NEW YORK — A coalition of 160 auto parts retailers and warehouse distributors, known as The Coalition for a Level Playing Field, have filed an antitrust suit in federal court in New York against AutoZone, Advance Auto, Wal-Mart, Sam’s Club and 13 auto parts manufacturers, including Dana, Ford Motor Co, Standard Motor Products and CARDONE Industries.
As stated in a press release issued yesterday, the Coaltion is claiming that the manufacturers are selling auto parts and accessories to AutoZone, Advance Auto, Wal-Mart and Sam’s Club at substantially lower per-unit prices than charged to the plaintiff warehouse distributors, and that the prices to the favored purchasers are lower than the manufacturers’ direct costs, a violation of the Robinson-Patman Act as well as the Sherman Antitrust Act.
The plaintiffs, being represented by attorney Carl Person, claim that the defendant auto parts manufacturers have failed to comply with the requirements of the Sarbanes-Oxley corporate governance statute, which became effective in September, 2003, by failing to report in their SEC filings that they are selling below cost to their largest customers, and by not having in place any system to disclose the existence of such below-cost sales practices. The plaintiffs claim that they are unable to compete because of the price discrimination, and will be driven out of business.
The retailer plaintiffs are suing the manufacturers for failing to provide advertising and promotional programs comparable to the programs they provide to the retailer defendants, as well as for injunctive relief requiring the manufacturers to create and use a price list instead of negotiating different terms with the major-retailer defendants.
The warehouse distributors are suing the competing retailer defendants for price discrimination, and for similar injunctive relief.
According to the press release, the plaintiffs are also suing AutoZone and various manufacturers to enjoin sales being made to AutoZone on a “pay on scan” or “POS” basis, under which AutoZone received a refund from the participating manufacturer for inventory previously bought by AutoZone (and not resold), and only pays the manufacturer for inventory as it is sold to AutoZone’s customers, within 90 days after the AutoZone sale is made (and “scanned”).
The plaintiffs allege POS enables AutoZone to stock slow-moving parts without any investment, whereas plaintiffs are required by the same manufacturers to pay for such parts within 30 days, or be cut off from further purchases. POS will force the plaintiffs out of business, according to allegations in the complaint.
Also, the plaintiffs are suing Wal-Mart and Sam’s Club for imposing costs of development of Radio Frequency Identification (RFID) technology and chips upon the defendant auto-parts manufacturers without the manufacturers offering any programs to plaintiffs for development of RFID capabilities.
The plaintiffs allege that Wal-Mart has imposed costs of an estimated $50 billion on the 21,000 suppliers to Wal-Mart (an average cost of $2,380,952 per supplier), which amounts to an unlawful rebate or reduction of the price at which Wal-Mart is purchasing its goods from such suppliers.
The plaintiffs allege that Wal-Mart, Sam’s Club, AutoZone and Advance Auto are purchasing monopolists (actually, “monopsonists”) with the power to dictate the price at which they buy auto parts, and that they are exercising such monopsony power to coerce lower prices when purchasing their inventory requirements, in violation of Section 2 of the Sherman Antitrust Act.
The Coalition also pointed out that while auto parts manufacturer Federal-Mogul, was not included in the suit because it is under the protection of the Bankruptcy Court, they plan to sue Federal-Mogul when it emerges from bankruptcy in January 2005, if its discriminatory pricing practices have not changed.
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