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Automaker representative says ‘unscrupulous insurers’ spur manufacturing of low-cost ‘copycat parts,’ while consumer advocates tout bill’s support of marketplace competition.
The U.S. House of Representatives Committee on the Judiciary held a hearing on “Design Patents and Auto Replacement Parts” March 22. The hearing focused on Rep. Zoe Lofgren’s (D-Calif.) Access to Repair Parts Act, H.R. 3059.
Witnesses at the hearing included:
Jack Gillis, director of Public Affairs, Consumer Federation of America (CFA), Washington, D.C.
Damian Porcari, director, Enforcement and Licensing, Ford Global Technologies, LLC, Dearborn, Mich.
Robert C. Passmore, senior director, Personal Lines, Property Casualty Insurers Association of America, Des Plaines, Ill.
Perry J. Saidman, principal, Saidman Design Law Group, Silver Spring, Md.
Lofgren opened the hearing by stating the purpose for her bill to prevent price gouging combined with auto manufacturers not needing a monopoly over crash parts to spur innovation but also recognized that “intellectual property rights exist to create incentives for innovation that’s why it’s in our constitution…these government-created exclusive rights are crucial to the legal framework that promotes innovation in our country.”
Ford’s Porcari testified against H.R. 3059, stating: “Copycat parts hurt Ford, our employees, our suppliers, our dealers and our customers. Ford customers rarely know that they are getting copycat parts because their use is frequently concealed.”
Porcari added that the bill could lead to a slippery slope of more design patent exceptions in the future.
“The bill’s proponents present no basis for treating visible repair parts differently than other items protected by intellectual property,” he said. “The copyists want to eliminate design patent protection because that’s what they make. As soon as their business model includes engines, brakes and air bags, we will likely hear the call for the elimination of patent protection on all types of replacement parts. And it won’t stop with cars. The denial of intellectual property rights will always reduce copiers’ costs.”
Porcari also accused insurers of basing insurance premiums on OEM parts pricing but pushing repairers to install cheaper, non-OEM parts to save money.
“Some background about the insurance industry will illuminate what’s really spurring foreign parts copiers and unscrupulous insurance companies. Ford provides insurance companies with its genuine Ford replacement part pricing for every new Ford vehicle. Insurance companies use genuine Ford replacement part prices to set their insurance rates,” he said. “After state regulators approve these rates, insurance companies then refuse to pay for genuine Ford parts and steer body shops to use cheap, copycat parts…This entire discussion about consumer choice and right to repair is merely a distraction from the basic unethical business practice of pricing insurance premiums and using genuine Ford parts and then giving consumers cheap foreign parts.”
Gillis, who is also the executive director of the Certified Automotive Parts Association (CAPA), testified in support of Lofgren’s bill.
“For over 25 years, consumers have benefited from competition, albeit limited, between car company brand replacement parts and independently branded parts,” Gillis said. “Such competition, where it exists, lowers prices, provides choices and improves quality.”
Gillis’ reasons for supporting H.R. 3059 include:
Elimination of competition will increase the cost of repairs.
Eliminating competition will increase insurance premiums for consumers.
Eliminating competition in crash parts could diminish safety.
Eliminating competition will result in more total losses.
Eliminating competition protects the automakers’ “double whammy,” which Gillis described as meaning “not only will the lack of competition allow car companies to charge whatever they want for the parts we need to fix our cars, but when they charge so much that the car is totaled, our only recourse is to go back to them and buy another one of their products.”
Congress can preserve consumer access to affordable, competitive and quality crash parts by adopting a “repair clause” in the design patent law.
The Automotive Service Association (ASA) says it opposes H.R. 3059 because it makes no assurances for the quality and safety of non-OEM parts. ASA, along with other associations, sent a letter opposing Lofgren’s bill in 2009. ASA has also provided a draft letter for repairers to send to their representatives opposing H.R. 3059.
BodyShop Business tracks how collision industry leaders, parts manufacturers and legislators react to questions raised about the safety of structural aftermarket crash parts.