HDAW panel to distributors: Know liabilities in selling nonbranded parts

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Many aftermarket distributors think they can’t be held liable for selling counterfeit parts or if a consumer is harmed by a defective component. “That’s a myth,” Sarah Bruno, an associate with Arent Fox and Heavy Duty Manufacturers Association general counsel, told attendees at a panel discussion held Tuesday, Jan. 22, during Heavy Duty Aftermarket Week in Las Vegas, Nev. “You can be held liable even if you had no knowledge the product was defective.”

In assigning liability, courts consider several factors: where the goods were purchased, whether they were sold with authenticating documentation and whether the quality differs from what’s expected by consumers, Bruno said. Unusual pricing, coding or language on billing slips are also red flags, she said.

To reduce their liability, Bruno recommends distributors pay attention to details such as packaging slips, part quality and safety standards. Also, check to make sure the country of origin is what you expected and that trademarks and logos are authentic. “If something’s off, call the manufacturer to verify,” she said.

Other steps Bruno recommends distributors take:

  • Trust your gut – if something doesn’t seem right, pull it, contact the manufacturer and put them on notice of the problem;
  • Protect yourself contractually – have an agreement with the manufacturer that asks them to indemnify you for any claim of infringement;
  • Require the part manufacturer to meet safety specs and to warrant the product accordingly; and
  • Buy brands you trust.
  • Distributors must take responsibility for the products they sell, said Mark Karon, president and co-owner of Total Truck Parts. “If we sell inferior products and they end in a tragic result, that plays into the right-to-repair issue,” he said, referring to the controversy over independents having access to supplier technical information. “We can’t hide behind the idea that it’s not our problem.”

    To help lessen liability, “know who you’re doing business with,” recommended Joe McAleese, president and chief executive officer of Bendix Commercial Vehicle Systems. Because of the research, development and testing that goes into them, branded parts are more expensive, but the benefits should outweigh the cost, McAleese said. Troubleshooting assistance, training, “all that improves the economics for you,” he said. That investment is why Bendix has been aggressive in defending its brand. “We focus on intellectual property protection, education in the field about the impact of counterfeit goods, and then we do enforcement. It’s important for us as an industry to take this very seriously.”

    Suppliers should help distributors make the case for using more expensive branded parts, Karon said. They “need to get more guts,” he said, instead of letting their lawyers talk them out of providing distributors with the tools they need to define their products’ differentiation and value.

    McAleese agreed. “We as a supplier community have not done a sufficient job providing our distributor customers with information on why their customers should buy our products,” he said. “We haven’t put them in a position where they can win with that argument.”

    Distributors need to be aware that nonbranded products may not meet the customers’ performance needs, panelists said. “We’ve had a distributor take a photo of our product and put it in their catalog and then just switch it with a product that’s substantially lower price, but doesn’t meet our quality specs,” said Mike Scoll, ECCO vice president of sales and marketing.

    Unfortunately, there’s no way for a distributor to assess a product’s quality without doing testing, said Paul Johnston, senior director at Meritor Wabco. “My advice to distributors would be to request actual data – tests from an outside service to validate that the material will meet the requirements.”

    But the effort may be worth it to avoid problems down the line, Johnston added. “When you get into the recall of a vehicle, it can cost upwards of $1,000 to $2,000 per vehicle to repair. Then if you get into product liability, it can be millions in damages.”

    Ultimately, whether or not to use nonbranded parts is an individual business decision, the panelists said. The issue is not sourcing from low-cost countries – most suppliers do that. But to protect themselves, distributors must be confident that the parts meet quality specifications.

    “As we start to import more products where we don’t keep up with safety demands, it’s a time bomb,” said Anthony Lupo, an intellectual property attorney and partner at Arent Fox. “The last thing as a distributor you want is the liability of a recall or an accident.”

    “If you’re my distributor today and you’re doing something that’s not right, we’ll go in and talk to you first,” McAleese said. “Ninety-five percent of the time, that’s as far as it has to go.” But Bendix also has sent cease-and-desist letters to errant distributors and sued them. “We’ll do whatever we have to do to protect our intellectual property,” he said.