By Alysha Webb, Editor and Publisher
In August, Nissan Motor Corp. exercised its Right of First Refusal to grant the right to acquire San Leandro Nissan to Autocom de Mexico. That brought to four the number of San Francisco Bay Area Nissan stores owned by Autocom, a large dealership group based in Mexico.
There are similar groups of same-owner Nissan stores in the United States. It is part of what industry participants say is a deliberate strategy by Nissan to form clusters of stores under the same owner. Though not illegal, it has been challenged.
“Right now it isn’t a big case because the market is hot,” an attorney who represents dealerships told Automotive Buy Sell Report. “At the end of the day, if the market cools off and nobody wants to buy your Nissan dealership because they don’t want to mess with the manufacturer, that is a problem.”
Some claim the practice is anti-competitive. In at least one case, the court said that it is not, however. In October, Nissan exercised Right of First Refusal to award a Philadelphia-area store to Joseph Bush, Jr., who owned several other Nissan stores in the area.
The thwarted buyer, Thomas McMenamin, sued Nissan to block the sale, claiming the move amounted to a price-fixing strategy. A Pennsylvania federal court refused to block the sale.
Having a single owner for multiple stores in an area can be anti-competitive if all the stores are run in the same way, John Frith, vice president at dealership consultancy Urban Science, told Automotive Buy Sell Report. “The consumer doesn’t have any choices,” he said.
But if the general managers are given freedom to pursue their own sales strategy that is not a problem, said Frith.
Nissan, for its part, told Automotive Buy Sell Report: “When presented with a potential franchise sale, we evaluate the sale on a case-by-case basis to determine what is best for Nissan and for our customers. We do not comment on this decision-making process.”
There are other areas where a single owner operates a cluster of Nissan stores. For example, the Ed Martin Group owns three Nissan store in an area in Indiana, in Indianapolis, Fishers, and Anderson. It acquired the Fishers store in November from the Butler Auto Group. It is about 20 miles from the Indianapolis store to the Fisher store, and about another 20 miles to the Anderson store.
Disagreements ahead?
Whether or not dealers feel the strategy is anti-competitive, it is not unique to Nissan, a buy sell attorney told Automotive Buy Sell Report.
“We are seeing where Nissan is trying to deal with some favored people,” he said. “A lot of manufacturers have done that from time to time.”
Other automakers have faced problems with similar strategies. “The danger of having every store in the market [under the same ownership] is that at some point the OEM and the owner will not agree,” said Frith.
For example, Saturn’s policy was to award all the dealerships in a marketing area to one owner, said Frith. The dealer was required to add new stores as demand grew in that marketing area. That didn’t work, however.
“The two sides couldn’t agree on the timing of when market could support more stores,” said Frith. “As volume grew and Saturn wanted the dealer to add dealerships, the dealer said no.”
