NEWARK, N.J. - Mercedes-Benz USA Inc. and its 27 New York City-area dealers have been accused of conspiring to fix prices in a lawsuit filed in U.S. District Court here.
Prices were, 'fixed, raised, maintained or stabilized at prices higher than such prices would have been, in the absence of such conduct,' according to the complaint brought by six Mercedes customers.
The defendants are Mercedes-Benz USA, based in Montvale, N.J.; Sheft Kahn & Co., an accounting firm based in Jericho, N.Y.; and all 27 dealerships in the Mercedes New York region, which includes metropolitan New York, New Jersey and Connecticut.
The lawsuit was filed in September 1999, but only came to light last week because of a bid by plaintiffs to win class-action status. Plaintiffs, who have not specified damages, seek to widen the lawsuit to include anyone who bought or leased a Mercedes in the New York region between February 1992 and August 1999.
No trial date set
Defendants have asked Judge Alfred Wolin to dismiss the lawsuit, Mercedes spokeswoman Donna Boland said last week. 'It's ridiculous to suggest that Mercedes-Benz would engage in, or encourage anything illegal,' she said.
The judge has not set a hearing on that motion, nor a trial date.
The plaintiffs claim the lack of price competition among Mercedes dealers forces customers to pay inflated prices.
Mercedes officials gave dealers 'explicit directives to refrain from competing on price and threats to punish dealers who did not comply,' the complaint alleges.
With the knowledge and encouragement of Mercedes, it claims, dealers regularly disclosed transaction prices and other confidential financial data to the accounting firm and met with the accounting firm to discuss the results.
'At these meetings, the dealers were lectured about the importance of not competing against each other on the basis of price, and any dealer whose monthly reports indicated lower pricing and gross profit levels than the others was singled out and berated,' the complaint alleges.
Coast Automotive Group Ltd., a former Mercedes dealership in Toms River, N.J., and its owner, Tamim Shansab, raised similar allegations of price-fixing in a 1998 lawsuit, in an unsuccessful fight against being terminated.
Coast Automotive renewed its allegations in a lawsuit in U.S. District Court. That lawsuit is ongoing. The ex-dealership also asked to be included in an upcoming hearing in the customer lawsuit.
Regardless of the complaint, Mercedes has made no secret of its desire to get transaction prices as close as possible to sticker prices, and to get Mercedes dealers to compete with other makes, instead of each other.
Less wiggle room
In part to enforce the no-discount policy, Mercedes cut dealer discounts as of the 2000 model year, so dealers would have less room to negotiate. The company also has encouraged a few dealers in overcrowded markets to buy out adjoining dealerships. The approach seems to be working.
John Beyer, an economist and president of consulting firm Nathan Associates of Arlington, Va., said in a report submitted as part of the lawsuit that he studied transaction prices and gross profits for E-class and M-class models in the New York region.
The report found that dealers were in an increasingly narrow range. According to the report, for instance, gross profits on the M class ranged from about 11.5 percent of transaction price to about 15 percent in 1997. In 1998, that shrank to about 11.5 percent to 13 percent; in 1999, to a range of about 7 percent to 9.5 percent.
Transaction prices also were in a narrow range.