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Two leasing companies are taking issue with Canada's restrictions on importing vehicles from the U.S. Globe and Mail reports Fournier Leasing and Canadian Auto Associates have filed a class-action lawsuit against Transport Canada and the Canada Border Services Agency alleging they're part of a conspiracy to keep vehicle prices high. BMW Canada, Mercedes-Benz Canada and Mercedes-Benz USA are also named in the suit. The leasing companies claim Canadian import requirements reduce competition and raise prices 20 to 35 percent above similar U.S. models. They also say government restrictions on importers add additional costs. M-B Canada had no comment. BMW Canada said they weren't aware of the lawsuit, which seeks damages in excess of $1b.
15 Comments on “Leasing Companies Sue Mercedes, BMW, and the Canadian Government...”
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“BMW Canada said they weren’t aware of the lawsuit, which seeks damages in excess of $1b.”
Love it.
-Matt
I didn’t know that Canadian Auto Associates leased cars; I’ve been over to their lot before and actually got a pretty good vibe from them – a pretty rare experience for me! (Of course, it could have just been the salesguy I spoke with – most relaxed indep. dealership salesperson I’ve met to date).
I wish ’em success – I’m looking for a new 335i Coupe in the next year or two, and won’t pay Canadian prices. I’ve considered biting the bullet and paying the extra $2k or so in “tax” to the dealer for importation documents and bogus charges (they now want you to swap out the cluster to get KM readings, were before you could just get it repogrammed for free or a few dollars) – it’s still 10k+ cheaper after factoring in the fees. However I’m now thinking that I’ll just stand on principle and look somewhere else; and write a letter to BMW corporate to that affect. Unfortunately BMW is reporting record earnings in Canada this year (don’t know how much is bs), and they really haven’t adjusted their prices much yet…
So what’s this really all about?
The fact that they’ve probably got lots and lots of open-ended leases on the books and face the threat of not only losing current business but the prospect of losing their existing portfolio when it comes time to renew?
Boo-hoo. You lived by the sword when you could offer unbelievable residuals to customers (due to inflated Canadian prices) that had no business in high-end cars, then you could ship `em South when the dollar was low to make a killing in the pre-owned market.
These companies can die by the sword too.
CSJohnston –
I think that the argument that these companies are putting forward is this (bear with me!), at least on the BMW side;
1) The transportation department in Canada (Transport Canada) created a number of guidelines surrounding importation requirements (presumably “safety”, but the “what” is a bit irrelevant). It is up to the manufacturer to identify which vehicles meet or don’t meet requirements and submit this info to “RIV”.
2) A company called RIV (Registrar of Imported Vehicles) handles the documentation process for the government.
3) One of the regulations is that their be no outstanding recalls on a vehicle – typically something that a consumer could request from a dealership – a matter of safety, if you will.
4) BMW is now charging $500 to provide this documentation, though it is freely available from any US dealer, and up until mid-July of last year, also from any Canadian BMW dealer (see more below).
5) BMW is now requiring an inspection ($250-$300?) before providing the documentation – which is absolutely irrelevent to the actual documentation provided (either the recall exists, or it doesn’t – if you don’t know, I suppose you could inspect, but it seems unlikely).
6) One of Transport Canada’s requirements is that the speedo show metric units (ie KM vs Miles), though they need not be the primary markers (ie, having both kmph and mph is fine). An acceptable solution if you don’t have km markers is to actually have stickers affixed to the glass over the speedo, showing the major speed points. In BMW’s case, you can also switch this information yourself through their iDrive system or have the dealership “reprogram” the information for the digital read-out.
7) BMW will currently not release suitable documentation without swapping the entire cluster – to the tune of $1200-$2000 for the cluster & labor. I’ve heard Mercedes doing the same thing.
8) Last I checked, neither BMW nor Mercedes would actually provide a consumer with the cost of any of the work (and in Mercedes case, what work might be required) before actually having the vehicle in their posession.
Basically BMW & Mercedes have created a barrier to importation by refusing to provide documentation without some additional charges/work that is NOT mandated by law. The problem goes further, as they have instructed RIV to NOT accept documentation from US dealers – even though this is exactly where the Canadian dealers MUST source the information (they don’t have access to it from their computers). These changes were implemented late last year – so it’s a “new” thing…
Hi Brendon,
I agree that their claims surround a lot of these needless restrictions but I question what the real reasons are on such a substantial lawsuit.
If we look at what the RIV requirements are plus what looks like to be expensive but still not that expensive set of silly extras BMW and Mercedes impose, it does not seem to me that these leasing companies would stand to lose a whole bunch of money even if they imported the units now. If fact, it is not even a loss but likely a lower margin.
What they want is a clean, unrestricted supply of cheaper units to maintain their lease portofolios which will dry up when customers learn the downside of open-ended leasing.
Sorry, my heart does not bleed for these companies nor the individuals who bought into the “you just can’t lose” promise.
Manufacturers use RIV as the “firewall” for entry of US vehicles into Canada. This “firewall” morphs into different versions and nuances as per the “adjustments” dictated by the manufacturers.
Some manuafcturer’s “adjustments” and constant tinkering with the RIV “firewall” are more blatant than others.
The import firewall administered through RIV should be uniform, and transparent irrelevant of the manufacturer, and should favor the consumer. When manufacturers are permitted to blatantly adjust the firewall to their advantage, and the detriment of consumers, something is amiss.
CSJohnston,
Manufacturers and their franchised dealers are on a trajectory to pressure independent dealers and leasing companies into irrelevance.
That is the BIG PICTURE.
AGR,
So what? Those self same independent dealers and leasing companies made out like bandits when the currency situation favoured them (when franchised dealers were coerced by manufacturers to NOT export units South). They are under no obligation to sell anything unless it is popular and easy to move, they do not have to invest in expensive service and parts businesses (that’s what those dumbass franchised dealers and manufacturers are for).
Now they are caught and if the system now favours manufacturers and dealers, turnabout is fair play. Again, no sympathy.
CSJohnston – I think I misunderstood your initial post (or perhaps not)… The lawsuit dollar amount seems a little unlikely to me, but I take that with most other lawsuit figures as just a random large number that lawyers make up fully knowing that it’ll get knocked down again. I would certainly agree with your statement that BMW/Merc/whoever is under no obligation to any independent dealers – after all, these independents could really damage their (BMW/Mercs/etc) brand through bad customer relations, etc, etc.
All that being said, I thought that this was a class action suit – thus I could participate (having imported a Mini Cooper last summer) as much as anyone else. It was merely these two companies that are big backers, since they have a larger stake in the financials then any one person, and as such would be more inclined to bring suit.
AGR – I’m not sure how these actions are pressuring independent dealers/leasing companies into irrelevance… You’re still going to get a better rate on the imported vehicle (which I assume is their unique offering to the customer), it’s just that their margins will be lower. If this wasn’t a class action suit, merely something brought by these two dealers, it would probably get tossed out pretty quickly… The manufacturers should not be responsible for creating a business opportunity for the indepedents.
And from your posts, I certainly do agree that the RIV process should be uniform (or at least transparent) across the board; creating barriers to obtain recall information certainly sounds like an actionable case.
CSJohnston,
I respect your opinion, although I don’t agree with it. The vehicles that were exported by Canadian independent dealers came from where?
The poor franchised dealer that needs to put up the fancy brick and mortar to keep his manufacturer content. What business is he in? In the business of defending his franchise, or offering value to his customers?
Brendon,
Historically the value of a vehicle was decided by the “market” and the “market desirability” of the vehicle.
In Canada 50% of vehicles are leased, and at some point become lease returns. It is in the best interest of certain stakeholders in the lease returns to protect their interests, at the expense of others.
AGR: What you write may be technically correct, but protecting ones interests does not create a legal issue – even if it is at the expense of a competitor! ;) I’d consider BWM’s or Mercedes’ reasons actually secondary to the lawsuit – I think the crux of the suit (if it is to have any merit) is that the repairs/charges/etc must be shown to be disproportionate or complete irrelevent (ie cluster changes) to the laws currently in place.
I think what this will ultimately boil down to is that BMW (since I’m not familiar with Mercedes requirements) is charging for work NOT required to satisfy transport Canada; but refusing to provide the appropriate non-related documentation without this work. It’s actually analogous to the scalper that can’t charge more then 100% of the face value of a ticket, so they sell you a “hat” (or other merchandise) at a ridiculously inflated rate to maintain a certain profit level. I think there’s probably pretty good case law against this practice in Canada — in the US it’s called a “tying arrangement”, and quite possibly the same in Canada.
Anyhow, should be intersting if nothing else…
Brendon,
I would conclude that legally a Canadian is permitted to import a vehicle from the US and if its less than 15 years old it must go through the RIV process.
If the RIV process is modified and tweaked that a Canadian consumer could be left in “limbo” with a vehicle since the requirements were altered in mid process…who is to blame.
If a Canadian cannot avail himself or is discouraged of the opportunity to save money on a vehicle since certain manufacturers create requirements that become moving targets…is it fair.
Does Levi stop a Canadian from buying jeans in the US? Does Bombardier stop a Canadian or place unreasonable hurdles to buy a jet in the US? I’m sure that planes have to meet stringent safety regulations.
For years the RIV guidelines were static, now there are constant updates, accompanied by warnings to the consumer. If Transport Canada changes their mind every second week with their RIV guidelines, are they enduring the safety and well being of Canadians?
AGR,
Agree to disagree then.
However, the vehicles independents and leasing companies exported South did indeed originate in Canada from Canadian sources, however now these same entities want to import units into Canada that while beneficial to consumers hurt Canadian Business. Businesses that as you say have invested in Canadian bricks and mortar, employ a lot of Canadian workers and pay a great deal of Canadian taxes.
As for the consumer, how many of these BMW and Mercedes customers using leasing companies and independent dealers are themselves protected by Canadian trade or legislative barriers against competition? Lawyers? Doctors? Bankers? Investors? Executives at companies like CP Rail and Air Canada?
Maybe a truly free and fair exchange should apply across all industries.
A small dealer’s perspective. I import for sale and lease pre-owned US vehicles. I also import occasionaly a new vehicle. I’ve been in business since the 70’s. I applaud the efforts of these 2 dealers/leasing companies.
Why is it that other manufacturers allow the free movement of vehicles between our 2 great nations, but these 2 manufacturers do not? GM, Ford, Toyota etc freely supply the buyer the required recall information. Honda gives RIV complete access to the needed info via the internet – you don’t even need a letter.
The answer is: It’s all about money and nothing else. These 2 auto manufacturers mentioned in the suit only care about money. Whether that means keeping their resale values higher – to justify the higher new vehicle prices. Or, whether its because they want to regain some of the lost revenue from not selling a “Canadian” vehicle.
I wouldn’t be suprised if I hear that RIV was getting a kickback from BMW and Benz for enforcing this excessive and unnessasary charge.
I am reading these replies with interest. In respect to the two companies, no matter what their motive I applaud their move. Canadians have been treated second class by automakers for a long time and the dollar parity has made this more evident.
In particular BMW and Mercedes are overcharging for their products in Canada. We just bought an ML350 in Canada, we could have saved at least 20% on it in the US, but decided the hassle was not worth it. We are paying 20% more for a vehicle built in the same plant as a US model. The plant is in the US. One could say that they are protecting their dealers and the US market is much larger. Mercedes dealers are not found in small towns but in big cities with markets comparable or better than in the US. In Vancouver, there are no independent Mercedes dealers, just corporate ones.
I would guess that their costs are no different than a Mercedes dealer in Seattle, except in Seattle it is an independent dealer who carries many lines of vehicles and not just Mercedes. We Canadians are sheep basically. We should have bought a Toyota in the US and just driven it across. The ML belongs to my wife. My next car will be used from the US.
If Walmart USA refused to sell something to someone because they were a Canadian resident everyone would be upset. We have been paying 20%-30% too much for the same car and are forced to and no one cares, but maybe that will change with this lawsuit. good for them.