You know it's serious when the lawyers get involved ...
TORONTO — Several automakers have been slapped with a $2-billion class action lawsuit that claims the industry conspired to inflate 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 cars between August 2005 and August 2007.
The plaintiffs say they forked out more money to buy 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 (NYSE
“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.
He claims the auto industry reached its goal “by instituting a series of offensive business practices that we allege violate the Competition Act.”
The plaintiffs said the automakers worked together to minimize cross-border competition and limit the number of new cars that crossed the border.
“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.
None of the allegations has been proven in court and the suit has yet to be certified officially as a class action.
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 (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 it,” Williams said from Ottawa.
The class action suit materialized just as Porsche announced on Tuesday plans to chop its Canadian prices on 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.
—— THE CANADIAN PRESS