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Addressing Anti-Trust

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Bringing up anti-trust to collision repairers is like bringing up Thanksgiving to a turkey. It ruffles their feathers.

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For the most part, however, this fear of anti-trust is the result of ignorance. “The Sherman Act prevents us from discussing compensation,” says one repairer. “It’s construed as price fixing. But insurers can discuss amongst themselves how they intend to compensate us. Not exactly fair, but it’s the law.”

Actually, it’s not the law. But ignorance fuels the fear surrounding anti-trust – a fear that’s compounded by the warnings given at meetings and classes – and by insurers. Says one repairer: “Vindictive insurers have been known to bring baseless anti-trust charges against shop owners to keep them in line.”

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It makes sense, then, that associations and organizations prefer to err on the side of caution. “But it’s beyond caution,” says one re-pairer. “We have a right to free speech. Anti-trust laws weren’t intended to be a muzzle.”

So repairers can legally discuss pricing and labor rates? YES. But since I don’t expect you to take my word for it, I spoke with James Castleman, a partner in a Massachusetts law firm who’s worked with and represented the repair industry for more than 25 years.

Q: Does the Sherman Act prevent repairers from discussing compensation?

A: “No. The Sherman Act does not prevent shops from discussing compensation; it only prevents them from taking concerted actions as a result of those discussions,” says Castleman. “And it’s a widely held misconception that insurers can freely discuss among themselves how they intend to compensate shops. … Insurers cannot agree specifically how much they’re going to pay for repairs or what operations they’re going to pay for.”

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Q: Is it illegal for shops to discuss prices?

A: “It is not per se illegal for shops to discuss prices. And the reality is that everybody does discuss prices to some degree. On one hand, body shops are supposed to be competitors in the marketplace; on the other hand, it may be difficult to set competitive prices unless you know what your competitors are charging. In fact, shops can legally discuss almost any aspect of the business, including prices, as long as no two shops agree that goods and services should be sold at a particular price and as long as each shop makes its own independent decisions.

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“The problem in addressing the legality of price discussions is that a resulting agreement between shops doesn’t have to be explicit to be prohibited. If a group of shops discusses prices and on the heels of that discussion, several of them start charging the same amount, an illegal agreement can be inferred, even in the absence of a formal arrangement. …”

Q: So if a shop owner discovers at an association meeting that he’s not charging what’s “reasonable and customary” for his area, he can’t raise his prices without risking an allegation of price fixing?

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A: “There’s no black-and-white test to determine when the line is crossed. It’s a question of fact: Did Joe raise his rate to X because of an agreement with a competitor to do so, or did he raise it to X as the result of his own independent business decision?

“… From the shop’s perspective, there is no such thing as a ‘reasonable and customary’ rate; the shop’s rate is what it determines it needs to be to make what it considers a reasonable profit, based upon what it perceives the market will bear. Insurers can issue policies … that will reimburse their insureds only for what each insurer determines to be the ‘reasonable and customary’ body shop rate, but that’s between the insurer and its insured. The shop the insured brings his car to can still charge whatever it wants as a rate and can contract with the insured for repairs at that rate (unless the shop has a referral contract with the insurer). …”

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Q: If a shop performs a local labor rate survey and based on the results, raises its prices, can an illegal agreement be inferred?

A: “There is nothing per se illegal about this situation. Again, it is a question of fact: Would a jury infer that the survey was a sham utilized to encourage shops to get in line with each other, or did the shop owner make an independent business decision to raise his rate? … To the best of my knowledge, none of the people who have conducted or published [labor rate] surveys have been charged with anti-trust violations.”

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As complicated as the anti-trust issue is, it’s actually a small part of an even bigger issue: control.

“These guys need to know what’s going on in their markets and have to turn their guns on the low-life operators and hacks,” says one repairer. “Because insurers work to the lowest common denominator, the hacks and outlaws determine prevailing rates.

“What’s even more important than knowing you can discuss rates or times is taking control of the marketplace.”

Georgina K. Carson, Editor
[email protected]

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