A sharply split Federal Trade Commission ruled yesterday that General Motors Corp. has not violated antitrust laws by favoring its own dealers over independent auto-repair shops in distributing crash parts, such as fenders, doors, bumpers and hoods.
Although the commission acknowledged that GM's refusal to sell crash parts directly to independent body shops placed these outlets at a competitive disadvantage, the agency voted 2-to-1 to dismiss a six-year-old staff complaint against GM.
Overturning a decision by an agency administrative law judge who ruled against GM, Commissioners Patricia P. Bailey and David A. Clanton said that GM's policy of selling crash parts exclusively to its dealers had enough "business justification" to offset any competitive harm suffered by the independent body shops.
The commissioners said that ordering an end to this discriminatory distribution system would place unjustifiable costs on GM because the auto company would be faced with a "significant administrative burden" in trying to deal with the nation's 50,000 independent auto shops.
Commissioner Michael Pertschuk dissented, noting that independent repair shops pay at least $37 million more than GM dealers for crash parts as a result of the distribution system.
"We should be wary of justifying a monopolist's refusal to deal with a class of customers where competition is harmed substantially on the grounds that there are transactional costs in dealing with additional customers," Pertschuk added.
Not voting was FTC Chairman James C. Miller III, who had excused himself from the case because he formerly had been an economic consultant to GM.
At issue was GM's distribution scheme in which crash parts are sold only to GM dealers. If an independent body shop needs a GM fender or other parts commonly damaged in accidents, the owner must go to a GM dealer who resells the parts for an average 17.7 percent mark-up. In return for handling these sales, GM will give the dealers a 30 percent rebate on each part sold.
"Although we find injury to independent body shops caused by the effects of General Motors' selective distribution system for crash parts, we cannot say that that system causes any enduring weakness to the independent body shops as a class of competitors or that GM's choice of distribution system is arbitrary or without business justification," Bailey wrote for the commission.
Even though many independent firms have failed because of GM's policies, many more have entered the repair trade, resulting in a net growth in the industry, she added.
"If the system were opened, GM would undoubtedly face a significant administrative burden in checking the creditworthiness of and attempting to collect payments from a potentially vast number of new customers. Other costs could be expected, chiefly those associated with handling more and smaller orders," the decision said.
GM immediately hailed the decision, saying it vindicated the company's long-held position that the distribution scheme was legal.
Independent dealers denounced the ruling, saying it ultimately will increase the price of collision repairs.