Dragon

Automakers slapped with $2B lawsuit

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http://www6.autonet.ca/News/story.cfm?stor...4527976-cp.html

by DAVID FRIEND -- Canadian Press posted 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

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why just target the automakers...

i know most books say USD 9.99 CAN 14.99

its called currency exchange...

usually lawyers tell their clients if they have a decent case

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why just target the automakers...

i know most books say USD 9.99 CAN 14.99

its called currency exchange...

usually lawyers tell their clients if they have a decent case

if currency exchange were the reason, then that book and those car's should be 1:1, thats the whole basis of this lawsuit.

I imagine the reason they are going after automaker's and not publisher's is the relative price difference in the products. $3-4 on a book isnt' a big deal and since most people dont' look long term, they just dont' care. $5-10k on the other hand tends to get and keep people's attention

The suit hasn't been certified, and unless they can somehow prove the companies were colluding to keep car prices higher here, I doubt it will be since there are a lot of factor's that make our car's more expensive, including the fact the Canadian car maker's have to make up for profits lost on cars made here and sold to the US

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Many moths ago I saw a few reviews on auto123.com where they complained about the Canadian prices, because even with the exchange rate factored in there was still an overcharge...

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The canadian vehicle prices do need to work their way down to be more in line, but the fact is it takes time. Are all other goods now costing the same as in the US now that the exchange rate is the same? I doubt it. I takes time, welcome to a real-life economy vs playing with paper.

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well shouldnt they go after japan inc, for jacking up prices in their own market?

its not fair for the japanese to pay almost twice what americans pay

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The canadian vehicle prices do need to work their way down to be more in line, but the fact is it takes time. Are all other goods now costing the same as in the US now that the exchange rate is the same? I doubt it. I takes time, welcome to a real-life economy vs playing with paper.

well with Auto sales in america... inflation over the last 15 years has only been like 13%

where as the rest of the goods in america have gone up by as much as 54%

its just highly competative here...

no one can complain about profits...

if this lawsuit were to succeed, one should be able to go from dealership to dealership and complain the price is different...?

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well with Auto sales in america... inflation over the last 15 years has only been like 13%

where as the rest of the goods in america have gone up by as much as 54%

its just highly competative here...

no one can complain about profits...

if this lawsuit were to succeed, one should be able to go from dealership to dealership and complain the price is different...?

I'm not saying prices should be the same, just that they're probably more different than they'll work out to be given some time. With an even exchange rate, the automakers should be coming out further ahead on Canadian vehicle sales. Pricing competition will probably work the Canadian pricing down with time. The lawsuit is dumb.

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Fueled by a crazy guy!

No, a Loonie is a duck.

America was founded by George Washington, which is why he is on your one-dollar bill. Canada was founded by a duck, and so a duck is on our coin, and we call that coin a Loonie.

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No, a Loonie is a duck.

America was founded by George Washington, which is why he is on your one-dollar bill. Canada was founded by a duck, and so a duck is on our coin, and we call that coin a Loonie.

A duck? Well that tells a lot about Canadians then :P

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This is excellent.

The fact is that the CDN dollar has been appreciating VS the US dollar for some time, yet each year (for the most part) the cost of Canadian vehicles continues to go up. The auto makers have had chances to hold the line or even drop the prices a little, but they have continued to increase them. They obviously need this kind of encouragement.

As for the difference in models, daytime running lights cost what? A few dollars? And the bumper issue is a problem on VERY few cars.

The next car I buy I will ask a Canadian dealership for price-parity (or, by that time, perhaps a 10% discount) VS the US price. If they don't do it then I will have to buy a Lexus or a BMW from the US (as they both offer NA-wide warranties and I can't afford a 911 Turbo).

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The suit hasn't been certified, and unless they can somehow prove the companies were colluding to keep car prices higher here, I doubt it will be since there are a lot of factor's that make our car's more expensive, including the fact the Canadian car maker's have to make up for profits lost on cars made here and sold to the US

I'm not sure why Canadians should pay more for a car because an automaker no longer makes as much when they build a car in Canada and sell it in the US. It isn't their responsibility to subsidize the US consumer.

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why just target the automakers...

Because 1) They're an easy target and 2) They're high profile.

Just another law firm trying to make a name for themselves while getting rich off of the backs of others... Typical american bull$h!, but pretty surprising for Canada.

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It's funny though... Not everything in Canada is imported. It still costs the same to manufacture many of those cars in Canada as it did 2 or 4 years ago.

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What about those in England? The EuroZone? The currency exchange rate is even higher in those areas.

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The only thing that can support this lawsuit, is the collaboration between companies to inflate prices, or price fixing. Otherwise, a company has the right to charge whatever they feel like charging, and you have the right to not buy it.

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The law-firm doesn't bank on winning this, or at least I don't think so. They're also suing other companies on separate issues.

What it will do, is give Canadians more incentive to head south for vehicle purchases. I don't see why I should pay $45,000 for a Crew-Cab Silverado LTZ up here, when I can drive down south in an hour, and get one for $35,205. (I kinda can't, due to stupid agreements)

I'm not sure if Canadian dealers assume Canadians are stupid, or don't have internet access, but we'll vote with our dollars. I have absolutely no problem heading State-side to buy stuff, because it's cheaper, and the American's can use some more business these days.

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I'm not saying prices should be the same, just that they're probably more different than they'll work out to be given some time. With an even exchange rate, the automakers should be coming out further ahead on Canadian vehicle sales. Pricing competition will probably work the Canadian pricing down with time. The lawsuit is dumb.

It's just more whining. Pricing is determined by market conditions. Plain and simple.

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For those that know the differences, how much of this price disparity has to do with corporate tax structure differences between the 2 countries?

I assume the price differences don't include any sales or local taxes, which are added on to the MSRP.

But, federal and state/provincial taxes that are paid by employers (taxes on profit, property, matching income taxes/employee "burden," etc.) are hidden in the MSRP. Just like the pretty hefty gas taxes.

Does anyone have any actual numbers that can explain part, all, or none of this disparity?

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Can I have that 45 seconds back...

you know, the time I spent reading about this complete B.S. :P

(good post though Dragon)

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For those that know the differences, how much of this price disparity has to do with corporate tax structure differences between the 2 countries?

I assume the price differences don't include any sales or local taxes, which are added on to the MSRP.

But, federal and state/provincial taxes that are paid by employers (taxes on profit, property, matching income taxes/employee "burden," etc.) are hidden in the MSRP. Just like the pretty hefty gas taxes.

Does anyone have any actual numbers that can explain part, all, or none of this disparity?

I think taxes are a red herring. Here is what happened:

About 30 years ago a Canadian dollar was worth more than a US one. Over the next 30 years the Canadian dollar steadily dropped against the US dollar. During that time the price of Canadian cars increased to cover the exchange rate difference (or at least enough of it). As recently as 2002, the Canadian dollar was worth ~.625 US dollars. I recall that in 2004 a 27,000 USD TSX was going for 37,000 in Canada (no taxes included in either price). Since that time the Canadian dollar has appreciated ~60% VS the US Over the past 5 years. Today? A 2008 TSX in the US is 28,905USD and 37,855 Canadian in Canada. ~37% more in 2004 and 31% today. Or, to look at it another way, Canadians are paying 4,364,174 yen for a TSX (the TSX is made in Japan) and the US is paying 3,320,028 yen.

How long should Canadian consumers wait?

To put it Cheers and Gears terms, if the US suffered from the Candian pricing issues, you would be stuck paying CTS money just to buy an Impala. Don't tell me that wouldn't piss you off to drive around in an Impala knowing that you should have had a CTS for the same money.

Last year I was talking to the Denon rep in my area of Canada. I was complaining about the price difference north and south of the border on Denon's products. I asked when they were going to adjust for the value of the dollar. His response was something to the effect of:

1) Canadian consumers are used to paying this much.

2) He was under the impression that the natural state was for the US dollar to be worth significantly more than the Canadian, and Denon was just waiting for that to be the case again. He may be waiting a long time.

As long as manufacturers use artificial warranty barriers to segment markets they should be subject to these lawsuits.

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It's funny though... Not everything in Canada is imported. It still costs the same to manufacture many of those cars in Canada as it did 2 or 4 years ago.

no it doesnt. a lot of materials used in the manufacturing process are still imported

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