Consumer perception of a fraudulent automotive service industry was aided in 1993 by a number of high-profile cases that saw large tire dealerships and automotive service providers scrambling to control the damage from several investigations. Three Big O Tires Inc. franchisees were caught in two unrelated fraud suits in 1993 that resulted in out-of-court settlements totaling more than $204,000.
CSB Partnership, an independent franchise operator of 17 Big O stores, reached an out-of-court settlement of $169,000 with the California Bureau of Automotive Repair (BAR) for allegedly selling unnecessary parts and labor.
The partnership also was a party in a second suit against Big O and six of its franchise outlets in San Diego alleging the company engaged in unfair competition and misleading advertising. The total out-of-court settlement in that case was $35,000, but Big O denied any wrongdoing.
Cavote Tires Inc. and Fiel Regatta Co. Inc. were party to the suit along with CSB Partnership and Big O.
In Pittsburgh, 12 Midas International Corp. muffler shops agreed to pay the state $51,250 after the Pennsylvania Attorney General's office charged the shops failed to detect safety problems before issuing state inspection stickers and, in some cases, performed unnecessary repairs on consumers' vehicles.
In settling the case, Midas denied any wrongdoing.
The California BAR also uncovered incidents in which Winston Tire Co., the state's largest independent retail tire dealership, allegedly made unnecessary repairs to customers' vehicles or charged customers for parts and services that were never installed or performed.
In an out-of-court settlement that followed almost four months of negotiation, the BAR ordered Winston to pay $1.4 million in penalties and restitution.
Part of that amount, $450,000, was to be used to reimburse some 20,000 consumers identified during the investigation who may have unnecessarily purchased shock absorbers, brakes, calipers or coil springs.
And in an unresolved case, Kmart Corp. could end up losing billions of dollars in damages to millions of consumers for allegations that its automotive service centers sold repair merchandise and performed service that was not needed.
Also in 1993, the National Association of Attorneys General initiated a survey to determine the prevalence of auto repair fraud.
The NAAG Auto Repair Task Force distributed a three-page survey containing 13 questions asking, among other things:
Whether organizations believed commission incentives for auto repairers increased the chance of fraud;
What policies or procedures organizations had in place to guard against unnecessary repairs; and
What reforms, if any, organizations deemed necessary to combat auto repair fraud.
The task force also asked for copies of company manuals, legislative testimony, official policies on employee commissions and aftermarket parts and other relevant materials.
The task force was formed in December 1992 from funding provided by Sears, Roebuck and Co. as partial settlement of auto repair fraud charges against the company.