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Letter to the Editor

ChoiceParts versus General Motors, DaimlerChrysler, and Ford Motor Company: The Case in Brief According to ChoiceParts

The following has been released by ChoiceParts:

ChoiceParts, LLC, on January 4, 2001, filed a federal antitrust lawsuit against General Motors, Ford, and DaimlerChrysler asserting multiple violations of the Sherman Antitrust Act. Among other relief, ChoiceParts is requesting the federal district court in Chicago to enjoin the defendants' concerted anticompetitive efforts aimed at blocking ChoiceParts from providing its customized electronic automotive parts locator/transaction system to automobile retailers and repair shops nationwide. At its core, this lawsuit is about the right to compete.

As further alleged in the court filing, GM, Ford and DaimlerChrysler have jointly recognized the breakthrough that the ChoiceParts e-commerce product offers their dealerships and repair facilities in the multi-billion dollar area of parts transactions. In fact, GM, Ford and DaimlerChrysler attempted to jointly purchase ChoiceParts in late 2000 to secure ChoiceParts' patent-pending technology for use in a joint venture the "Big Three" announced in December, which was established to directly compete with ChoiceParts. Throughout 2000, and continuing this year, the defendants have acted to prevent ChoiceParts from bringing its own developed product to market - initially to hundreds of the defendants' own retailers who are literally waiting to install ChoiceParts in their dealerships. Most importantly, the defendants collectively denied access to critical data that they customarily make available about the parts utilized in their respective vehicles. For decades, this data has been available in the automotive industry to those businesses that support the needs of car dealers, as ChoiceParts is poised to do right now. ChoiceParts has made multiple attempts - over many months - to amicably resolve these issues on standard commercial terms, but the defendants will not cease in their collective refusal to deal with ChoiceParts.

Prior to formation of their own competing venture, these defendants applauded the opportunity that ChoiceParts would offer their automotive retailers. However, the defendants then all coincidentally decided to form their own venture in the same market space. The object of their preventive tactics, thus, is easily identified: To block any competition in the developing advanced parts procurement market. Not only would these actions allow the defendants to impose higher prices for advanced parts procurement systems, it would also thwart further innovation in advanced parts procurement, including the opportunity for repair shops and consumers to secure parts not necessarily designated as the "preferred" parts of the Big Three. Additionally, and quite importantly, the immediate effect of GM, Ford and DaimlerChrysler's behavior here will be to force auto retailers and collision shops to wait a significant period (likely the better part of a year, if not longer) to receive a product that ChoiceParts has commercially available right now.

ChoiceParts' position is clear: the opportunity to compete should not be denied merely because GM, Ford and Chrysler have decided as a group to enter a similar business. Filing this lawsuit was the penultimate step for ChoiceParts - the last would have been to merely cede the marketplace to GM, Ford and DaimlerChrysler's new venture. The management of ChoiceParts has an obligation not to permit harm to three important constituencies: Customers, Investors, and Employees. The existing customer installed base at ChoiceParts is 8,000 strong, comprised largely of retailers of GM, Ford and DaimlerChrysler vehicles. Building on commercially successful products, which drive value for our customers, ChoiceParts is then able to provide returns to our investors and great opportunities for our employees. ChoiceParts remains exceedingly optimistic about the opportunities in this market, its products, and its employees' obsessive desire to deliver great customer-focused solutions. In that spirit, we will vigorously pursue our rights in the court action and the marketplace.

Additional Background:

• From the business perspective, this unwillingness to share information contradicts years of industry practice and will severely undermine the efforts of dealers to market their inventories.
• From a legal perspective, businesses may not conspire to prevent competition as these defendants have done, especially when that conspiracy is focused on depriving a competitor of an "essential facility" (here, information GM, Ford and DaimlerChrysler uniquely control about their identification numbering, auto wholesale parts prices, etc.).

Following is a statement regarding ChoiceParts federal antitrust lawsuit against General Motors, DaimlerChrysler and the Ford Motor Company by Chan W. Galbato, ChoiceParts CEO

"ChoiceParts has filed a federal antitrust lawsuit against General Motors, DaimlerChrysler and Ford asserting multiple violations of the Sherman Antitrust Act. We are simply asserting our right to compete in a fair and free marketplace.

We are pursuing the right to utilize data about parts pricing and identification numbering that has been historically and consistently provided to other companies servicing the needs of car dealers. We have a great business model and are ready to deliver our product to customers. We have over 250 dealers signed up for our product and are eager to provide the data and the technology to connect dealers and distributors quickly.

At its core, this lawsuit is about the right to freely compete. The existing customer installed base at ChoiceParts is 8,000 strong, comprised largely of retailers of GM, Ford and DaimlerChrysler vehicles. We already have over 250 customers - automotive dealers - that are waiting for our latest product, and with equal access to industry data, ChoiceParts can help them and repair shops do business quickly and more efficiently."

Publisher's note: INSIGHT will be checking out the court filing in more detail. It will be interesting to see where this leads. Obviously this lawsuit is a reaction to the decision by the Big Three to go with the Bell and Howell program.

One may wonder now if it would be logical for the estimating system providers to cross-license Bell and Howell, allowing Bell and Howell to enter the estimating systems marketplace. Time will tell how this will all play out.

Obviously the CIC Gold Pin Planning Session is an inappropriate forum for the discussion of these issues, but it will be interesting to see how this unfolds. We look forward to seeing data encryption and licensing on the agenda for the upcoming CIC General Meeting in April.

The lengthy legal filing by ChoiceParts (25 pages) sets out points that could have significant impact on how proprietary rights and licensing agreements are perceived. The portrayal of the Big Three/Bell and Howell arrangement as a secret project Code Name "Marmaduke" conjures up big friendly dog images - hardly the usual cloak-and-dagger protagonist.

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