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Saturday, 31 August 2002 17:00

Lawsuit against paint companies and jobbers filed

Five major paint manufacturers and seven paint jobbers are named in a class action lawsuit for price-fixing in violation of State antitrust laws filed on August 15 in Los Angeles Superior Court. The action alleges that the paint companies and jobbers engaged in "horizontal price fixing and minimum resale price maintenance." The lawsuit covers the period from 1993 to the present and asks for class action status on behalf of 7,000 California body shops. It alleges that defendants "conspired to fix, raise, maintain or stabilize prices for automotive refinishing paint." The defendants include paint manufacturers PPG, DuPont, Sherwin-Williams and Akzo Nobel, together with jobbers D'ANgelo & Sons, Tri-City Paint Corporation, Finishmaster, Inc., Auto Color Specialists, Inc., National Oak Distributors, Inc., and Hayward Color, Inc. 

The named plaintiffs, represented by attorney Maxwell M. Blecher of the law firm Blecher & Collins in Los Angeles, include small to medium size shops throughout the state: Bessen Auto Body in Los Angeles; Superior Automotive in San Francisco; Hart & Sun Body Repair in Oakland; Manuel's Auto Body in Bakersfield; Sharp Auto Body in Garden Grove; and Bryant Auto Body in San Francisco.
 
"A key difference between this action and the others filed in Federal Court on the East Coast is that, under California law, you don't have to purchase the paint directly from the manufacturer in order to have standing (be able to sue)," explained Herman Franck of San Francisco who helped organize the plaintiffs. "Shops can join this lawsuit even if they purchase their paint from a jobber, as most of them do," said Franck.

Franck, 65, has been an industry gadfly and thorn in the side of the paint and supplies companies for many years. He's been a jobber on and off for 40 years. He was a 3M distributor in Palo Alto until that company dropped him (he says for discounting) in 1966. In the early '90's he was selling DuPont paints to body shops in the Bay area at a discount. He was not a DuPont authorized distributor and the company in 1994 took steps to shut him down, threatening to revoke the distributorship of any authorized jobber who sold paint to him in violation of their jobber agreement. He claims that he sued several paint manufacturers for unfair business practices and won substantial but confidential settlements.

Justice Department investigation

The class action lawsuit alleges that in January 2001 the U.S. Department of Justice commenced an investigation into price fixing in the auto refinishing paint industry, particularly into alleged meetings in Europe where DuPont, Sherwin-Williams, PPG, BASF and Akzo Nobel were said to have discussed fixing the wholesale price of paints to be sold in the United States.

It goes on to allege that the paint companies starting in 1993 entered into a conspiracy with their jobbers to set the resale price of paint sold to body shops in California by setting a minimum resale price; that the same paint was sold to entities other than body shops at a lower price known as the "C" schedule price; that this was intended to keep the price of auto refinishing paint artificially high.

The lawsuit estimates that the Defendants currently sell $300 million worth of auto refinishing paint in California. The suit alleges that body shops in California have paid in excess of $50 million in artificially higher prices. The suit asks for treble (3x) damages available under antitrust laws.

After news of the suit appeared in the New York Times and the Wall Street Journal, several paint manufacturers were quoted in the Journal. DuPont spokesman Cliff Webb said his company is cooperating with the Justice Department probe on the East Coast and that they are evaluating the specifics of the California action.

PPG spokesman Jeff Worden said PPG had not yet reviewed the California complaint but that since the series of lawsuits began "PPG has uncovered no facts that would support a claim that any PPG personnel were involved in any such (price fixing) activity." Spokesmen for Sherwin-Williams and Akzo Nobel have previously denied all claims of wrong-doing in similar actions filed in other states.

 

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