Felder's Collision Parts, Inc. v. All Star Advertising Agency, Inc.
777 F.3d 756
5th Cir.2015Background
- Felder’s Collision Parts (aftermarket parts dealer) sued All Star (GM dealer) and GM alleging GM’s “Bump the Competition” rebate program effects predatory pricing that harms aftermarket competition.
- Bump the Competition required dealers to sell certain GM OEM collision parts at a bottom-line price 33% below prevailing aftermarket prices; GM then paid dealers a rebate that covered the dealer’s loss and added a 14% profit on the part’s list price.
- Example in the complaint: dealer buys part from GM for $135.01, sells under program for $119.93, then receives a rebate that turns the sale profitable for the dealer.
- District court dismissed federal Sherman Act predatory-pricing claims for failure to plead sales below average variable cost and inadequate market definition; state claims fell with the federal claims.
- Central legal factual question: whether the dealer-level rebate from GM should be counted in assessing whether All Star’s sale price was below average variable cost (the Forrest/Brooke Group cost test).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether dealer rebate should be included in below-cost analysis | Felder’s: price for predatory-pricing comparison is the market sale price at point of sale (exclude rebate) | Defendants: rebate is part of the transaction and reduces dealer’s net cost (include rebate) | Include rebate; analyze transaction as a whole — rebate reduces dealer cost and shows dealer makes a profit, so not below average variable cost |
| Appropriate cost measure for predatory-pricing claims | Felder’s relied on price vs. dealer’s unit cost at time of sale | Defendants relied on average variable cost as the correct surrogate for marginal cost | Court confirms Fifth Circuit uses average variable cost as the proper measure in predatory-pricing claims |
| Whether pleadings sufficiently allege below-cost pricing | Felder’s alleged dealer sells below its unit cost at time of sale (without rebate) | Defendants argued complaint fails because rebate makes net transaction profitable and no allegation GM sold below cost | Court agrees complaint fails to plead below-average-variable-cost pricing when rebate is considered; dismissal affirmed |
| Whether low prices here could be predatory given absence of recoupment allegation | Felder’s claimed program aims to drive aftermarket rivals out and enable recoupment | Defendants contended program lowers prices for consumers and there is no plausible recoupment theory or allegation GM sold below cost | Court focused on cost prong and found no below-cost pricing—thus no predation; affirmed dismissal (also noting skepticism of predatory-pricing claims without strong proof) |
Key Cases Cited
- Brown Shoe Co. v. United States, 370 U.S. 294 (1962) (antitrust law protects competition, not competitors)
- Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) (two-part test for predatory pricing: below-cost pricing and dangerous probability of recoupment)
- Stearns Airport Equip. Co. v. FMC Corp., 170 F.3d 518 (5th Cir. 1999) (Fifth Circuit uses average variable cost as the appropriate measure for predatory-pricing claims)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) (Courts should be wary of predatory-pricing claims that chill procompetitive price cuts)