Saying there's no evidence a "ruinous price war" will result, a divided Commonwealth Court panel has agreed to let the competition flow freely between two midstate dealers that both want to sell Arctic Cat all-terrain vehicles.
There's no proof, either, that allowing Kennedy RV & Powersports Inc. of Dillsburg and Neiman's Garage & Equipment Inc. of Dover to sell Arctic Cat's ATVs is part of a plot by Arctic Cat to put those dealers out of business to benefit one of its larger area ATV dealers, the Bass Pro Shops store in Harrisburg, a majority of the state judges found.
The state court decision overturned a ruling by the state Board of Vehicle Manufacturers, Dealers and Salespersons that had blocked Arctic Cat's plan to add Kennedy to its roster of ATV dealers.
Acting on a protest filed by Neiman's, which has sold Arctic Cat ATV's for more than 30 years, the dealer board concluded the Dillsburg-Dover area was too small a market to support two dealers selling identical ATV lines. And the board said it could not rule out the possibility that Arctic Cat was following a strategy that would leave Bass Pro Shops as its only surviving ATV dealer in the area.
Commonwealth Court took on the case when Minnesota-based Arctic Cat petitioned for a review of the dealer board's ruling. The state Dealer Act allows Pennsylvania authorities to weigh in on disputes, including unfair competition claims, regarding the placement of vehicle sales dealerships.
State Judges Bonnie Brigance Leadbetter and Mary Hannah Leavitt sided with Arctic Cat in reversing the dealer board ruling, while Judge Robert Simpson said he would have let the board's decision stand.
In the court's majority opinion issued this week, Leavitt noted that Arctic Cat notified Kennedy and Nieman's in January 2014 that it intended to offer its full ATV line through both dealers. Neiman's has been selling Arctic Cat products, including ATVs, since 1983, but Kennedy had relinquished its dealer franchise after Bass Pro Shops became an Arctic Cat ATV dealer in 2006. Kennedy does sell another ATV brand. Neiman's franchise agreement with Arctic Cat is up for renewal next month, the judge noted.
Neiman objected to Arctic Cat's plan, and when Arctic Cat refused to reconsider, Nieman filed the original protest that drew the dealer board, and ultimately Commonwealth Court, into the fray. The dealer board's and the court's role in such disputes is to determine whether proposals to add or relocate vehicle dealerships are in the interest of the public.
The dealer board found that adding Kennedy to the local ATV sales scenario would prompt sales competition that could result in the demise of either or both the Neiman's or Kennedy businesses, especially since Bass Pro Shops in on their doorstep. Neiman's and Kennedy are less than 10 miles apart, the board noted.
"The board concluded that the Dover-Dillsburg market area could not support two dealers of Arctic Car products," Leavitt wrote. "One would fail, and Bass Pro Shops would be the beneficiary of the price war between Neiman and Kennedy, not the consuming public."
Yet Leavitt found the board's prediction that destructive competition would result isn't supported by the evidence. And the conspiracy theory regarding Arctic Cat and Bass Pro Shops "is not even logical" and "is not even a plausible business strategy," she wrote.
In a dissenting opinion, Judge Simpson said he shared the dealer 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."