Suit by State Repairers Settled by Electronics Manufacturers

Thirty of the world’s largest electronics equipment manufacturers have agreed to pay 8,000 California repair shop owners up to $150 apiece to settle a lawsuit over what manufacturers pay for warranty repairs.

The settlement amount, estimated at less than $2 million, is a tiny fraction of the $200 million initially sought by the California State Electronics Assn., which represents the repair shop owners.

In the lawsuit--filed March, 1992--the CSEA argued that manufacturers forced servicers to accept unprofitable contracts for warranty work, an alleged violation of California’s Song-Beverly Consumer Warranty Act.

The lawsuit centered on the amounts Matsushita, Mitsubishi, JVC Corp. and a parade of other Japanese, Dutch, Korean, French and American firms paid servicers to fix equipment covered by manufacturers’ warranties. The California servicers maintained that they were forced to accept payments that were up to 50% below market rates in order to become “authorized service dealers” with access to all-important service manuals and parts.

CSEA attorney Richard I. Fine said he is pleased with the settlement because it requires manufacturers to negotiate future repair contracts with servicers.

In settling the dispute, the manufacturers maintained that they did not violate any laws, and in certain cases, the laws did not apply to them. Three major manufacturers, Sony, Sharp and Toshiba, did not participate in the settlement and are continuing to fight the allegations in court.

Fine said the settlement means California servicers will take in about $26.5 million more each year for doing warranty work. Manufacturers disputed that figure.

But Gary Shapiro, general counsel for the Electronics Industry Assn., a Washington trade group representing the manufacturers, said that if repair costs rose substantially, manufacturers would probably find it more economical to do the work themselves.

How the settlement might affect consumers isn’t clear.

The CSEA said prices for non-warranty work are likely to fall because repair shops will no longer have to cover losses on warranty work by overcharging consumers.

However, Electronics Industry Assn.’s Shapiro predicted that consumers will end up paying more for non-warranty repairs. If repair shops use non-warranty rates to determine warranty rates, “there is an incentive to let the price of out-of-warranty work rise,” he said.