina 29211 (eServed)

106

S. Keith Hutto, Esquire Nelson, Mullins, Riley & Scarborough, LLP 1320 Main Street, 17th Floor Post Office Box 11070 Columbia, South Carolina 29211 (eServed)

Christopher M. DeVito, Esquire Morganstern, MacAdams and DeVito Company, L.P.A. 623 West Saint Clair Avenue Cleveland, Ohio 44113-1204 (eServed)

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.

107