Automation Alley’s First Annual Technology Industry Report: Driving Southeat Michigan Forward
Patrick L. Anderson, Ian K. Clemens
AEG conducts market research to determine the best location for Covisint.
Market and Good Cause Analysis
Mercedes-Benz Dealership – Chicago Area
The attorneys for a franchised dealer of Mercedes-Benz USA operating in the Greater Chicago Area retained Anderson Economic Group after Mercedes-Benz USA appointed a new dealer within the “Area of Influence” of their client. Anderson Economic Group was tasked with evaluating the effects of the new dealer on the current dealer’s operations, and analyzing the market before and after the introduction of another dealership.
We completed an expert report that began with an evaluation of the fundamental rationale of the franchise relationship and the responsibilities of both parties. The report continued with a detailed analysis of sales data, the pattern of sales as distance from the retail outlet increases, the geographic and demographic characteristics of the changed market areas, the concentration of Mercedes-Benz dealers in other cities, and the likely effect of the new dealer on the sales of the existing dealer.
The analysis concluded that there was not “good cause” under the Illinois Statute for the appointment of a new dealer in the area. Our report rebutted contrary reports submitted by USAI and Price Waterhouse Coopers, and also commented on a report submitted by RL Polk.
After submission of the report, Patrick Anderson was deposed on its contents. Mercedes-Benz later settled the case by allowing the Plaintiff to sell the dealership to a new owner that would be given a chance to relocate, and also allowing the Plaintiff to open a new dealership in a more favorable market.
Market and Franchise Law Analysis
Michigan Honda Dealerships
The attorneys representing three franchised dealers of American Honda in Michigan retained Anderson Economic Group after American Honda appointed a new dealer within the primary market areas of their clients. Anderson Economic Group was tasked with evaluating the effects of the new dealer on the existing dealer’s sales, service, and other revenues, as well as the impact on profitability and market value.
We completed an expert report that began with an evaluation of the fundamental rationale of the franchise relationship, and the responsibilities of both parties. The report continued with a detailed analysis of sales data, the pattern of sales as distance from the retail outlet increases, the geographic and demographic characteristics of the changed market areas, and the likely effect of the new dealer on the sales of the existing dealer. We then completed a valuation and damages estimate that translated the lost sales into tangible figures for the court. Patrick Anderson and Victor Wrotslavsky were deposed on the contents of the report.
Our client was a large auto group that operates franchises that include Mercedes-Benz, Porsche, Lincoln-Mercury, Mazda, Honda, Ford, Chrysler, Dodge, and Jeep in markets around the country.
Our client was awarded a desirable luxury vehicle franchise in one of the largest metropolitan areas in the United States. The manufacturer provided our client with a market report that suggested sites away from the growing population and high income areas. The group retained Anderson Economic Group to conduct a thorough site-selection analysis, including a site visit, analysis of prospective sites, demographic trending, past auto sales analysis, and projected sales for select locations.
Our analysis was conducted in three stages, each adding additional information and revising the list of potential candidates. Sites were screened based upon geography, road network, population, household income levels, projected growth in income-qualified households, luxury vehicle registrations in the nearby area, and the location of competitive dealerships and their statutory protest zones.
Basing our findings on the location of income-qualified buyers, we recommended a final cut of two prospective sites. One was selected on the basis of factors including income growth, population growth, historical sales of luxury vehicles, and the impact of competitor locations.
Our client was one of the United States leading engineering and manufacturing companies, specialized in water and wastewater treatment and industrial processes, defense electronics and services, electronic components such as connectors and switches, and a wide range of other industrial products.
When our client sold a subsidiary that provided components to automotive manufacturers, the State of Michigan charged the firm with a very large Single Business Tax (“SBT”) liability. The SBT is a value-added tax (VAT), unique within the United States, though common in Europe and Canada. For a suit filed against the State of Michigan, we prepared a report and affidavit which described how the application of the tax in this manner would violate the Commerce Clause of the United States Constitution. For the report, we:
-Reviewed value-added taxation in general
-Reviewed Michigan’s SBT in particular
-Reviewed the past interstate commerce cases relating to taxation and state actions violating interstate commerce
-Summarized the structure of the auto industry
-Analyzed how the application of the Michigan SBT in this matter infringed interstate commerce, was contrary to the purpose of the SBT, and resulted in perverse tax treatment of this company and, potentially, many others.
Before the report was presented in court, the State made an acceptable settlement with our client, based partially on the record established by our report.
Ilhan K. Geckil
Article in NABE by Ilhan Geckil on CAFÉ.
The report quantifies the size of the industry in terms of employment, establishments, and payroll. It also assesses areas of the technology industry that signal future advances, such as R&D spending and patent awards, and takes a closer look at the defense and homeland secutiry technology industry