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Class Action Lawsuit

Carmakers Blocked Canadian-U.S. Imports

February 20, 2003
A Boston law firm has filed a class action suit against major automakers, claiming they conspire to prevent Americans from buying new cars in Canada, where prices are about 30 percent less than in the U.S.

"Carmakers have rigged the deck," said Joseph Tabacco Jr., a partner in the Boston law firm of Berman DeValerio. He said automakers refuse to honor warranties and punish Canadian dealers who sell new cars and trucks to Americans, as ConsumerAffairs.com reported last May(story).

The situation is similar to prescription drugs, which are much cheaper in Canada than in the U.S. Seniors groups have been highly critical of GlaxoSmithKline for cutting off supplies to Canadian pharmacies that had been selling drugs to Americans. (story)

Prices are generally lower in Canada than in the U.S. because Canadians have less take-home pay as the result of lower pay scales and higher taxes. A weak Canadian dollar also hinders their ability to buy imported goods.

Tabacco said the auto industry was all in favor of the North American Free Trade Agreement, but only when it works to their advantage. When free trade began reducing their profits, they "broke the law to keep prices high," he said.

The suit names General Motors, Ford, DaimlerChrysler, Toyota, Honda, Nissan, BMW and the American and Canadian dealers associations.

The lawsuit says there are no major differences between the American and Canadian versions of cars, other than metric instruments and minor variations in safety and emissions standards.

Industry publications estimate the number of new cars and trucks that make their way from Canada to the U.S. at somewhere between 5,000 and 100,000 a year. Many are brought into the U.S. and resold by brokers, rather than by individual consumers.

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