How Feds Dodged the Consent Decree in '93, Charlie Barone, BodyShop Business, December 2000

On Dec. 10, 1993, a group of eight citizens made a trip to the Antitrust Division of the U.S. Department of Justice (DOJ) because they believed the DOJ would move on the information they brought regarding the auto insurance business and its claims settlement practices.

But today it's as if the group never made the trip. In fact, despite the pilgrimage being only a few short years ago, most in the collision repair business don't know anything about it.

And neither does the Justice Department, it seems.

The delegation was armed to the teeth. They had reams of documentation, a Ph.D. in economics in tow and a copy of the 1963 Consent Decree. Once inside the H Street office in Washington, D.C., they dropped a boat-load of allegations along with a 3-inch pile of evidentiary documents in the government's lap. It included direct-repair program (DRP) agreements, along with letters of testimony from consumers and lawmakers (each piece establishing a foundation for their complaints).

Representing the Antitrust Division of the U.S. Justice Department was Joseph Melillo and a staff of four lawyers. They met with the '93 Eight for almost three hours, during which each member of the delegation had an opportunity to present their case. While the U.S. officials were patient through the first half of the three-hour conference, Melillo turned chilly when he dismissed the group. As they left, he explained the protocol for these sorts of things. Basically, "Thanks for coming, now run along."

So the group of eight left Washington, went back to their businesses and waited ... waited ... and waited some more.

It soon became clear in the following months that the insurance industry had dodged the '63 bullet. But a few questions remain: What happened to the documents left with Melillo? What was the disposition of the case? How long did it take the government to dismiss the allegations and possibly throw the entire notebook into the archives? Melillo was left with so much material that an investigation into them would have taken his entire staff months.

To get the official account of how the Justice Department proceeded after the '93 meeting, I contacted Melillo for this story. Four weeks later he responded, stating information specific to that meeting wouldn't be available without going through the Freedom of Information Act.

Any number of Justice Department persons may also maintain files on the collision repair business. For example, Karen Sampson Jones, in the DOJ Atlanta office, is reported to have accumulated entire filing cabinets of documents related to the collision repair industry in what appears to be an on-going case, assuming, of course, one exists. When contacted to confirm this, Jones declined comment for this story and referred all inquiries to public affairs.

But many in the collision industry aren't yet willing to give up their goal of getting the Decree enforced.

The 1963 Consent Decree was a landmark for the post-war collision repair business. Since its signing, however, little has changed in terms of the insurance industry's attempts to dominate the repair market. In 1993 - as well as today - body shop owners have attempted to draw attention to the document. But considering the DOJ's apathetic response - complete silence - regarding repairers' concerns, will present-day Consent Decree supporters be able to overcome obstacles any better than their '93 counterparts?

A Cross-Country Trip Made in Vain?
The shop owner who came the farthest for the 1993 Washington meeting was Bob Amy, owner of Auto Body Specialists in Portland, Ore. Amy was prepared with reports of substantial market- and claims-related difficulties in Oregon. Despite recent reform measures signed into law for the purpose of regulating the business, Amy told the Justice Department they were being flaunted by the insurance companies. And he had with him an official letter from his State Senator to back it up.

"We spent the money to go to Washington, and we asked the Justice Department to please put it in writing if they weren't able to do anything on this matter - to give us an answer," says Amy. "But we never got one letter. They showed us no respect whatsoever.

"I brought a letter from [Oregon] State Senator Kennemer to the meeting, and they didn't even bother to respond to the Senator's letter. No one got anything out of the Justice Department on this issue. Of course, they did patronize us and tell us to come back."

In the letter, Senator Kennemer expressed grave concerns regarding the states' regulative bodies and their ability to enforce their state laws. He cited Oregon's own bill, SB 718, which was passed and signed into law.

Senator Kennemer's letter read: "The directing of business is the major concern. In the legislative record, [my fellow] Senator Groener made the intent clear: What starts out sounding like a terrific consumer convenience actually turns into an anti-competitive, predatory arrangement, carefully organized to deny the consumer what he actually paid for."

Kennemer went on to cite Amy's unsuccessful attempts to seek a review of the matter on the state level and begged the Federal government's assistance. But he didn't get it. He didn't even get a response.

Fred Jennings, the Massachusetts economist involved in the '93 meeting, is now doing analysis and expert work for law firms involved in complex litigation. His take on the DOJ's lack of action? "Officials have official duties, and it's their responsibility to ultimately draw some conclusions. They can't arbitrarily not look at your request."

But is that what happened? Jennings suspects, as do the others who brought documents to Washington in 1993, that the DOJ didn't even read Jennings' study. To simply ignore evidence is unconscionable but, considering the DOJ's lack of action, very possible.

"We had a whole notebook of documents," says Jennings, "part of which included a lengthy study on antitrust I had completed on the matter. It's sufficiently in the record."

And despite the lack of action in '93, Jennings' material being in the record could serve as a lever for present-day 1963 Consent Decree activists - who, as of press time, numbered in the hundreds. Yes, hundreds.

I'd imagine the present group could and probably will at some point raise this issue by saying something like, "You've known all along the laws as well as the Consent Decree are being flaunted. Will we be given lip service, or will one of the government attorneys actually look into this and state for the record that there's no crime?"

Somebody Call a Cop
How does something this large fall through the cracks? The fact is, it's left to the discretion the Antitrust Division of the DOJ to exercise its administrative actions (the last word in law enforcement).

If an affected party alleges a violation of any of the provisions contained in court orders (such as the one in 1963), an appeal may be taken to the federal courts, where such authority can set aside administrative oversights or abuse. In the matter of the '93 Eight's visit, discretion seems to be the decisive factor in the results, or lack thereof.

After the DOJ's investigation of the collision repair industry was zipped up, it was within the DOJ's power to summarily dismiss the '93 Eight. End of story. Of course, anything the DOJ does is ultimately subject to judicial review by the U.S. Supreme Court. It ends there. (Although, given the quick settlement in 1963, it's doubtful this case would go that far, let alone see a courtroom. The defendants could simply sign another consent decree.)

Federal prosecutors are frequently faced with criminal conduct committed by or on behalf of corporations. On the heels of the recent Firestone/Ford fiasco, the House passed a measure in October to bring criminal prosecution to executives who wantonly create policy resulting in injury or death. While the '63 insurance case wasn't specifically about public safety, it is as serious, compounded by the fact that we're not talking about one corporation. It was then, and is now, what many consider an orchestrated set of acts by a group.

Constitutional government demands that state and federal officials aren't to be manipulated or influenced. The separations between the judicial, executive and legislative branches of government are clear. And the popular notion that public officials must be accountable (be they elected or not) is a matter of constitutional law.

The Watergate crisis of the early 1970s led to reform measures including the Ethics in Government Act of 1978. From the Reagan years up until today, the American public has witnessed a series of highly publicized scandals involving Congress, the White House and the Justice Department. It's easy to see why the entire government gets broad-brushed as corrupt. Unfortunately, the '93 trip - and the resulting indifference on the DOJ's part - only reinforces this label.

"They shoved it under the table from influence by GEICO insurance," says Florida shop owner Jerry White, one of the '93 Eight. "Because of that, I have a very low regard for the Justice Department. I walked away knowing they were giving us lip service, and I didn't anticipate anything coming from the meeting. It was water off the duck's back in 1993."

So is there hope for reviving the '63 Consent Decree? White is understandably pessimistic. "[Present-day Consent Decree supporters] are beating a dead horse. If they want to change the status quo, the thing that would stop it all would be filing charges of extortion under the Hobbs Act."

Is that a Gorilla I See? Reviving the '63 Decree
The insurance industry and its regulation is the province of the states, so there's not an office in Washington where matters of claims, rates and practices can be discussed. And that, according to many, is how the insurance industry likes it

In September of this year, Michael J. Snead, chairman of Admiral Insurance Company, spoke at a meeting of Chartered Property and Casualty Underwriters Society. "Do you want to be governed by 50 monkeys or one big gorilla?" he asked. "With all its perils, I'd rather deal one-on-one with the local regulator." Snead went on to say the insurance lobby has effectively "weakened state regulations" in recent years.

Unbeknownst to Snead, there could be a very large primate lurking in his future, since the 1963 Consent Decree is once again getting shaken from its nap. But this time, there are many more than eight of them poking the beast. In fact, their numbers are in the hundreds, all of whom have been writing letters, networking and contributing to the effort. Who are these people? They've become known as the Consent Decree Community and would be best described as a loosely organized, but restricted, group of shop owners, activists and lawyers who've converged on the Web site (www.consentdecree.com). But unlike so many past collision repair industry initiatives, this group is playing it tight to the vest. Though their lawyers declined to be interviewed for this article, word has it that the folks in Washington are about to get very busy.

"It's my opinion that what they're doing today is a lot better than what we did years ago," says Cindy Denya, one of the '93 Eight. "No. 1, they have financial backing, they're getting organized and they're getting specific paperwork. I don't think we accomplished that much in 1993. I think we let them know there was a problem."

And, according to the Consent Decree Community, there's still a problem. But will the DOJ do anything about it this time around?