Dealers Have Been Using Software to Hike the Price of Spare Parts, Claims Lawsuit
Buying parts from the dealership may be more expensive due to ‘perceived value.’
When it comes to servicing a car, one event that always seems to be dreaded is the trip to the dealership. Whether it be to drop off a car for repair or simply to pick up parts that couldn't be waited on, it's an unwritten rule that parts from the dealership will always cost a premium. Most people would just assume that this is traditional dealer markup for new parts, but as Reuters reports, a recent lawsuit suggests that automakers have been breaking European anti-compete rules by price gouging customers using this method for nearly a decade.
The story begins in 2010 when French software designer Laurent Boutboul reportedly sold a piece of software to Accenture, which brands itself as a management consulting company. Accenture had been working with as many as five different automakers during years prior, dating back two years to the acquisition of Boutboul's software, dubbed “Partneo.” The developer is now suing Accenture, claiming that it is breaking European anti-compete laws using the software that he sold them, effectively damaging his reputation.
Accenture marketed its newly acquired software to automaker Renault as a method to identify ways to increase profit margins on the sales of replacement parts, and it was a clear hit. Over the next several years, Accenture was said to have worked with at least four other manufacturers; Chrysler, Jaguar-Land Rover, Nissan, and Peugeot-Citroen. It has been estimated that the software helped the manufacturers earn a collective profit in excess of 2.6 billion Euros ($3.1 billion) thanks to cost markup for the automaker's spare parts sold to consumers.
Using products identified by Partneo, manufacturers were suggested ways to price certain items based on perceived value, all while avoiding a catalog of certain parts which had prices closely monitored by certain regulatory bodies. For example, if the software believed that a specific part appeared as if it were expensive, such as a manufacturer's badge or complex component, it would suggest to the automaker that the price should be increased. However, if the part was something often purchased by insurance companies, Boutboul's lawsuit alleged that the software would purposefully overlook the item so it could allow the price gouging of other parts to fly under the radar without sparking an outcry.
Parts are already a huge moneymaker for the automotive industry; eventually someone, somewhere will need to repair their car. The software capitalizes on this approach by offering to increase revenue by creating a lifecycle management system for spare parts, as well as providing analytics data to assist manufacturers in decision making. Accenture made bold claims on its website, stating, "Although spare parts often represent only 10 percent of global turnover, they can contribute up to 50 percent of net income for an average industrial or automotive company."
Accenture also boasts about its presence in other markets, such as with Whirlpool Europe, opening the possibility of this same practice being instilled across different industries. However, it views this as being commonplace amongst most modern businesses.
"Accenture believes there is no merit in these claims. The Partneo tool tracks publicly available prices for spare parts, which helps manufacturers make informed pricing decisions and does not share any confidential or sensitive information between clients," an Accenture spokesperson told The Drive, "Solutions of this type, which enable companies to assess and manage their products, are commonplace across industries. They help companies analyse [sic] spare part visibility and availability, optimize inventory, reduce their costs and improve the efficiency of operations."
Antitrust regulators in France agreed with Accenture that no wrongdoing had occurred. In fact, the agency had reportedly declined to open a full investigation over the profiteering methods. Renault was also on the side of Accenture, telling Reuters that it believed the pricing of its "quality spare parts" was both "fair and equitable".
While some manufacturers are seeking alternative ways to produce low-cost parts and keep the base cost of automobiles from rising, consumers are feeling the heat from the dealer. Rising repair costs have even been blamed for a rise in auto thefts around the United States. Even though what Accenture is offering may be a completely legal way for auto manufacturers to price their parts, it’s also frowned upon by consumers.
BMW, Daimler-Mercedes, Ford, General Motors, Honda, Hyundai, Mazda, Mitsubishi, Volkswagen, and Volvo were all said to have been pitched the sale of Partneo or other services through Accenture. Out of the manufacturers, court documents allege that the following companies told the European Investigative Collaborations that their firms had declined to purchase the software: BMW, Daimler-Mercedes, GM, Toyota, Volvo, and Volkswagen.