On Jan. 27, 2015, the 5th U.S. Circuit Court of Appeals affirmed the dismissal of a lawsuit brought by an auto parts retailer, Felder's Collision Parts, against General Motors and its distributor, All Star, alleging that GM attempted to monopolize the market for collision parts through an unlawful predatory pricing scheme. Felder's Collision Parts, Inc. v. All Star Adver. Agency, Inc. et al., Case No. 14-30410, 2015 U.S. App. LEXIS 1253 (5th Cir. Jan. 27, 2015).
The lawsuit challenged GM's "Bump the Competition" program. Under the program, GM provided rebates to dealers like All Star that sold GM-manufactured parts at a consumer price 33 percent below the prevailing price of equivalent generic parts. This retail price was also below the price All Star and other dealers paid GM for the part. However, the rebates allowed the participating dealers to ultimately make a 14 percent profit on the sale, despite initially selling the part at below cost.
At issue on appeal was whether the rebate needed to be included when considering All Star's pricing. Affirming the district court, the 5th Circuit held that the answer was yes: the rebate was appropriately viewed as a reduction in the price All Star paid to GM for the part. The court rejected Felder's "freeze frame" approach, which focused on the price and cost only on the day of the sale, as "ignoring economic realities." Because below-cost pricing is a necessary element of a predatory pricing claim, treating the transaction as indivisible doomed Felder's case―in fact, Felder's had conceded at oral argument that if GM charged a lower price up front, it would have no claim.
The court also noted an "unusual feature" of the case: that under the predatory pricing theory pursued by Felder's, it was unclear which defendant was accused of attempted monopolization. Although the only allegations of market share related to GM's 80 percent share of the market for certain replacement parts, the lawsuit challenged only the prices charged by All Star and other dealers; it did not allege that GM was selling to the dealers at below the cost incurred for manufacturing. As a result, even though the challenged program was created by GM, the only potentially viable predatory pricing claim was against All Star.
The 5th Circuit's decision is available here.
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