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Lawsuit alleges automakers conspired to boost Canadian prices
David Friend, THE CANADIAN PRESS
September 26, 2007
TORONTO - Several automakers have been slapped with a $2-billion class action lawsuit that claims the industry conspired to artificially maintain car prices in Canada and inhibited cross-border vehicle shopping fuelled by a rising loonie.
The suit was filed with the Ontario Superior Court by Toronto-based law firm Juroviesky and Ricci on behalf of four Toronto residents who bought or leased cars between August 2005 and August 2007.
The plaintiffs say they forked out more money for cars in Canada than they would have for similar or identical models in the United States and are seeking $2 billion in general damages as well as $100 million in punitive damages.
Named in the lawsuit are the Canadian and U.S. divisions of General Motors (NYSE:GM), Honda, Nissan and Chrysler.
"We believe that we have uncovered a conspiracy that has been designed and choreographed by the automobile manufacturers to artificially enhance the price of cars in Canada to Canadian consumers," Henry Juroviesky, the firm's managing partner, said in a telephone interview.
Representatives of the auto dealers and some of the carmakers declined to comment on the lawsuit. However, a spokesman for GM Canada said the company prices its cars and trucks in part after observing what rival automakers do in a competitive marketplace.
As the loonie hovers around parity with the U.S. dollar, many Canadian consumers have questioned why there's such a big price difference between the two countries on many ordinary goods imported from the U.S. - everything ranging from guitars and DVD players to flat-screen TVs, cars, trucks and baby products.
In Wednesday's lawsuit, the plaintiffs allege that the automakers worked together to minimize cross-border competition and limit the number of new cars that crossed the border. As well, the lawsuit alleges that the companies breached both the Competition Act and the Consumer Protection Act in Canada.
"Cars on an absolute basis are just cheaper in the United States and one has to wonder why. When you go and try to exercise that reasonably available efficient alternative, you're stopped," Juroviesky said.
"Tinkering has been done, we allege, with the market forces that don't allow a downward adjustment to Canadian auto prices of an efficient alternative supply."
Included in the allegations are claims that the automakers agreed not to honour warranties for vehicles purchased across the border, forcing Canadian consumers who wanted a manufacturer's warranty to pay 25 to 35 per cent more on average for a vehicle in Canada.
"It would be expected under natural laws of competition that if not for the defendants' conspiracy to artificially maintain their domestic prices in the U.S. at historical levels, the prices of U.S. domestic goods would have fallen to approximate the price levels of the readily available Canadian alternative," the suit said.
None of the allegations have been proven in court and the suit has yet to be certified officially as a class action by a judge.
The suit also claims some auto sales contracts included "no-export clauses" that prevented buyers from taking their cars from the U.S. to Canada, or vice-versa.
It also alleges manufacturers penalized dealers if the cars they sold were later exported, either by threatening to delay shipment of certain models or issuing "chargebacks."
Also named in the suit are the Canadian Automobile Dealers Association, or CADA, and its Viriginia-based U.S. equivalent the National Automobile Dealers Association.
CADA spokesman Huw Williams said that as of Wednesday afternoon the association had yet to receive a copy of the suit.
"We're obviously not prepared to either comment on it or anything revolving around it," Williams said from Ottawa.
Representatives for Honda and Nissan did not return calls for comment while Chrysler declined to discuss the suit.
In the United States, a similar pricing lawsuit is being heard at a court in Maine which involves both U.S. and Canadian automakers and dealers. The suit, filed in 2003, claims that Americans were denied warranties for vehicles they bought in Canada when the U.S. dollar was well above the loonie.
It's hard to ignore the sometimes drastic price differences between Canada and the United States, which are more apparent on higher-end models.
For example, the 2007 Honda Accord Sedan starts at C$25,090 in Canada while it costs US$20,360 in the United States. The higher end Cadillac Escalade EXT starts at C$71,730 while it sells for US$55,045 south of the border.
Vehicles cited in the suit include a leased Jeep Grand Cherokee Overland, which it says under a lease had a sale price of C$58,645 while it was advertised in the U.S. at less than US$40,000. A GMC Yukon Denali was purchased by one of the plaintiffs for C$69,615 while it was priced at US$50,000 stateside.
While GM Canada spokesman Stew Low declined to comment on the specifics of the case, he said GM prices its vehicles by observing how fellow automakers are acting in Canada.
"It's an extremely competitive marketplace," he said in an interview. "We price to what we believe we need to do to be competitive in the various segments."
Low also noted that regulatory differences between Canada and the U.S. can drive up so-called logistics costs. He said daytime running lights and higher bumper standards increase the cost of vehicles, such as the bumper system on the Corvette, which he says is "totally unique" in Canada.
The class action suit materialized just as Porsche announced on Tuesday plans to chop Canadian prices on its 2008 models by an average of about eight per cent.
"We cannot ignore our customers and dealers in Canada who can look to the U.S. and recognize a substantial price difference," Peter Schwarzenbauer, president of Porsche Cars North America Inc. said in a release.
But Juroviesky said the move was "too little, too late."
"Even if they're lowering their prices by 10 to 15 per cent that's not enough and they should've thought about that two and a half or three years ago when the dollar flipped," he said.
-
TORONTO - A sample of current manufacturer suggested retail prices for automobiles in both the United States and Canada:
-Honda Accord Sedan 2008
Canada: C$25,090
U.S.: US$20,360
-Honda Odyssey 2008
Canada: C$33,300
U.S.: US$25,645
-Cadillac Escalade EXT
Canada: C$71,730
U.S.: US$55,045
-Chevy Monte Carlo
Canada: C$25,230
U.S.: US$21,700
-Nissan Maxima 3.5 SE
Canada: C$36,998
U.S.: US$28,130
Lawsuit alleges automakers conspired to boost Canadian prices
David Friend, THE CANADIAN PRESS
September 26, 2007
TORONTO - Several automakers have been slapped with a $2-billion class action lawsuit that claims the industry conspired to artificially maintain car prices in Canada and inhibited cross-border vehicle shopping fuelled by a rising loonie.
The suit was filed with the Ontario Superior Court by Toronto-based law firm Juroviesky and Ricci on behalf of four Toronto residents who bought or leased cars between August 2005 and August 2007.
The plaintiffs say they forked out more money for cars in Canada than they would have for similar or identical models in the United States and are seeking $2 billion in general damages as well as $100 million in punitive damages.
Named in the lawsuit are the Canadian and U.S. divisions of General Motors (NYSE:GM), Honda, Nissan and Chrysler.
"We believe that we have uncovered a conspiracy that has been designed and choreographed by the automobile manufacturers to artificially enhance the price of cars in Canada to Canadian consumers," Henry Juroviesky, the firm's managing partner, said in a telephone interview.
Representatives of the auto dealers and some of the carmakers declined to comment on the lawsuit. However, a spokesman for GM Canada said the company prices its cars and trucks in part after observing what rival automakers do in a competitive marketplace.
As the loonie hovers around parity with the U.S. dollar, many Canadian consumers have questioned why there's such a big price difference between the two countries on many ordinary goods imported from the U.S. - everything ranging from guitars and DVD players to flat-screen TVs, cars, trucks and baby products.
In Wednesday's lawsuit, the plaintiffs allege that the automakers worked together to minimize cross-border competition and limit the number of new cars that crossed the border. As well, the lawsuit alleges that the companies breached both the Competition Act and the Consumer Protection Act in Canada.
"Cars on an absolute basis are just cheaper in the United States and one has to wonder why. When you go and try to exercise that reasonably available efficient alternative, you're stopped," Juroviesky said.
"Tinkering has been done, we allege, with the market forces that don't allow a downward adjustment to Canadian auto prices of an efficient alternative supply."
Included in the allegations are claims that the automakers agreed not to honour warranties for vehicles purchased across the border, forcing Canadian consumers who wanted a manufacturer's warranty to pay 25 to 35 per cent more on average for a vehicle in Canada.
"It would be expected under natural laws of competition that if not for the defendants' conspiracy to artificially maintain their domestic prices in the U.S. at historical levels, the prices of U.S. domestic goods would have fallen to approximate the price levels of the readily available Canadian alternative," the suit said.
None of the allegations have been proven in court and the suit has yet to be certified officially as a class action by a judge.
The suit also claims some auto sales contracts included "no-export clauses" that prevented buyers from taking their cars from the U.S. to Canada, or vice-versa.
It also alleges manufacturers penalized dealers if the cars they sold were later exported, either by threatening to delay shipment of certain models or issuing "chargebacks."
Also named in the suit are the Canadian Automobile Dealers Association, or CADA, and its Viriginia-based U.S. equivalent the National Automobile Dealers Association.
CADA spokesman Huw Williams said that as of Wednesday afternoon the association had yet to receive a copy of the suit.
"We're obviously not prepared to either comment on it or anything revolving around it," Williams said from Ottawa.
Representatives for Honda and Nissan did not return calls for comment while Chrysler declined to discuss the suit.
In the United States, a similar pricing lawsuit is being heard at a court in Maine which involves both U.S. and Canadian automakers and dealers. The suit, filed in 2003, claims that Americans were denied warranties for vehicles they bought in Canada when the U.S. dollar was well above the loonie.
It's hard to ignore the sometimes drastic price differences between Canada and the United States, which are more apparent on higher-end models.
For example, the 2007 Honda Accord Sedan starts at C$25,090 in Canada while it costs US$20,360 in the United States. The higher end Cadillac Escalade EXT starts at C$71,730 while it sells for US$55,045 south of the border.
Vehicles cited in the suit include a leased Jeep Grand Cherokee Overland, which it says under a lease had a sale price of C$58,645 while it was advertised in the U.S. at less than US$40,000. A GMC Yukon Denali was purchased by one of the plaintiffs for C$69,615 while it was priced at US$50,000 stateside.
While GM Canada spokesman Stew Low declined to comment on the specifics of the case, he said GM prices its vehicles by observing how fellow automakers are acting in Canada.
"It's an extremely competitive marketplace," he said in an interview. "We price to what we believe we need to do to be competitive in the various segments."
Low also noted that regulatory differences between Canada and the U.S. can drive up so-called logistics costs. He said daytime running lights and higher bumper standards increase the cost of vehicles, such as the bumper system on the Corvette, which he says is "totally unique" in Canada.
The class action suit materialized just as Porsche announced on Tuesday plans to chop Canadian prices on its 2008 models by an average of about eight per cent.
"We cannot ignore our customers and dealers in Canada who can look to the U.S. and recognize a substantial price difference," Peter Schwarzenbauer, president of Porsche Cars North America Inc. said in a release.
But Juroviesky said the move was "too little, too late."
"Even if they're lowering their prices by 10 to 15 per cent that's not enough and they should've thought about that two and a half or three years ago when the dollar flipped," he said.
-
TORONTO - A sample of current manufacturer suggested retail prices for automobiles in both the United States and Canada:
-Honda Accord Sedan 2008
Canada: C$25,090
U.S.: US$20,360
-Honda Odyssey 2008
Canada: C$33,300
U.S.: US$25,645
-Cadillac Escalade EXT
Canada: C$71,730
U.S.: US$55,045
-Chevy Monte Carlo
Canada: C$25,230
U.S.: US$21,700
-Nissan Maxima 3.5 SE
Canada: C$36,998
U.S.: US$28,130
