06/14/2012 07:42 EDT | Updated 08/14/2012 05:12 EDT

U.S. Car Dealers Refusing Canadians Illegally, Prof Says


Automakers are breaking U.S. law in order to prevent Canadians from buying cheaper cars there, according to an Ottawa trade lawyer and anti-trust expert, by ordering their American licensed dealerships not to sell new cars to Canadians.

The big five automakers — Ford, GM, Chrysler, Honda and Toyota — fear they could lose their Canadian franchises if people were crossing the border to buy their vehicles, says Michael Hart, who holds the Simon Reisman chair in trade policy at Carleton University.

This forces Canadians to buy from dealerships north of the border, where prices tend to be thousands of dollars higher.

The Canadian prices for Canadian-made vehicles tend to be lower or on par with American prices for the more affordable vehicles like the Honda Civic or Toyota Corolla, consumer advocates have told CBC News.

But for more expensive vehicles, the price differences are particularly noticeable, especially considering the relative dollar parity between Canada and the United States.

Dealerships fear breaking rules

Hart added the companies are guilty of "refusal to deal," which is an automatic offence under U.S. anti-trust laws, but the government is not acting to help consumers.

"It can also be solved, in part, by the government," said Hart. "I mean the government can reduce the current incentives not to buy in the U.S."

Jack Backus, who owns Backus & Sons GM in Ogdensburg, N.Y., said he received a letter five years ago from General Motors directing him to sell only to Americans.

The dealer sales and service agreement included a clause that authorized his dealership to sell "only to customers located in the United States".

A Chevrolet-Oldsmobile dealership owner in Massena, N.Y., confirmed he has received a similar letter from GM. He said the first-time breaking the rule would only lead to a slap on the wrist, but after a few sales there is a fear he would lose his business.

Customs system discouraging

Hart added the Canadian government has played its part, too, in setting obstacles for Canadian car buyers who want a deal. The paperwork is both complicated and costly, costing hundreds of dollars depending on the vehicle.

"The whole customs system is set up to discourage Canadians from going down to the U.S. and saving money," he said.

Hart also alleged car companies are making purchases less attractive by refusing to honour warranties on their own models when Canadians buy them in the U.S.

He said there is currently a class-action suit in a U.S. court against several automakers alleging anti-competitive practices, but it has lagged there for many years.

The Competition Bureau has said in an email response it conducts its investigations confidentially and so would not comment on whether it had received any complaints about anti-competitive practices by car manufacturers or whether it has any investigations on the subject.

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