Antitrust Law Daily Wrap Up, ANTITRUST—M.D. Fla.: State Farm dodges price fixing, illegal boycott suit by auto repair shop, (Mar 25, 2016)

By Michael Menzhuber, J.D., LL.M.

A Louisiana automobile repair shop failed to sufficiently allege that State Farm Mutual Automobile Insurance Company conspired with other automobile insurance companies to engage in price fixing, with respect to repair costs of its insureds’ vehicles, according to the federal district court in Orlando, Florida (Southern Collision & Restoration Company v. State Farm Mutual Automobile Insurance Company, March 24, 2016, Presnell, G.)

Southern Collision & Restoration, LLC (SCR), a Louisiana automobile repair shop, filed an action against State Farm and various other insurance companies that alleged that they entered into a price fixing arrangement to control and suppress automobile repair costs. Specifically, SCR alleged that: (1) the defendants paid automobile repair shops essentially the same rates and these rates are based on market surveys performed and “manipulated” by State Farm; and (2) the insurers boycotted repair shops by steering the insured away from certain shops to “compliant” shops.

Price Fixing. SCR relied on allegations of “parallel behavior” to demonstrate that the insurers engaged in a price fixing arrangement through coercion and intimidation. Because the court found that the actions taken by the defendants did not constitute price fixing under Section 1 of the Sherman Act, it determined that SCR was required to demonstrate that the insurers took steps that: were against their economic self-interest or tended to show collusion.

SCR argued that the defendants’ alleged actions were against their economic self-interest because the defendants’ refusal to fully and properly repair vehicles could result in their going out of business. The court disagreed because: (1) SCR did not allege that it had systematically failed to fully and properly repair vehicles that were insured by one of the defendants; (2) the refusal to pay for top-quality parts and materials was simply rational profit-maximizing behavior; and (3) the potential loss of customers was merely speculation.

The court disregarded SCR’s assertions that the defendants’ “market power” and “motive” for profit making were “plus” factors for purposes of showing collusion because SCR did not explain how they constituted “plus” factors. Similarly, SCR’s assertion that the defendants were invested in a company that held a majority interest in a collision repair shop which, in turn, owned certain collision centers, did not make it more likely that the defendants conspired to enter into a price fixing arrangement. Finally, the defendants’ participation in trade associations and similar organizations did not provide any indication of conspiracy.

Boycott. The court also dismissed SCR’s claim that the defendants attempted to coerce auto repair shops into going along with their price fixing scheme because there were no allegations that any defendant ever refused to do business with any of the shops. Although SCR alleged that State Farm steered one of its insured from SCR’s shop to a shop on State Farm’s “preferred provider” plan, this was insufficient to state a boycott claim. Furthermore, there were no allegations that the steering occurred because SCR was attempting to obtain a higher reimbursement rate, or anything of that nature, from State Farm.

The case is No: 6:14-cv-06005-GAP-TBS.

Attorneys: Allison P. Fry (Eaves Law Firm) and Stephen M. Huber (Huber, Slack, Thomas & Marcelle, LLP) for Southern Collision & Restoration, LLC. Hal Kemp Litchford (Baker, Donelson, Bearman, Caldwell & Berkowitz, PC) and Johanna W. Clark (Carlton Fields Jorden Burt, PA) for State Farm Mutual Automobile Insurance Co., State Farm Fire & Casualty Co., and State Farm General Insurance Co. Dan W. Goldfine (Lewis Roca Rothgerber Christie LLP) for GEICO Casualty Co., GEICO General Insurance Co. and GEICO Indemnity Insurance Co.

Companies: Southern Collision & Restoration, LLC; State Farm Mutual Automobile Insurance Co.; State Farm Fire & Casualty Co.; State Farm General Insurance Co.; GEICO Casualty Co.; GEICO General Insurance Co.; GEICO Indemnity Insurance Co.

Cases: Antitrust FloridaNews