FIAT Chrysler (FCA), who have been in the news quite a lot recently, has recently settled an anti-trust lawsuit that was filed in January 2016. The lawsuit consisted of several parts: racketeering, anti-trust and breach of contract.
Initially the racketeering charges were dismissed in October 2016 and then dismissed again in July 2017 when they were rewritten and recharged. These charges have been amended yet again and are still open, so the Justice Department is clearly out to get the company.
The original charges were brought by a group of dealers who claimed that FCA asked competing dealers to provide false sales figures and then gave those dealers better pricing such that the sales increased and then tried to prove that the sales were actually better. The group of unhappy dealers have complained about price fixing and that FCA broke franchise laws and dealer protection statutes in several US States.
The company was accused of providing a cash incentive if dealers counted in unsold stock to the sold stock for example, a car used for demo purposes. Then on the first day of the following month, the figures were adjusted back to start a new cycle. There was a claim made in the documents that a dealer manager was offered $20,000 to add in an extra 40 cars sold and the payment was classified as a marketing program.
Once the first of the racketeering charges had been dismissed, FCA recounted the previous five years of sales and updated the figures, saying that the original methodology had been in place for decades and ensured that sales weren’t double counted. The revised figures were lower than the recorded figures so something was amiss with the methodology!
FCA has settled with the Justice Department for a $14.75M payoff. The dealers who started the legal action have still to decide what they are going to do – clearly the money went to the Government, not them. They are still smarting that their competitors got better pricing.
In doing the sales figure revision and showing a reduced number of unit sales, FCA gave the lawyers something to bite into and subsequently several new lawsuits were filed relating to securities fraud. The legal attack was based on the fact that FCA’s new numbers stopped a year-on-year sales improvement that had been ongoing for three years. Subsequently the share price dropped and the investors were unhappy. These lawsuits are still ongoing and it will be interesting to see what happens with them.
Now, here at Motoring Weekly, we’re not experts in the ins ’n’ outs of the dealer relationship with a manufacturer, however having experience in other industries and the relationships with business partners, it is clear that some dealers would be more equal than others! We’re also sure that some dealers who have a relatively profitable relationship would be encouraged in many ways to keep the sales of higher profit vehicles moving whereas if a dealer is struggling to sell cars then they wouldn’t get the benefits of the relationship.
One then has to wonder about the businesses that are complaining – were their sales so low that they couldn’t get the perks that others did? If that was the case, then the legal attack was probably not the best way to improve the relationship with FCA! Perhaps the dealers should look at some of the new entrants to the US market because they won’t be benefitting from FCA in the future. A Chinese manufacturer might be keen to give them more margin to kick start their own sales figures.