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A recent decision from the Supreme Court of Georgia in the case captioned WMW Inc. v. American Honda Motor Company, Inc. (291 GA 683, 733 S.E. 2d. 269), addressed the standing of an existing Honda automobile dealership to challenge the addition of a new Honda dealership within the existing dealership’s relevant market area.
Similar to many jurisdictions, in order to protect existing dealerships from unfair competition, Georgia has enacted an anti-encroachment law that prohibits the addition of a new dealership within an existing dealership’s “Relevant Market Area.” Section 10-1-664 of the Georgia Franchise Practices Act (the “Act”) provides in relevant part:
The Act defines “relevant market area” as the area located within an eight-mile radius of an existing dealership. The Act defines “dealership” as the “dealer,” and defines the “dealer” as either:
Since 1976, WMW Inc. (WMW) has operated a new Honda dealership in Roswell, Georgia under a franchise agreement with Honda (the “Franchise Agreement”). WMW sells and services vehicles in the Roswell location, but also operates a service only location in Alpharetta, Georgia pursuant to an amendment to the Franchise Agreement. In 2010, Honda notified WMW of its intention to authorize a new Honda dealership in Cumming, Georgia, which would be more than eight miles from WMW’s sales and service Roswell location, but less than eight miles from the service-only location in Alpharetta. WMW sued under the anti-encroachment provision of the Act, which authorizes an existing dealership to file suit to prevent its franchisor from establishing a new or relocated dealership within the existing dealership’s relevant market area. (OCGA Section 10-1-664(b)). The trail court concluded that WMW lacked standing under the Act and dismissed the case. WMW appealed, and the Court of appeals affirmed. The Supreme Court of Georgia granted certiorari.
In reviewing the facts of the case, the Court found that because WMW both sells and repairs Honda vehicles pursuant to its franchise agreement, it does not qualify as an exclusively-repair dealer. Instead, the Court found that WMW is a car-selling dealer, that is, it qualifies as a dealer and dealership under the Act only because it engages in the business of selling new motor vehicles. The Court reasoned that as a “car-selling” dealer, WMW’s relevant market area is read most naturally to mean the eight-mile radius around the location or locations where it performs the only activity that qualifies it as a “dealer” and/or “dealership” under the Act, that is, where it sells new vehicles pursuant to its franchise agreement with Honda.
In conclusion, the Court held that WMW is a dealer and dealership covered by the Act solely because it sells new cars, and it is undisputed that WMW does not sell cars at its Alpharetta service-only location. Accordingly, WMW’s protected relevant market area is the eight-mile radius around its Roswell new car sales location, which does not include the proposed new Honda dealership. Because the new dealership is outside WMW’s relevant market area, WMW lacks standing under Section 10-1-664 of the Act to sue to prohibit the new dealership.