US car dealers turn away Canadian new-car buyers - is that legal?

Now that the Canadian dollar has reached parity with the US dollar (1
USD = 1CDN), the media here in Canada is running many news items
pointing out that US car dealers are turning away Canadians who want
to plunk down cash to buy a new car.

The dealers say that their franchise agreements prevent them from
selling vehicles to people who live outside their territory. I
remember from a few years ago where there were moderate differences in
prices in the Chicago area and all sorts of games were being played
(both by customers and dealers) to sell cars to people outside a
dealer's franchise area.

In any case, it seems like some of the off-brand vehicles (Hundai sp?,
Suburu sp?) are more likely to look the other way and sell to
Canadians.

But I'm wondering if franchise agreements that contain
geographic-based sales clauses are violating any trade laws that may
be on the books in the US, and hence could be used to break this rule
and open the floodgates to the many Canadians that are ready to save
$4k to $30k on a new vehicle.

In the mean time, can anyone point to entities called "independent
dealers" who buy new vehicles and turn around and re-sell them (as
used) even if they haven't been used?

 

They'll try anything to protect their excess profits from Canadians.

Several years ago when the CDN$ was about 0.67 US the shoe was on the
other foot. In the west Americans came from Washington and Alaska to buy
their vehicles at a discount in Canada.
A Vancouver, BC area Chrysler dealer had quite a business selling Neons
to USA buyers. The dealer split the C$4k difference with the USA buyer.
After several threats from Chrysler that dealer actually lost their
Chrysler franchise.

Some manufacturers, such as Honda, have stated they won't honor warranty
work on cross border vehicles.

I don't remember the name, but I did see on TV several weeks ago a
Toronto independent dealer importing USA cars.

This is one way it is done:
http://www.canada.com/vancouversun/news/story.html?id=2eaf555f-83ff-4a71-
abe4-1ac2e48da188&k=88155

The problem right now is Canadian buyers are buying lots of vehicles.
If buyers simply went on strike for a month or two, I'll bet things
would change.

Porsche just made an announcement of an 8 to 10% price reduction in
Canada.

 

Interesting. The EU has made restrictive practices illegal. Anyone can buy
any car from anywhere.

Earlier, manufactures would insert hurdles. E.g. when I bought a car in
Germany to bring to Britain I had to wait 2 years (mid-eighties); Mercedes
were quoting this lead time for RHD vehicles.

All gone and 6 years ago I bought another Merc in Germany and had no
problems, though I had to pay significantly more for RHD (but less than in
UK).

DAS

For direct replies replace nospam with schmetterling
---

 

"Who" has it wrong. I worked for DC in Western Canada during the Exporting
times in the mid 90's through early 2003. No dealer lost there franchise for
exporting vehicles. That is against the law. There is no law stating that a
US person cannot buy a vehicle in Canada. However the law stated that all
vehicles "sold within Canada" must meet Canadian Federal safety vehicle
standards" If you look at the vehicles in Canada you will have the sticker
stating that in your car. The US has the exact same sticker and wording for
the US. So if an american purchased a vehicle from Canada and brought it
down to the US the Vehicle's warranty was voided by DaimlerChrysler because
technically it does not meet US safety laws. After the first year of
exporting to the US DC re-wrote the dealer agreements stating any vehicle
found to have been exported outside of Canada is against the franchise
agreement, but the punishment was a chargeback of any warranty repairs done
on the vehicle prrior to being reported exported, as well as all rebates
paid to the dealer.

 

You are missing the point of my original post.

I said NOTHING about the issue of EXPORTING or IMPORTING.

I an talking about a Canadian walking into a US car dealership and
plunking down cash to buy a new car, then putting his own plates on
the car and driving it off the lot. The Canadian customer is the one
who will be importing the car back into Canada, and who will have to
deal with any regulatory, compliance, or tax issues.

The point is that the US dealerships are saying that their franchise
agreements prohibit them from selling cars to Canadians - the reason
being that their sales territories (or customer residency addresses
restrictions) are strictly defined in the franchise agreements.

I'm wondering if there are US laws (constraint of trade, etc) that
would make such clauses illegal.

For example, can a General Motors franchise agreement in Dallas say
that I am not allowed to sell a new car to a resident of Fort Worth?
Would such a clause violate any existing state or federal trade laws?

If indeed Americans came to Canada 5 to 10 years ago and bought new
cars (NEW cars) right off the lot, then why weren't the dealerships
afraid of violating their franchise agreements? Weren't the same
restrictions in their franchise agreements as we are being told are in
the US dealer's agreements?

 

I realize that this isn't exactly what you're talking about, but
Pennsylvania has a 6% sales tax. Allegheny and Philadelphia Counties
have a 1% sales tax, thus making a 7% sales tax paid on items
purchased there. If a person goes to a surrounding county and makes a
major purchase they can save 1%. BUT, eventually you will be billed
for the 1% if the out of County dealer didn't collect it. And now they
notify the county if you make major purchases other than vehicles,
ie., appliances, furniture, etc..

 

With a cash and carry situation, it is fairly simple to get around some
taxes. Registering a motor vehicle is much different. I don't know how the
Provinces work, but here, you cannot register a vehicle unless the proper
taxes are paid. Importing can subject you to certain regulations also
since the vehicle must comply with Federal regulations for emissions and
safety.

All of that said, I don't see why a dealer should turn away a buyer that
walks into his store. I can see where GM may want the dealer to refuse so
they can keep the Canadian dealers happy, but I doubt any laws can be made.

 

Canadian dealers have the same restrictions on selling new vehicles to
US purchasers. There are even stickers on the vehicle that state "not
intended for sale in the US', or something like that. There is no
problem selling into neighbouring cities, or provinces, as I understand
it, just across international boundaries.

 

My question remains.

Do US franchise agreements between CAR DEALERS ->and<- AUTO MAKERS
(such as Ford, GM, Chrysler, Toyota, Honda, Nissan, Volkswagon, BMW,
Mercedes, Volvo) stipulate that they cannot sell new vehicles to
purchasers with out-of-boundary primary residential addresses?

Can a dealer in Michigan refuse a sale to a resident of Ohio, for
example?

Are there not US trade laws (restraint of trade?) that would make such
a practice illegal?

Would it be the case that the prohibition of selling to a Canadian
customer is technically illegal, but the Canadian customer has no
recourse under US law?

 

There are no such laws. Franchise dealers have no obligation to sell to
anybody, just as they have no obligation to sell at a particular price.

There are restrictions when it come to which VEHICLES can be sold in some
instances, however. I. E. cars sold in states that do not require
California emission system can not be sold in states that do, like the
states in New England. Even that does not restrict the dealer from selling
the car, but it does prevent it from being licensed in that state. In other
words a vehicle without California emission, that would be driven only on
private property, but not only the public highways, could be sold in a
California emission only state.

mike

 

Yes they have agreements that state where a dealer can sell vehicles.
They don't restrict the dealer from selling to other customers they just
state that Joe-Bobs Chevrolet will be the only authorized dealer for a
certain area, and that the company won't set up another dealer for a set
time period.
As for restricting the sales to other areas, it depends on the federal
and state emission and safety laws. In NY for example a NEW vehicle must
meet NY standards (which are the same as California) You cannot buy a
vehicle new in another state and register it in NY unless it meets those
standards.

As for buying in Canada and registering it in the US. It is usually
restricted due to the emissions and the high importation fees. Those are
Federal importation rules. Same ones that apply if you buy a Ferrari and
try to import it. They have to go through a Federal inspection and
retrofit so they comply with the laws in the US. Doesn't matter if the
car was bought in Canada or Africa they still have to be imported the
same way.

The same import restrictions apply taking the vehicle into Canada.
No laws saying that those restrictions are illegal exist.

The dealer can refuse to sell to anyone. They own the vehicles and can
sell or not sell to whomever they please. They can even have you removed
from the dealership and arrested for trespassing if they desire.


--
Steve W.
Near Cooperstown, New York
NRA Member
Pacifism - The theory that if they'd fed
Jeffrey Dahmer enough human flesh,
he'd have become a vegan.

 

there may be an issue with warranty as well. I had a Ram 3500 pick up
come in with the check engine light on. we found it needed a gas cap but
warranty would not cover it because the vehicle was manufactured and
sold in Mexico. we were told the vehicle has no warranty in the USA.

 

Can a Denny's refuse to serve or do business with black customers?
There is no law against it?

Why would a franchise owner refuse someone paying MSRP, paying in cash
(or bank draft, or some other registered security) ???

Why do US dealerships say that it's their FRANCHISE AGREEMENT that
prohibits them from selling to Canadians?

What salesman would be happy with the franchise owner nixing such a
sale?

Why are we hearing reports of US dealerships getting letters from auto
makers reminding them that they can't sell to Canadians?

What about this:

http://en.wikipedia.org/wiki/Restraint_of_trade

 

We are not talking about restrictions on where (physically,
geographically) a dealer can operate from.

We are talking about a US dealer refusing to sell a new car to a
Canadian customer soley on the basis that the customer is Canadian.

There is no question as to the ability of the Canadian to produce
funds or sufficient payment. There is no issue as to how the Canadian
customer moves the purchased vehicle away from the dealership to it's
destination (where-ever that may be). The sale is not contingent on
the dealer delivering the car to the Canadian customer's place of
residence, or a responsibility to insure the car can be registered for
operation in the customer's jursidiction.

Restraint of trade laws say that it is illegal to have a contract
between two parties that restricts trade between them.

That would make it illegal for a car maker to have a clause in a
franchise agreement stating that the dealer is prohibited from selling
products to specified persons or groups.

If a GM franchise agreement with a Detroit car dealership states that
the dealership can't sell new cars to Canadian citizens, then couldn't
a MacDonald's franchise agreement have a clause saying that Big Mac's
can't be sold to blacks?

Are you saying there is no law that would make such a clause illegal?

 

For the last time.

This is not about warranties,
This is not about emmissions or other regulations
This is not about import/export issues, duties or taxes

This is about a Canadian walking into a US dealership and plunking
down a money order or cashiers check for the full MSRP window-sticker
(Monroney) amount for a given new vehicle (plus any applicable state
or local retail sales tax) and loading the vehicle onto a flatbed
truck and driving away with it.

Why on earth would a US car dealer turn away a sale like that?

The reason being offered is that the FRANCHISE AGREEMENT prohibits
sales to Canadians. So I'm asking if such an agreement is legal,
given restraint-of-trade laws.

 

I have no horse in this race, but from a legal standpoint, blacks are a
protected class. Canadians are not.

Bill Putney
(To reply by e-mail, replace the last letter of the alphabet in my
address with the letter 'x')

 

Blacks: Protected class.

Canadians: Not protected class.

Certain laws trump others.

Bill Putney
(To reply by e-mail, replace the last letter of the alphabet in my
address with the letter 'x')

 

Ok, replacem blacks with Asians, or native indians.

Ok, what law trumps what other law then?

 

Yes it is legal. Restraint of trade has NOTHING to do with Federal
Import/Export laws.

 

A franchise agreement is a private contract. If the franchisor
stipulates a condition that the franchisee cannot sell across an
international boundary, then the franchisee has to choose to honour, or
defy the conditions of the agreement. If the penalty for breaching the
contract is loss of the franchise, then that is the result.

I believe that only discrimination that you can't include in a contract
would be areas protected by constitutional provisions, or by specific
legislation. Certainly here in Canada protection from racial
discrimination is provided by the Charter of Rights. Any service
business has the right to refuse service to anyone they choose, as long
as it does not violate Charter Rights.

Ford operates in Canada as a separate company, Ford Motor Company of
Canada, and that could lead to warranty restrictions if they so choose. ?