Barnett sues Kia over secret advertising aid

Barnett Kia is testing its crash ratings -- against its own supplier.

The White Bear Lake auto dealership filed a federal antitrust lawsuit last week against Kia Motors of America, charging that the manufacturer has been unfairly aiding rival Kia dealers with secret advertising assistance worth millions of dollars since 2003.

According to the lawsuit, dealership vice president Jim Barnett discovered the advertising program in December 2006 when he "inadvertently" opened a Federal Express envelope that had been misdirected to his dealership.

Inside were letters addressed to some of Barnett's competitors, showing that Kia Motors had been providing them with advertising incentives of $10,000 to $35,000 a month in a "Regional Marketing Fund program."

The letters were from Phil Kelley, director of regional operations in Kia Motors' office in Lombard, Ill. They indicate that certain dealerships -- including Duluth Kia and Luther Kia in Inver Grove Heights -- had been approved for special "co-op" advertising funds to help them stimulate sales.

The letters, which were attached to the lawsuit, says that Luther Kia was to get $35,000 in December 2006 and Duluth Kia had been approved for $20,000. The money was supposed to be used to advertise only Spectra and Sportage models, the letters say.

Kelley declined to comment on the lawsuit this week. He referred questions to the company's national headquarters in Irvine, Calif. The company declined to comment.

As a result, the lawsuit says, the dealership has "suffered many millions in lost new car sales and other cash-flow opportunities," including used car trade-ins, service work, financing, manufacturer rebates, sales incentives and interest.

The suit says that Kia Motors interfered with the dealership's ability to meet monthly sales targets. Dealers who met their goals in December 2006 got an extra $500 per unit sold, the suit says.

The suit says that Bruce Barnett, the dealership's president, asked Kia Motors to disclose how the promotional advertising money was distributed in the Central Region. The manufacturer refused.

Barbara Bagdon, a Minneapolis attorney representing Barnett Kia, said the dealership tried unsuccessfully to mediate a settlement. She declined further comment.

The lawsuit, filed in U.S. District Court in Minneapolis, accuses Kia Motors of violating the Robinson-Patman Act. Congress passed the act in 1936 to protect small grocers. It prohibits manufacturers from providing sales incentives to retailers unless they're available to all competitors on proportionally equal terms.

But the Robinson-Patman Act is under attack. Congress created the Antitrust Modernization Commission a few years ago, which has recommended repealing Robinson-Patman Act, said Daniel Gifford, a professor at the University of Minnesota School of Law.

Other antitrust laws protect consumers, he said, but Robinson-Patman protects retailers. Gifford said the government no longer enforces the law, leaving it up to companies to bring lawsuits.

Barnett Kia also accused Kia Motors of violating the state's Motor Vehicle Sale and Distribution Act, which bars sales inducements unless they're made to all comparable competitors in the market area. And it accused the manufacturer of violating the state's anti-discrimination and unfair competition laws, breach of contract and the implied covenant of good faith and fair dealing.

Barnett Kia is seeking unspecified financial damages.