Automakers to face $2B class-action for Canadian price discrepancies
A few days ago we posted on the price discrepancy between identical vehicles sold in the U.S. and Canada. The discrepancy was always there, but became apparent when the value of the Canadian Loonie reached parity with the U.S. dollar recently. It was then that consumers couldn't ignore the fact that they were paying more for vehicles than their U.S. neighbors, up to 38% in some cases.
The Toronto-based class-action lawsuit firm Juroviesky and Ricci is taking up the case and expected to file a $2 billion class-action suit on behalf of four Canadians who feel that they paid more for their cars than they would have in the U.S. The class-action suit is open to any Canadian consumer who bought a new vehicle between August, 2005 and August, 2007 when the Canadian dollar was rapidly appreciating, but the prices of Canadian cars weren't adjusting.
Thanks for the tip, SS3!
[Source: Canada.com, photo by KAREN BLEIER/AFP/Getty]
The fact that cars cost more in Canada is hardly new information, and many Canadians simply cross the border and buy their new cars in the U.S. The class-action lawsuit, however, also charges that automakers conspired to inhibit this practice by making consumers sign "no-export clauses" preventing them from returning to Canada with their cars, as well as refusing to perform warranty work on cars purchased in the United States. Even dealers have gotten caught up in the mix, with U.S. dealerships allegedly being penalized for selling cars that were later exported and Canadian dealers threatened with termination if they didn't comply with these practices.
The lawsuit also names the Canadian Automobile Dealers Association and the National Automobile Dealers Association in the U.S as defendants. Cases like this have been brought up before apparently, but have been long, drawn out affairs with little ultimate effect on the issue at hand. With the Loonie and US dollar at hovering around parity, however, the discrepancies are now shockingly apparent.
Reader Comments (Page 1 of 4)
Darrell 2:09PM (9/26/2007)
Classic international finance question. However, Price != Cost != Value. I used to mock americans all the time (okay, not used to, every chance I can get) because they didn't understand this. Now I get to mock Canadians too?
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mike m 2:21PM (9/26/2007)
I'm all for lower car prices here in C, but a class-action lawsuit seems a bit over the top. Does anyone know which manufacturers were imposing the "no export" clauses and which penalized dealers. I know Audi can't be one of them because I explored this avenue last year and spoke to a US dealership as well as Audi Canada about this. There was no problem from Audi's perspective. The US dealer did say that my future Canadian dealer might not be very curtius because I didn't buy it from them.
Porsche announced that they will be dropping their prices around 5-8%. So someone is starting!
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sw 3:19PM (9/26/2007)
What some manufacturers have done is void the warranties on what's essentially the same product if you buy a car in the U.S. and import it to Canada. Driving television also did a segment where some dealers didn't want to sell the car when they found out it was destined for Canada. All in all it's pretty crappy when a car in Canada costs more after all the duties have been paid for a U.S. vehicle. It's even worse when the dollar is now at par.
Johnny Rotten 2:25PM (9/26/2007)
Holy WTF Batman. Are these people f'n stupid. What are they suing for? Collusion? Maybe Germans should sue BMW since their cars cost significantly more there than here in the USA. Or maybe drivers from the UAE should become idiots like the canadians in this suit and sue their government for making cars cost more due to taxes. What a bunch of crap. Scumbag plaintiff's attorneys are always looking for an easy buck to steal.
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MiniMe 2:38PM (9/26/2007)
What are they suing for? Turn on your brain and start thinking.
When Canadian Dollar was 0.66 US then it made sense that a car in the US was sold for $20K while in Canada for $30K. Now 1 CAD = 1 US so the same car is in fact 1.5 times more expensive in Canada.
Given that salaries are somewhat similar 20K in Canada will be similar to 20K in the US why are the Canadians paying more?
The reason is simple. If GM builds a car in Canada (as it does) and then sells it in the US for $20K it makes some money. If the same car is sold in Canada then it will make some money + $10K. Before that $10K compensated for the conversion rate differnce. What about now? 1 CAD = 1 US. Hence automakers make extra money and Canadians get ripped off.
Johnny Rotten 2:50PM (9/26/2007)
So f'n what. If you people are paying for it, you obviously think its still an acceptable deal. Its call micro-economics. Supply and Demand. So what if GM sells cars at a different price somewhere else. If you don't like the price they offer you, negotiate or don't buy. No one is forcing you to buy. If it was efficient for automakers to sell their cars at a lower price in Canada, one of them would and would reap all of the profits since the competitors were over-priced. Obviously this is not the case, so it seems your market is in equilibrium. You sir are the one who needs to turn on your brain and start thinking, or at least take a basic course in economics.
ello 3:02PM (9/26/2007)
MiniMe, market dictates the price. Canadian market compared to US is a tiny one, thats why automakers can afford to sell basically the same vehicle in US for a lesser price as they will simply sell more of them quantity wise. They may not make the sam eprofit per car but the overall profit is not even close due to larger quantity of cars sold.
Besides, Euro has been higher than the dollar for over 4 years now, and yet prices in Europe for same goods are also much higher than in USA. Maybe if Canada wasn't a socialistic country and get taxed for everything, the prices would be a bit lower.
Again, you can't just convert currencies to get the prices, it's much deeper than that. Each market is specific, has different regulations, tarrifs/taxes, size etc etc. And what if in the next 3 years the Canadian dollar will lose it's value, will the prices need to be readjusted? Currency fluctuates on daily basis, should we change prices on daily basis? Just learn to live with it or move to USA.
MiniMe 3:42PM (9/26/2007)
People pay because they need to drive. If gas prices went up to a $20 a gallon people still will buy it. And the fact that people will buy it is not enough justification for artificially keeping the prices up. Of course it is a free market, and class-action suits are part of it. So let's hope that part will win.
Firley 3:36PM (9/26/2007)
Mini-me, the salaries in Canada and the US are NOT roughly equal.
How would the CAW respond if the automakers told them, "because of the exhange rate, you guys are now charging us way more for labor than the guys in the US, so now you need to lower your prices. 30% pay cuts for everyone." And that could go for every company that operates in Canada and the US...
Furthermore, this is purely a case of people being mad because they see someone else (Americans) allegedly getting a better deal. Nothing is actually costing Canadians any more. The cars cost the same amount in Canadian dollars as they did last year, and Canadians make the same amount of money in Canadian dollars as they did last year.
Honestly, the whole thing is like when you give your kid an ice cream cone, and he loves it, and then sees another kid with a bigger ice cream cone and decides he's getting ripped off.
LeRobert 4:41PM (9/26/2007)
@Johnny
You are the one who needs a course in macroeconomics. With the price level that all Canadian consumer goods are priced at now, our economy is in for quite a bit of inflation. The free market can only work if the corporations don't collude implicitly, which, unfortunately, is not the case in the Canadian car market currently. The USA is our biggest trading partner, i.e. most of our imports are American, so there is reason for the price level to adjust as a result of our currency's appreciation.
The plantiffs in all likelihood will not win, but hopefully corporations will get the message.
psarhjinian 8:38PM (9/26/2007)
You can compare car prices between the US and Canada for the same reason you can do so between, say, France and Germany: they're geographically adjacent and in economically similar climates.
I can accept things being slightly more expensive, but this is gouging, plain and simple. Automakers got used to the margins that they were getting when the dollar started to rise and they do not want to give it up.
I can understand that they cannot roll back MSRP without wrecking the value of prior years' cars and inducing even more ill will, but they could have:
* Done price decreases gradually over the last 2+ years as CAD has been rising steadily. They didn't because this wouldve eaten into margins
* Used PDI as a buffer. This would have isolated MSRP from market forces like currency and transportation. Unfortunately, Canadian divisions have been gouging this way for years ($1400 PDI? WTF!?!). Again, they got addicted to the revenue stream.
Whomever breaks ranks amongst the automakers (Porsche doesn't count--they're a niche brand with wicked margins already) will make a killing.
Chris 2:34PM (9/26/2007)
It's not just cars either. Many products like such as books and magazines and CD's / DVD's carry a price discrepancy that has always been explained away by the difference in the currencies. That excuse no longer exists and now people are looking for accountability. Should be interesting.
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Shadyman 3:11PM (9/26/2007)
Gas, too. They say that gasoline is on average $1USD/US Gallon more expensive in Ontario than in Florida.
JMa 2:31PM (9/26/2007)
Porsche is lowering all of their 2008 prices by 10% in Canada due to the potential lost business. It will be interesting how many/if any other manufactures follow suit (source: http://www.reportonbusiness.com/servlet/story/LAC.20070926.RPORSCHE26/TPStory/robNews)
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suspekt360 2:32PM (9/26/2007)
Okay
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T Randell 2:34PM (9/26/2007)
Perhaps the real question is why are US cars still so cheap given the US $$ deprecication NOT why are Canadian cars so expensive. I suggest Canadians go to the US quickly to but thier car before the US prices adjust to the weak US dollar!
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ello 3:04PM (9/26/2007)
Currency value is based mostly on speculation and doesn't really reflect the inner markets. If that were the case then US would pretty much go through a HUGE recession given US Dollar lost it's value towards most major currencies.
It all pretty much is simple, US gov't is in big debt because of wars in Iraq and Afghanistan mostly with Chinese and since all their transactions/loand are in US dollars, whats the better way to decrease the amount of debt then to decrease the international value of dollar and invest in other currencies? I am pretty sure US Dollar will bounce back, definately not tomorrow but after Bush and after US withdraws from Iraq the value should go up.
Kowell 2:35PM (9/26/2007)
I don't care much for the lawsuit but those prices need adjustments... trucks that cost 30000$ in the US cost 40000$ in Canada.
When the canadian dollar was lower, they kept telling us that price management was necessary to make cars profitable. The logic at the time was that 40000$ CAD x exchange rate = 30000$ US. All fair... but now that both dollars are worth the same, car manufacturers have the audacity to tell us that their own logic "doesn't apply in this case"... That's the most frustrating part.. that they tell us just like that that the very logic THEY used when the situation was profitable to them, no longer applies when the situation becomes profitable to US.
We pay the same overcharged price for cars but they now make 150% profit when bringing the money back... That 40000$ CAD truck that used to bring them 30000$ US (parity with USD price) now brings them 40000$ US.... THAT'S the problem....
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Jay Evans 2:37PM (9/26/2007)
Gee, when I bought my 2002 Mazda6, the Canadian version of the same car had a retail price (with currency conversion) that was less than my dealer's invoice price.
I wonder if Canadians would like to pay back Mazda the difference now?
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MiniMe 2:43PM (9/26/2007)
You got ripped off, brother. The same dealer could have sold it for half of what you paid.
The fact is $20K car in US will be $30 in Canada.