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U.S. Is Investigating Alleged Mercedes-Benz Price-Fixing

July 20, 2002|From Bloomberg News

DaimlerChrysler said the Justice Department is conducting a criminal investigation into allegations that the company's Mercedes-Benz subsidiaries participated in a price-fixing scheme among New York-area dealers.

The world's fifth-largest car maker said in a filing Friday with the Securities and Exchange Commission that the case is connected to a 1999 proposed class-action lawsuit against two Mercedes-Benz units, Mercedes-Benz USA and Mercedes-Benz Manhattan Inc. They were served with grand jury subpoenas in May, the company said.

The 3-year-old lawsuit was filed in federal court in Newark, N.J., on behalf of motorists who bought new Mercedes-Benzes. It accuses 27 dealers in New York, New Jersey and Connecticut and Mercedes-Benz USA of conspiring since 1992 "to artificially maintain prices," said Jeffrey W. Herrmann, one of the plaintiffs' lawyers.

Shares of DaimlerChrysler fell $3.90, or 8%, to $43.65 on the New York Stock Exchange as part of a broad Wall Street sell-off.

"It's a massive overreaction," said analyst David Healy of Burnham Securities Inc. "It's just a symptom of the psychotic nature of the market right now." He doesn't own DaimlerChrysler shares or have a formal rating for the stock.

The lawsuit is based on allegations by a dealer whose franchise the company tried to revoke for poor performance, DaimlerChrysler spokeswoman Donna Boland said.

"We think this is without merit," she said.

Mercedes-Benz USA said, "Once the facts are brought out, it will be clear that there was no wrongdoing." The Justice Department would not comment.

In October, DaimlerChrysler was fined $73 million by the European Commission for refusing to sell cars to Germans who shopped abroad in search of lower prices. A European Commission spokesman, Michael Tscherny, said in Brussels that he was unaware of any price-fixing investigation similar to the U.S. probe.

In 1998, Honda Motor Co. paid more than $400 million to settle suits by its U.S. dealers that it sought kickbacks in return for shipping them hot-selling Accords and Preludes. A Cleveland Honda dealership filed a new suit this week, resurrecting the 20-year-old bribery claims that led to mail fraud convictions of almost a dozen executives of Honda's U.S. unit.

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