Antitrust Law Daily Wrap Up, ANTITRUST NEWS: GM’s “Bump the Competition” program challenged in High Court, (Apr 30, 2015)

By Greg Hammond, J.D.

An auto collision parts dealer has asked the Supreme Court to review a decision by the U.S. Court of Appeals in New Orleans, affirming the dismissal of claims that General Motors LLC’s “Bump the Competition” program constituted unlawful predatory pricing. The dealer suggests that rebates dealers received under the program should not be considered when calculating average variable cost (Felder’s Collision Parts, Inc. v. All Star Advertising Agency, Inc., Dkt. 14-1299).

Felder’s Collision Parts, Inc.—a dealer of aftermarket auto collision parts that are compatible with General Motors vehicles—filed suit against competitor All Star Advertising Agency, Inc. and GM, alleging that GM’s “Bump the Competition” program is unlawful predatory pricing, in violation of the Sherman Act and Louisiana antitrust law. GM’s program lowers the prices consumers pay for GM-manufactured parts below the prices of equivalent “generic” auto parts manufactured by other companies. The program also provides rebates to dealers, such as All Star, that sell GM-manufactured parts at the reduced prices. The rebates allow dealers to make a profit on the sales, despite the lower price charged to consumers.

The federal district court in Baton Rouge dismissed the predatory pricing claims, finding that the rebate dealers received should be accounted for when calculating average variable cost and concluding that Felder’s failed to adequately define the relevant geographic market and failed to sufficiently allege below-cost pricing. The U.S. Court of Appeals in New Orleans’s agreed with the district court that the rebate should be considered in the predatory pricing analysis, finding that rebates definitely affected the bottom line in whether the GM dealer obtained a profit and whether it sold the collision parts at below cost.

In its petition, Felder’s asks whether, for purposes of a predatory pricing claim under the Sherman Act, cost should be measured at the time of the point-of-sale to the end-consumer, which is when the anticompetitive harm occurs, or whether the predatory competitor is entitled to factor in after-sale kickbacks from a conspiring supplier to show that the sale was not made below its cost.

Felder’s asserts that the Fifth Circuit’s decision conflicts with the consumer-focused analysis of other courts of appeals and that the issue of when “cost” should be captured in a predatory pricing claim has not been, but should be, settled by the Supreme Court. Specifically, Felder’s argues that in cases where the key question is harm to competition, instead of harm to competitors, and the harm to competition is the coercive effect of predatory pricing practices on a consumer’s decision, then consideration of economic activity outside the zone of consumer participation is in conflict with settled principles of antitrust law. Moreover, Felder’s suggests that the Fifth Circuit’s open-ended “economic activity” calculation is a “step away” from the Supreme Court’s directive to maintain “the practical ability of a judicial tribunal to control without courting intolerable risks of chilling legitimate price-cutting.”

Instead, Felder’s suggests that the Court should grant its petition and hold that the appropriate boundary is at the point where a consumer’s participation in a transaction comes to an end. “If, at that point, the predatory competitor’s costs are below the price paid by the consumer, then that prong of a predatory pricing claim is satisfied,” Felder’s asserts.

Attorneys: James M. Garner (Sher Garner Cahill Richter Klein & Hilbert, L.L.C.) and Harvey S. Bartlett III (Jones, Swanson, Huddell & Garrison, L.L.C.) for Felder’s Collision Parts, Inc.

Companies: Felder’s Collision Parts, Inc.; All Star Advertising Agency, Inc.; All Star Chevrolet North, L.L.C.; All Star Chevrolet, Inc.; General Motors LLC

News: Antitrust FranchisingDistribution