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Felder's Collision Parts, Inc. v. All Star Adver. Agency, Inc.

United States Court of Appeals, Fifth Circuit

January 27, 2015

FELDER'S COLLISION PARTS, INCORPORATED, Plaintiff - Appellant
v.
ALL STAR ADVERTISING AGENCY, INCORPORATED; ALL STAR CHEVROLET NORTH, L.L.C.; ALL STAR CHEVROLET, INCORPORATED; GENERAL MOTORS, L.L.C., Defendants - Appellees

Appeal from the United States District Court for the Middle District of Louisiana.

Before KING, JOLLY, and COSTA, Circuit Judges.

OPINION

Page 757

GREGG COSTA, Circuit Judge:

It would not be an antitrust opinion without the line that the antitrust laws were designed for " the protection of competition, not competitors." Brown Shoe Co. v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962). Though often included by rote, the axiom is particularly apt in this case.

The competitors are Felder's Collision Parts, Inc., a Louisiana dealer of aftermarket auto body parts that are compatible with General Motors vehicles but not manufactured by GM, and All Star, a dealer of GM-manufactured parts. Felder's filed this antitrust suit against All Star and GM alleging that GM's " Bump the Competition" program is an unlawful predatory pricing scheme. The program lowers the consumer price for GM-manufactured parts below the prices of equivalent " generic" auto parts manufactured by others. It does so by providing rebates to dealers like All Star that sell GM-manufactured parts for the reduced prices. The rebates ensure that the dealers still make a profit on these sales despite the lower price charged consumers.

The primary issue in this appeal from a dismissal of the antitrust claims is whether we consider the effect of this rebate in deciding whether Felder's can meet one of the essential elements of a predatory pricing claim: that the defendant is selling its product at a price below average variable cost. See Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 224, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993); Stearns Airport Equip. Co., Inc. v. FMC Corp., 170 F.3d 518, 532 (5th Cir. 1999).

I.

There are two types of automobile parts.[1] Original equipment manufacturer (OEM) parts are produced by the same manufacturer that created the vehicle, in this case GM, or by a submanufacturer;

Page 758

these parts are considered " name brand." Aftermarket equivalent parts are non-name brand and are produced by a supplier other than the vehicle manufacturer. OEM parts and their aftermarket equivalents are interchangeable. But not all parts have an aftermarket counterpart; for certain parts, the only option is to purchase an OEM part. For the collision parts that are the subject of this case, OEM parts make up about 80% of the market. As is typical for generic products, aftermarket equivalents historically have enjoyed a significant price advantage over their brand-name counterparts. Prior to the pricing program at issue in this case, OEM collision parts were often priced 25% to 50% higher than aftermarket equivalents.

Motivated by the cost-conscious insurance companies that are the primary purchasers of auto body parts, GM instituted a program in 2009 to eliminate its historic price disadvantage and offer " highly competitive pricing" with aftermarket equivalents. The program, transparently named " Bump the Competition," is available only for GM parts that have an aftermarket equivalent; prices remain the same for parts with no aftermarket equivalents. A " GM Collision Conquest Calculator" determines prices. The calculator provides a dealer of OEM parts with the " bottom line price" at which they should sell the part. This price is 33% less than the prevailing market price for an aftermarket equivalent. That " bottom line price" is also below GM's list price--the price All Star and other dealers pay GM for the part on the front end. But after a dealer sells a highly discounted part under the program, it is entitled to a rebate from GM. The rebate compensates the dealer for the difference between the sale price and the price it paid GM for the part. On top of making up for that loss, GM also pays the dealer a 14% profit based on the part's original price.

An example from the complaint illustrates how the program works.[2] Prior to Bump the Competition, a dealer would have purchased a part from GM for $135.01. It would have then sold the part to a customer--usually a collision center or body shop--for $228.83, which is more than 30% above the $179 price for an aftermarket equivalent part.

Under Bump the Competition, a dealer like All Star would still pay an initial purchase price of $135.01 from GM. It would then sell the part for $119.93, 33% less than the market price for an aftermarket equivalent ($179 * .67). This sale price would also be about $15 less than the $135.01 the dealer had initially paid GM for the part. By submitting the rebate, however, the dealer would get back this $15 " ...


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