Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Ariz. App.: Yamaha loses appeal to establish new dealership in Scottsdale, (Jul 8, 2014)

By Greg Hammond, J.D.

Yamaha Motor Corporation, U.S.A. was unable to overturn an Arizona state superior court decision, affirming the denial of its request to establish a new dealership in North Scottsdale. In upholding the lower court’s decision, the Arizona Court of Appeals determined that the Administrative Law Judge (ALJ) correctly applied relevant statutory factors and substantial evidence supported the conclusion that Yamaha failed to establish good cause for the proposed dealership (Yamaha Motor Corporation, U.S.A. v. Arizona Department of Transportation, July 3, 2014, Downie, M).

Background. After two Yamaha franchisees, YSA Motorsports, LLC and Apache Motorcycles Inc., received notice of Yamaha’s intent to establish a new dealership in North Scottsdale, YSA objected and requested a hearing through the Executive Hearing Office. The ALJ found that Yamaha did not establish good cause for the proposed new dealership and consequently denied the franchisor’s request to open the facility, which would be located approximately 8.6 miles from YSA’s site. The superior court affirmed, and Yamaha timely appealed.

Good cause. According to the appellate court, state law dictates that Yamaha may not create "an additional new motor vehicle dealership in a community in which the same line-make is then represented, unless there is good cause for the additional new motor vehicle dealership under the franchise and unless it is in the public interest." On appeal, Yamaha mainly challenged the ALJ’s interpretation and analysis of the economic impact the proposed dealership would have on existing franchisees of the same line-make.

The ALJ found that, based on the evidence presented by both parties, it was more likely that an additional competitor would reduce sales at existing dealers and negatively impact them. The ALJ further found that: (1) Yamaha’s under-performance was not attributable to YSA and Apache, but could be attributable to the company’s failure to offer competitive incentive programs and to allocate popular vehicles to the market; (2) YSA and Apache have made significant investments in the Yamaha brand and rely heavily on sales of Yamaha products; (3) YSA and Apache provide sufficient facilities and customer service in the Phoenix area; and (4) increasing competition among the local dealers will likely result in loss of sales, causing a negative effect on the retail motor business that is not in the public’s best interest. In examining the record, the court concluded that the ALJ’s conclusions were supported by substantial evidence and therefore affirmed the superior court’s judgment.

The case number is 1 CA-CV- 13-0242.

Attorneys: Michael T. Liburdi and Mark A. Molique (Snell & Wilmer L.L.P.), and Maurice Sanchez and Kevin M. Colton (Baker & Hostetler L.L.P.) for Yamaha Motor Corp., U.S.A. Chad L. Schexnayder and Hillary P. Gagnon (Jennings Haug & Cunningham L.L.P.) for YSA Motorsports, LLC.

Companies: Yamaha motor Corp., U.S.A.; YSA Motorsports, LLC; Apache Motorcycles Inc.

Cases: FranchisingDistribution ArizonaNews