Rare Decision: California Judge Says Not Enough Dealers

In a rare decision upholding the need for more dealers in a metro market, the California New Motor Vehicle Board and one of its administrative law judges have turned down a complaint by a Subaru dealer against Subaru of America's choice of a location for a replacement store for a closed Subaru point in the San Francisco Peninsula market.

Carlsen Subaru disputed the plan to replace Ron Price Subaru, of South San Francisco, with a facility in nearby Burlingame. Price sold his facility to the city of San Francisco in early 2008 for approximately $6 million.

The administrative law judge, to whom the Vehicle Board referred the matter for a hearing, heard extensive testimony on the demographics and dealer financials of the market south of San Francisco and implications for service to Subaru owners if the number of Subaru dealers in the Peninsula cities were too close together or one was terminated. Price also had operated a service-only facility in the city of San Francisco.

The California franchise law requires same-make dealers to be at least 10 miles from one another. Carlsen Subaru's contention was that the new facility replacing the Price store would be under the 10-mile limit, but the judge, Jerold A. Prod, ruled that “as one starts from the vicinity of the now closed Price store and looks north to San Francisco itself, availability and practicability of a facility decrease rapidly toward a vanishing point, with cost as a major factor.”

Legal battles on dealership locations are few and far between, say legal experts.

“The establishment of a new Subaru dealership in Burlingame would increase competition and therefore be in the public interest,” says the judge.