Law to Protect Market in Auto Crash Repair Parts Proposed

Law to Protect Market in Auto Crash Repair Parts Proposed
April 14, 2010

Matthew Glans

Matthew Glans (mglans@heartland.org) joined the staff of The Heartland Institute in November 2007... (read full bio)

For the last two decades, drivers having their cars repaired after collisions have been saving money by using“generic” replacement parts that cost less than the original manufacturer’s replacement parts but are equivalent in every important respect. A proposed federal law would ensure that the parts remain available.

The “Access to Repair Parts Act” (H.R. 3059/S. 1368), would guarantee consumers the option of choosing original equipment parts or alternative replacement parts for vehicle repairs. It would do so by limiting the ability of original parts manufacturers to put design patent on such parts. Conventional patents would and could still apply to parts and processes used to make them.

The bill, introduced by Rep. Zoe Lofgren (D-CA) and Sen. Sheldon Whitehouse (D-RI), stems from conflicts over the use of original equipment manufacturer (OEM) or aftermarkets parts.

For many years, auto companies controlled access to replacement auto parts, with most parts available only from the original manufacturer of the vehicle. Components from older vehicles were more difficult to find and could be unduly expensive.

Aftermarket Emergence
This changed with the emergence of the aftermarket parts industry, in which “generic” versions of the original parts are made available. Because insurance companies pay for a large percentage of car collision repairs, the availability of aftermarket parts tends to reduce insurance premiums.

Insurance groups have produced copious data showing the benefits of aftermarket parts. According to the National Association of Mutual Insurance Companies (NAMIC), these parts are typically 26 percent to 50 percent less expensive than those issued by manufacturers.

“The ‘Access to Repair Parts Act’ provides much needed protections to consumers,” said Kathy Mitchell, NAMIC’s director of federal affairs. “A parts monopoly does not simply affect people who are in an accident. Decreased competition in the replacement parts market will likely lead to an increase in costs for consumers across the board.”

Price Drops
Research conducted by the American Insurance Association (AIA) found the prices of collision replacement parts sold by car companies fall by more than 8 percent when a competitive alternative exists, with the alternative part then priced an additional 26 percent below this reduced car-company price.

Car manufacturers tend to oppose the availability of replacement parts. Automakers say they have intellectual property rights to keep out aftermarket parts, and they have begun to obtain more design patents on crash parts to block aftermarket competitors. Automakers argue the aftermarket parts makers benefit from their research and development and create products of questionable quality.

Auto Industry Opposition
Groups such as the Automotive Service Association and the American Automotive Policy Council have voiced opposition to the use of aftermarket repair parts. In a coalition letter sent to Congress, the ASA wrote, “Automotive collision repairers are very concerned about the quality of replacement crash parts. Permitting this intellectual property infringement also exposes consumers to significant safety, performance or durability risks.”

Many body-shop groups likewise oppose the use of aftermarket parts. They complain of lower quality and raise safety questions.

Other Industry Support
The Quality Parts Coalition (QPC), a consortium of independent parts and insurance companies supporting the use of aftermarket parts, disagrees, arguing aftermarket parts benefit consumers and insurance companies. They say the availability of new parts at lower prices gives consumers and auto repair shops more options and leads to lower costs for crash repairs and car insurance.

The savings for consumers amount to approximately $1.5 billion a year, QPC says.

"The rising cost of repair parts will put a severe dent in the pocketbooks of many working Americans, who depend on their vehicles to take their kids to school, drive to the doctor, and simply get to work," Rep. Lofgren said in a statement released by the QPC. "I believe that our patent system should provide an appropriate incentive for industrial designers to innovate. However, the system must be balanced and take into account the legitimate needs of consumers."

Matthew Glans (mglans@heartland.org) is legislative specialist in insurance and finance at The Heartland Institute.

Matthew Glans

Matthew Glans (mglans@heartland.org) joined the staff of The Heartland Institute in November 2007... (read full bio)