HARRISBURG - A split three-judge Commonwealth Court panel found that two York
County recreational vehicle dealerships could sell the same brand of ATVs without diluting the market, reversing a ruling by the state Board of Vehicle Manufacturers, Dealers and Salespersons that stopped one of the two dealers from adding a brand to its lineup.
The 2-1 decision published Feb. 23 allows Arctic Cat to distribute the “Prowler” and “Wildcat” model ATVs to Neiman’s Garage & Equipment, Inc., in Dover, and Kennedy RV & Powersports, located 11 miles away in Dillsburg.
The state board had originally sided with the complaint filed by Nieman, which claimed that having both dealerships carry the lines, along with a Bass Pro Shops store less than 20 miles away in Harrisburg, would cause a “ruinous price war,” and possibly push out one of the smaller dealers.
According to the court opinion authored by Judge Mary Hannah Leavitt, Arctic Cat Sales seeks to introduce the Prowler and Wildcat ATVs to the York County area. The company describes the Prowler as a utility vehicle and the Wildcat as a sports vehicle, similar to a dune buggy.
Neiman has been an authorized dealer of Arctic Cat products, including snowmobiles and ATVs, since 1983. In March 2012, Neiman and Arctic Cat Sales executed the current franchise agreement that will expire in March 2015. Kennedy is an authorized dealer of recreational vehicles, Arctic Cat snowmobiles and Kymco ATVs, but does not sell Arctic Cat ATVs of any type.
Under prior ownership, Kennedy did sell Arctic Cat ATVs, but in 2006 it surrendered its dealer franchise after Arctic Cat Sales appointed the Bass Pro Shops in Harrisburg, as a dealer.
In January 2014, Arctic Cat Sales notified Kennedy and Neiman that it intended to offer a full line of Arctic Cat products through both dealers. This meant that Neiman, which had previously refused to carry the Prowler and had not requested to sell the Wildcat, would be able to sell those ATV products. Likewise, Kennedy, which sold ATVs manufactured by Kymco, would also be able to sell the Prowler and Wildcat along with all other Arctic Cat ATVs.
Neiman objected and requested Arctic Cat reconsider its decision, contending that the relevant market area could not support two dealers. After Arctic Cat rejected the request, Neiman brought the matter to the state board, which found that given the proximity of Bass Pro Shops to both dealers, the relevant market area could not sustain both Neiman and Kennedy.
Increased competition is good for consumers and that, generally, the appointment of an additional dealer to a relevant market area will increase competition, the board found.
However, it concluded that the market area could not support two dealers of Arctic Cat products. One would fail, and Bass Pro Shops would be the beneficiary of the price war between Neiman and Kennedy, not the consuming public, according to the ruling.
In its appeal to the Commonwealth Court, Arctic Cat argues that the plaintiff's case relies on speculative statements not found in facts.
Leavitt and Judge Bonnie Brigance Leadbetter agreed that the record lacks evidence to support the board’s findings that the appointment of Kennedy would result in the financial failure of either Neiman or Kennedy, or that it was Arctic Cat Sales’ intention to force the financial failure of Neiman and Kennedy in order to set up Bass Pro Shops as the exclusive dealer of Arctic Cat products in South Central Pennsylvania.
In his dissenting opinion, Judge Robert Simpson agreed with the board's concern that Arctic Cat "was using the addition of a new competing ATV franchise as a stealth squeeze on a small, underperforming existing dealer."
He also advised following the board's suggestion of distributing the ATVs to Neiman, the existing dealer, and monitor its market performance against Bass Pro Shops. The matter could be revisited when Neiman's franchise agreement is up for renewal.