Antitrust Law Daily Auto repair price fixing, illegal boycott claims against State Farm fail
Thursday, March 10, 2016

Auto repair price fixing, illegal boycott claims against State Farm fail

By Linda O’Brien, J.D., LL.M.

A group of Utah automobile repair shops failed to plead sufficient facts that automobile insurance companies engaged in a conspiracy to fix the prices they paid for automobile repairs for their insureds, the federal district court in Orlando, Florida, has decided. Therefore, the insurance companies’ motion to dismiss was granted (Alpine Straightening Systems v. State Farm Mutual Automobile Insurance Co., March 9, 2016, Presnell, G.).

In April, 2014, Alpine Straightening Systems, along with eight Utah vehicle repair businesses, filed suit in Utah federal district court against State Farm and 19 other insurance companies, alleging the insurers conspired to suppress the amounts that they were obligated to pay for automobile repairs, in violation of Section 1 of the Sherman Act and various state laws. The case was consolidated with 23 similar actions for pretrial purposes. The insurance companies moved for dismissal.

Price fixing. The court found that the plaintiff repair businesses presented no direct evidence that the defendant insurers entered into a price fixing agreement to suppress automobile damage repair costs through coercion. The plaintiffs alleged that the defendants’ parallel behavior of paying the same labor rates, refusing to pay for the same list of procedures, and requiring the use of lower quality parts constituted a violation of Section 1 of the Sherman Act. When the repair shops resisted these efforts, they were subject to boycotts in the form of having the defendants’ insureds steered away from their shops to compliant shops.

According to the court, evidence of conscious parallelism alone did not permit an inference of conspiracy unless the plaintiff established that each defendant engaged in the parallel action contrary to its economic self-interest and offered “plus factors” to show the defendants engaged in a collusive agreement to fix prices. Here, the plaintiffs’ argument that “underpaying” by a single defendant would result in a loss of customers to insurers that paid in full and therefore against the defendants’ economic self-interest was rejected as not plausible. Further, allegations of the possession of market power standing alone or the mere desire to make a profit did not constitute a “plus factor.” The plaintiffs’ allegations that the defendant insurers had numerous opportunities to conspire or there was a uniformity of action were conclusory and did not indicate collusion on the part of the defendants, the court noted.

Boycott. The plaintiffs also failed to allege conduct that constituted a concerted refusal to deal, the court determined. The plaintiffs alleged that the defendants attempted to coerce auto repair shops into going along with the price fixing scheme by steering their insureds away from the plaintiffs to another shop that had a relationship with the insurer. According to the court, there were no allegations that any defendant ever refused to do business with any of the plaintiffs or that the attempted steering occurred due to the repair shop seeking to obtain a higher reimbursement rate.

The case is No. 6:14-cv-06003-GAP-TBS.

Attorneys: Allison P. Fry (Eaves Law Firm) and Mark L. Shurtleff (Shurtleff Law Firm) for Alpine Straightening Systems, A.F. Collision Repair, Inc., and Perks Auto Repair, Inc. Elizabeth Helmer (Alston & Bird, LLP) and Johanna W. Clark (Carlton Fields Jorden Burt, PA) for State Farm Mutual Automobile Insurance Co. D. Matthew Moscon (Stoel Rives LLP) and David L. Yohai (Weil, Gotshal & Manges, LLP) for Mid-Century Insurance Co. Anthony C. Kaye (Ballard Spahr LLP) and Bonnie Lau (Dentons US LLP) for Allstate Fire and Casualty Insurance Co.

Companies: Alpine Straightening Systems; A.F. Collision Repair, Inc.; Perks Auto Repair, Inc.; State Farm Mutual Automobile Insurance Co.; Mid-Century Insurance Co.; Allstate Fire and Casualty Insurance Co.

MainStory: TopStory Antitrust FloridaNews

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