Antitrust Law Daily Wrap Up, ANTITRUST—MDLa: Aftermarket Auto Parts Seller Entitled to Amend Complaint Against GM over Incentive Program for Collision Parts, (Apr 19, 2013)

By Jeffrey May, J.D.

A provider of aftermarket automobile collision parts failed to sufficiently support antitrust claims challenging a General Motors price incentive program called the "Bump the Competition" program that purportedly had driven a number of aftermarket parts sellers in southern Louisiana and southern Mississippi out of business. However, the federal district court in Baton Rouge, Louisiana, granted the plaintiff leave to amend (Felder’s Collision Parts, Inc. v. General Motors Co., April 17, 2013, Brady, J.).

The plaintiff, Felder’s Collision Parts, Inc., sued General Motors, as well as original equipment manufacturer (OEM) parts sellers that serviced collision centers and body shops throughout southern Louisiana and southern Mississippi. There are two types of automobile parts: (1) OEM parts, which are produced by the manufacturer, and (2) aftermarket parts, which are produced by other entities and historically have been sold for lower prices than their OEM counterparts.

According to Felder’s, under the "Bump the Competition" program, the defending OEM parts sellers sell parts at a "bottom line price," which is 33% lower than the price for the aftermarket equivalent, and then apply to GM for a rebate. The rebate enables dealers to collect the difference between the sale price and the cost paid to GM, plus an additional profit. Additionally, GM allegedly offers cash rebate cards to sales representatives to induce sales under the program’s terms. The pricing program is available for 4,400 parts. According to the plaintiff, the pricing program has only been instituted with respect to OEM parts with a comparable aftermarket alternative.

Felder’s alleges that the program is aimed at undercutting aftermarket dealer prices in order to drive the aftermarket competition out of business. The plaintiff claimed that four of its competitors had already gone bankrupt due to the defendants’ conduct.

Felder’s asserted violations of the Robinson-Patman Act, Section 2 of the Sherman Act, and the Louisiana Unfair Trade Practices and Consumer Protection Act. For purposes of the price discrimination claim under the Robinson-Patman Act, Felder’s was required to make a showing that the defendant charged different buyers different prices for the same items. However, the complaint did not allege that GM discriminated in price as between Felder’s and a defending OEM seller or between any two distributors. It also failed to allege that that any of the defending OEM dealers charged different buyers different prices for the same item. Nevertheless, the court granted the plainitff’s request to amend its complaint.

An attempted monopolization claim based on predatory pricing also was inadequately pled. "Felder’s’ failure to specify the relevant market(s) in the Complaint is a deficiency which must be cured," according to the court. The plaintiff also needed to establish a relevant geographic market. Although a specific market share percentage was not necessary, the court instructed Felder's to provide specific allegations supporting the contention that the defendants’ market share was significant to establish market power.

While Felder’s adequately supported the proposition that the alleged predatory conduct could drive it out of the market, it was unclear whether the defendants would be able to charge supracompetitive prices for a period of time long enough to recoup profit lost as a result of the challenged program. The court noted, however, that Felder’s’ allegations with regard to recoupment were "sufficient to trigger antitrust concern at this stage of the litigation."

The court also took issue with the plaintiff’s suggestion that the appropriate measure of cost should be adjudged at the time of sale, rather than viewing the entire transaction. The defendants contended that, while price was below dealer cost at the point-of-sale price, the sales were not below-cost because dealers were made whole under the pricing program and, in fact, made a profit.

The court granted Felder's an opportunity to cure the deficiencies in its complaint. "Given the sudden and drastic difference between standard OEM prices and the prices offered under the challenged pricing program, there is reason for suspicion," the court explained.

The case is NO. 12-646-JJB.

Attorneys: James M. Garner (Sher, Garner, Cahil, Richter, Klein & Hilbert, LLC) for Felder's Collision Parts, Inc. David George Radlauer (Jones Walker LLP) for General Motors Co.

Companies: Felder's Collision Parts, Inc., General Motors Co.

Cases: Antitrust LouisianaNews