Fiat Chrysler Ordered to Face Dealerships’ Antitrust Suitby and
Carmaker accused of inflating sales figures to boost shares
Federal judge throws out some of dealers’ claims against Fiat
Fiat Chrysler Automobiles NV’s U.S. unit failed to persuade a federal judge to throw out an antitrust lawsuit claiming it pushed dealers to submit fraudulent sales numbers to prop up the carmaker’s share price.
Napleton’s Arlington Heights Motors in Illinois sued Fiat Chrysler in January, alleging racketeering, violations of antitrust laws and breach of contract. U.S. District Judge Virginia Kendall in Chicago threw out the racketeering claim, while rejecting Fiat’s motion to dismiss antitrust and other claims.
Allegations in the lawsuit spurred a U.S. Justice Department investigation into whether aberrations in reported sales figures as filed with the Securities and Exchange Commission misled shareholders about the health of the company. The automaker, which restated the past 5 1/2 years of sales results in July, said at the time that its counting methodology had been in place for decades and included safeguards to ensure sales weren’t double counted.
Napleton provided enough evidence that Fiat Chrysler’s incentives and subsidies “injured competition,’’ bolstering the antitrust claim, Kendall said in her order Tuesday. Kendall also allowed the dealer to pursue allegations of price discrimination.
Fiat Chrysler’s U.S. unit said in an e-mailed statement that it was “pleased the court dismissed some of the more serious claims in Napleton’s complaint” and that it was committed to a vigorous defense of the remaining claims.
Justice Department investigators are focusing on Reid Bigland, the head of sales for the company’s U.S. unit, formally known as FCA US LLC, people familiar with the matter have said. Fiat took control of the former Chrysler LLC as part of the Auburn Hills, Michigan-based automaker’s 2009 bankruptcy.
Investigators are examining whether Fiat Chrysler improperly adjusted monthly numbers to show growth over the prior year, a person familiar with the matter said. They are looking into allegations the company ordered dealers to create false vehicle purchases, some of which were made in the names of friends and relatives of salespeople, including underage family members, the person said.
The dealerships said in the lawsuit that Fiat Chrysler “stacked the deck against plaintiffs by soliciting fraudulent sales reports from certain dealers, and by using the numbers generated from these false sales to further subsidize plaintiffs’ competing dealers and to allocate hotter selling vehicles to them.’’
The dealers also contended that Fiat Chrysler violated civil racketeering laws, by engaging in mail and wire fraud through soliciting false vehicle delivery reports and “the manipulation and misuse of market and sales data,’’
Kendall rejected the racketeering claims, finding that the plaintiffs hadn’t proven any harm connected to the allegations. “It is possible that the plaintiffs did not receive various incentives simply because they were not meeting sales benchmarks,’’ the judge wrote.
During a court hearing in May, the company’s lawyer contended there was no way of proving lost sales were attached to the alleged racketeering violation. Kendall pointed to that argument in Tuesday’s decision, noting her response at that hearing: “Maybe you’re just a bad salesman.’’
The case is Napleton’s Arlington Heights Motors Inc. v. FCA US LLC, 16-cv-00403, U.S. District Court, Northern District of Illinois (Chicago).