General Motors on Tuesday announced it would institute an “Electronic Minimum Resale Price” on “certain products” at the beginning of 2020.
The OEM said more information would be coming Nov. 1. It said only a “limited number of parts” would be affected.
“GM is deeply focused on brand protection and this policy is intended to safeguard the reputation of our GM Genuine Parts and ACDelco parts customers and sellers,” General Motors customer care and aftersales general manager Mark Drennan said in a statement. “The policy is set to ensure confidence in our products and services.”
GM customer care and aftersales spokeswoman Christine Kunde confirmed that the policy would apply both to the GM and ACDelco parts.
The policy might prevent GM dealers and wholesalers from undercutting other dealerships with heavily discounted prices, fostering a price erosion which could affect collision repairers and mechanics’ revenue as well.
“The minimum retail price will be applicable to everyone selling parts online,” Kunde wrote.
“(GM Customer Care and Aftersales) provides automotive parts and accessories that have become known for high quality, performance and safety,” GM wrote in a news release. “The new policy allows GM to protect the overall brands, reputation, and image of GM, its dealers, and its business partners.”
Kunde said she couldn’t reveal whether the parts affected skewed more to the collision industry or to the mechanical repair sector.
“Unfortunately, we can not share the list of parts yet,” she wrote.
More details on the “eMRP” policy will come Nov. 1 and be posted to www.gmpartsemrp.com.
The Supreme Court in its 2007 Leegin Creative Leather Products v. PSKS ruling held 5-4 that a manufacturer had the right to set vertical price restraints, overturning the 1911 decision in Dr. Miles Medical Co. v. John D. Park & Sons.
Manufacturers don’t get carte blanche; the Court found that instead of a blanket ban on such restraints, their actions were “to be judged by the rule of reason” for violations of the Sherman Act.
PSKS, which did business as Kay’s Kloset, had been marking down Brighton accessories 20 percent in response to nearby retailers.
“Kay’s Kloset contended it placed Brighton products on sale to compete with nearby retailers who also were undercutting Leegin’s suggested prices,” majority opinion author Justice Anthony Kennedy wrote. “Leegin, nonetheless, requested that Kay’s Kloset cease discounting. Its request refused, Leegin stopped selling to the store. The loss of the Brighton brand had a considerable negative impact on the store’s revenue from sales.”
Kennedy and the court described reasons why vertical restraints could help competition rather than hurt it. This passage in particular seemed like it could be extrapolated to the repairer-dealer or consumer-dealer relationship:
Absent vertical price restraints, the retail services that enhance interbrand competition might be underprovided. This is because discounting retailers can free ride on retailers who furnish services and then capture some of the increased demand those services generate. Consumers might learn, for example, about the benefits of a manufacturer’s product from a retailer that invests in fine showrooms, offers product demonstrations, or hires and trains knowledgeable employees. … Or consumers might decide to buy the product because they see it in a retail establishment that has a reputation for selling high-quality merchandise. … If the consumer can then buy the product from a retailer that discounts because it has not spent capital providing services or developing a quality reputation, the high-service retailer will lose sales to the discounter, forcing it to cut back its services to a level lower than consumers would otherwise prefer. Minimum resale price maintenance alleviates the problem because it prevents the discounter from undercutting the service provider. With price competition decreased, the manufacturer’s retailers compete among themselves over services.
Featured image: A General Motors employee works at the brand-new ACDelco and GM Genuine Parts processing center in Burton, Mich., on Aug. 9, 2019. (Jeffrey Sauger/for General Motors)