SoundGate Exploring OEM Lawsuit Over GM Engineering
By Amy Gilroy -- TWICE, 12/9/2002
Sheridan, Wyo. — For over 20 years, the aftermarket has cried foul at car manufacturers' tactics that make it difficult for the aftermarket to design and sell non-factory radios. Some recent actions by car manufacturers, particularly General Motors, however, are causing an increased level of concern.
SoundGate president Rob Puttnam says that some members of The Mobile Enhancement Retailers Association (MERA) are currently examining certain car manufacturer radios to determine if their design may be considered an antitrust violation.
"We are looking at certain design features of automobiles such as the manner that General Motors integrates other sub-systems of the vehicle into the car radio, and the fact that they don't give anyone any data how to safely and reliably interconnect with the radios," Puttnam said.
In a related action, another OEM integrator, BlitzSafe, said it will not ship a new adapter for GM radios because GM ties the radio into OnStar, which could raise liability issues for the aftermarket in the case of a car accident. (See story this page.)
Puttnam said he is talking to an attorney about a lawsuit, but he is still in the "exploratory process. If it does turn out there are antitrust issues that need to be looked at then that will become something that MERA, CEA and other folks would need to be brought into for discussion." He added, "We've had discussions with Delphi engineers who admit that the first thing they do is try to get the aftermarket [designed] out."
CEA government and legal affairs VP Gary Klein said CEA would be willing to look at such a case. He said the car company's actions might violate illegal tying-in practices as defined in the Robinson-Pattman Act and Section 3 of the Clayton Act. "There is also the Federal Trade Commission Act which gives the FTC authority over a number of different areas and unspecified conduct that may constitute an antitrust violation," Klein said. "We have written letters when we see something we consider to be an illegal tie-in arrangement and we've also notified the FTC."
Rick Mathies executive director of MERA, said that the organization would be interested in pursuing "a suit like that if there was a clear course of action and a possibility of a win." Mathies said he has no knowledge that the aftermarket might have a winnable case but he noted, "It's something we would look at. I don't think this practice [of designing out the aftermarket] is right, MERA does not agree with it and we are concerned about it. If there was a unified effort to get this changed either through negotiation or through legal action, if there was something winnable then we would absolutely be interested."
This would not be the first time the autosound industry initiated legal action against a car company. In January 1988 the Car Audio Specialist Assn. (CASA) filed suit against Chrysler, claiming the fact that the company did not offer a delete option on its radios violated the Sherman and Clayton antitrust laws. In October 1992, the U.S. Supreme Court ruled in favor of Chrysler.
"We were down that road once before," Kenwood sales and marketing VP Bob Law said, referring to the Chrysler suit, "and I think we have to keep bringing it to the attention of the car manufacturers and try to find ways to work with them. I've never been one to believe you can legislate competitiveness. It's up to us to find ways to deal with this. I'm hoping the car manufacturers will adopt an open bus so car audio products can be added on."
Law said he advocates legislation protecting the consumer vs. protecting other manufacturers. "As cars get older and they become second-hand, the kids pick them up and it's a matter of expression for kids to customize their cars. It's not in the best interest of GM or other manufacturers not to allow that activity to go on."
Ron Freeman, VP at Peripheral Electronics, another OEM integrator company, said he was in favor of some action against the car companies.
One of Puttnam's key objections to OEM practices is that GM radios combine car features in the radio such as OnStar, oil-level messages and chimes for seat belts, door open and ignition key. "I've never said this before, but I really believe that they are doing it now to keep the aftermarket from integrating with their vehicles in any manner, Puttnam said. "There are specific design patterns being employed that make it exceedingly difficult for the aftermarket to work with. I think the aftermarket has to step up to the plate."
Puttnam said there might be a private meeting at the MERA Knowledgefest in February to look at antitrust issues "which may result in some action." He acknowledged that a lawsuit against GM would be dearly expensive, but he said "I don't have any doubt that GM would lose."
Not all OEM integrators favor a lawsuit. BlitzSafe president Ira Marlowe said that the car companies have the right to use whatever radios they wish. "It's like someone coming to your home and saying we don't want you to put in a Sub-Zero fridge. There's nothing wrong with GM building a radio to fit what they feel is their customer's need."
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