Judge blocks parts seller's suit challenging GM pricing plan

UPDATED: 8/7/13 9:08 am ET - adds correction

Editor's note: An earlier version of this story, which also appeared on Page 31 of the June 3 issue, mischaracterized a judge's decision in a lawsuit against General Motors. A federal judge in Louisiana found an aftermarket parts retailer's lawsuit deficient, but gave the plaintiff permission to amend its complaint, which its attorney says it will do.

A federal judge in Louisiana has blocked, at least for now, an aftermarket parts retailer's lawsuit challenging a General Motors program to boost sales of original-equipment parts at dealerships.

U.S. District Judge James Brady gave the plaintiff, Felder's Collision Parts Inc., permission to amend its complaint against GM and a Baton Rouge dealership group. The company's attorney said it will do so.

Felder's Collision had alleged that GM and original-equipment parts distributors such as All Star Automotive Group engaged in illegal "predatory pricing" practices to undercut aftermarket prices and drive aftermarket competitors out of business. The suit alleged violations of federal and state antitrust and state consumer protection regulations.

It is believed to be the first such U.S. suit against any automaker, lawyers for All Star and Felder's said.

All Star has a parts distribution center that services its three Chevrolet stores, according to dealer lawyer Michael McKay of Baton Rouge.

The case centers on GM's Bump the Competition program launched in 2009. It let parts distributors such as All Star sell OEM parts at what the suit alleges were "bottom line prices" one-third below their aftermarket equivalents, then seek rebates from GM.

Felder's claims the incentive program hurt aftermarket parts sales in its operating territory, cutting into profits and forcing four competitors into bankruptcy.

In his decision, Brady said, "Felder's contends that once the competition has been 'bumped,' the defendants will reap monopoly profits by ceasing to offer reduced prices on parts that currently have aftermarket alternatives and will be able to maintain these supracompetitive prices because 'high and difficult' barriers to entry in the automobile parts industry will prevent new entrants from effectively competing."

In a joint court filing, GM and All Star said the incentive program lowers resale prices "to be more cost-competitive" with non-OEM parts.

Brady ruled that the suit, as filed, is deficient in many ways. Felder's must show that there is "a dangerous probability" that GM and All Star will recoup profits that were lost on below-cost parts sales, and that they "engaged in the alleged predatory practice with the specific intent to gain monopoly power," he said.

Felder's will file its revised complaint and start pretrial discovery if the case is determined to have merit, said plaintiff's lawyer Peter Hilbert Jr. of New Orleans.

McKay, the dealer lawyer, said, "Obviously we don't think the case has merit and will defend it strongly."

A GM spokeswoman said she could not discuss pending litigation.

You can reach Eric Freedman at freedma5@msu.edu

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