As some of you may or may not be aware, there were several amendments to the Ohio Dealer Act that went into effect on September 14, 2016. This You Auto Know is not going to go into detail since there are several significant changes that cannot be dealt with in this short article. Therefore, I will briefly touch upon a few. In O.R.C. Section 4517.01(CC) “relevant market area,” the Ohio Legislature has again failed to state how a relevant market area is to be measured. The law states, “The ten-mile radius shall be measured from the dealer’s established place of business …” Until recently, this left some absurd methods for measuring the ten-mile radius and/or the one-mile radius as established for a relocation that is within one mile. In a very long, drawn out piece of litigation that this author was involved in, the courts have established that the measurement is to be from closest point to closest point of the related parcels of property. Therefore, manufacturers cannot argue that it should be the middle of the property, the back of the property, the door knob of the front door or any other type of gyration or measurement.
In determining whether a new franchise should be established and/or a current franchisee be relocated, the legislature has added a new and welcome addition. O.R.C. Section 4517.01(MM)(7) states that local market conditions include but are not limited to; (7) customer drive time and drive distance.” Having been involved in numerous automobile dealer relocation protests, this is a significant argument for either; (a) challenging the relocation or (b) attempting to support the establishment or relocation of a franchise. As you may or may not know, there are several factors that a manufacturer must meet in order to relocate a franchisee into an existing relevant market area as defined by the ten-mile radius from the dealership’s current place of business. One of the primary defenses was the “as the crow flies” straight line measurement. In many instances, this argument was successful if the relocation was within the relevant market area. However, in other hard fought situations, this was only one factor. Customer drive time and drive distance are significant in that the move may seem consequential as far as an “as the crow flies distance,” but the reality of drive time and drive distance may be noticeably different. For example, if a dealer wants to relocate to a distance that is within five miles of its nearest competitor but the Grand Canyon separates the two locations, then drive time and drive distance will aid the relocating dealer since common sense dictates that “as the crow flies” of five miles is significantly shorter than a drive time around the Grand Canyon. Having said that, the challenging dealer may be able to prove that a four or five-mile relocation away from the dealership is in essence closer by drive time or drive distance. For example, if the relocating dealer is moving further away, but on a freeway entrance it is conceivable that the drive time is significantly shorter due to the relocation. Therefore, it will take less time for a customer to drive between the two competing dealers to shop the deal and impact the established dealer’s area of responsibility.
There are numerous other significant changes dealing with warranty rates, ability to challenge relocation and a renovation of facilities and effects of succession planning.
It is worthwhile to review the changes to see how they will affect your business. In the near future, this author will be presenting a seminar regarding the significant changes to the Ohio Dealer Act.
Robert A. Poklar, Esq.
Weston Hurd LLP
The Tower at Erieview
1301 East 9th Street, Suite 1900
Cleveland, Ohio 44114-1862
p: 216.687.3243; f: 216.621.8369