If not overturned, State Farm trial outcome likely to reduce competition and increase prices. Consumers will be forced to pay more for crash repairs.
Washington, DC: Unless overturned, yesterday’s verdict in a class action lawsuit against State Farm will help to protect car company monopolies on crash repair parts and further increase crash repair costs for consumers. Even before the verdict, car companies had a monopoly because they supply about 80% of the auto body repair parts needed after an accident. “This is why a simple 5 mph bump into a pole can cost consumers hundreds, even thousands, of dollars in repairs—the parts needed to fix our cars are just too expensive,” said Jack Gillis, Executive Director of the non-profit Certified Automotive Parts Association. CAPA’s goal is to offer consumers a high quality, fairly priced alternative to expensive car company parts. As an independent, third party, certification organization, CAPA sets standards and certifies the quality of parts made by companies that offer alternatives to car company parts.
“Hopefully, this verdict will not dissuade insurance companies from continuing their efforts to establish competition and eliminate the car company parts monopoly,” said Gillis. Not only has the limited competition currently in the market (only 3% of the parts used in crash repairs are certified by CAPA) had a very positive impact on part prices, but it has also improved the quality of all parts. Today, thanks to competition, the car companies and their competition are offering much better warranties, better corrosion protection and better parts. “That simply wouldn’t have happened if there were no competition,” said Gillis.
Consumers today benefit tremendously from the availability of competitive “mechanical” parts (batteries, wiper blades, mufflers, brake pads, etc.). This competition has brought about such high quality names as DieHard, Midas, and NAPA. Consumers know, and appreciate, that buying a battery from Sears or Wal-Mart can be far less expensive than from a Ford or General Motors dealer. To the extent that some car dealers are now more competitive in their pricing, that is due to the existence of competition – the bedrock of the American marketplace.
If not overturned, this verdict will have a chilling effect on competition in the crash parts market and prevent consumers from enjoying the benefits of quality and price competition. “We simply won’t be able to buy crash parts from anyone but Ford, GM, and the other car companies—who will be able to charge as much as they want,” said Gillis.
If this verdict is upheld, consumers will likely be forced to pay more for crash repairs on the 14 million plus accidents we have every year AND more for insurance to cover the cost of those repairs. Since this verdict paves the way for car companies to dramatically increase their prices and profits, it is hardly a victory for the consumer.
The Certified Automotive Parts Association is an independent, non-profit, third party standard setting and certification program whose goal is to insure the availability of a high quality, fairly priced alternative to car company parts in the market. CAPA’s Board of Directors includes consumer, repair shop, part distributor and insurance members. A significant, though not a majority, of CAPA’s annual operating expenses are donated by members of the insurance industry. CAPA is modeled after Underwriters Laboratory, which is now independent, but founded by the insurance industry in the early 1900’s.
Contact: Jack Gillis