An Ontario man found it didn’t pay to shop around after he had a sale price on an ATV rescinded when he tried to get his hometown dealer to match the offer, a situation an expert in Canadian competition law says almost certainly contravenes the Competition Act.
Last month, John Watts was looking to replace his 12-year-old Honda ATV with a new Honda TRX500 Rubicon.
He got a quote from Napa Auto Sports, his local dealer in Elliot Lake, Ont., for a 2018 model for $15,825.70, a figure that included several accessories and taxes.
But Watts feels prices are generally a bit higher in Elliot Lake than elsewhere, so he wanted to check out another Honda dealership.
“I went to Sudbury to see if I could get a better price.”
He was quoted a similar price at the Sudbury dealer, Northstar Recreation, but the sales associate there offered to waive the freight and pre-delivery inspection (PDI) fees, which would have lowered the overall cost to $14,654.85, a savings of $1,170.85.
“I got my quote from Sudbury. I went to the fella that owns the Napa Honda dealer [in Elliot Lake] and [said]: ‘I can get this cheaper in Sudbury, what can you do for me?’ ” said Watts.
“Next thing I know, three days later I get an email from Sudbury [saying] the deal is cancelled, you are better off to purchase locally.”
The email came from Brydon Deforge, the sales associate at Northstar Recreation.
“The dealer there called us very upset that we are sort of cutting their throat,” Deforge said in an interview with CBC News.
“So I sent [Watts] an email saying, ‘You know, I suggest you shop in your own town and support locally and this way we avoid hardship between dealers.’
“I offered him a price. I would have honoured it,” said Deforge. “But when he started going back and forth and it was causing dealer problems, we said, ‘OK, you know what, I would rather have one unhappy customer than have an unhappy dealer.’
“And Honda Canada would have backed us up on that,” said Deforge.
Who can you trust?
In a statement to CBC News, Honda Canada said: “Every Honda dealership in Canada is independently owned and operated.
“As a result, dealers are free to negotiate directly with customers based on a variety of factors, including inventory levels, value of trade-ins, manufacturer incentives and overall market conditions. Honda Canada promotes good business practices among our vast dealer network and supports a fair and competitive market for our customers.”
Watts said he was told by a salesman at the Elliot Lake dealership that the owner there knows the owner of the dealership in Sudbury and called him to complain and that led to Deforge cancelling the sale offer.
CBC News was unable to reach the owner of the Elliot Lake dealership this week. An employee there said he was away from work for a few days.
Just comparing prices
Watts said he was just comparing prices and went back to his hometown dealer because he wanted to support the local business.
“Even if they would have taken $500 off, I want to shop locally,” he said. “We’re all flabbergasted. It’s unbelievable.”
Joseph Wilson, a research fellow at McGill University who is an expert on competition matters, believes this arrangement may be against the law, and says it should be reported to the Competition Bureau.
“This certainly attracts the Competition Act,” said Wilson.
“Apparently there is some sort of agreement … to not undercut each other and … to not entertain customers of other localities.
“So there is an allocation agreement, direct or real allocation. And there’s also an agreement to not compete with each other, it seems to me. In most probability, the bureau would find that this is violating section 45 [of the Competition Act].”
Section 45 (1) b of the Competition Act states:
- Every person commits an offence who, with a competitor of that person with respect to a product, conspires, agrees or arranges (b) to allocate sales, territories, customers or markets for the production or supply of the product.
The maximum penalty is 14 years in prison and/or a fine of up to $25 million, although Wilson said that is a much harsher penalty than might be levied in a case such as this, should it prove to contravene the act.
Wilson said the Competition Act plays an important role in the protection of consumers.
“When competitors agree not to compete, it has a direct effect on the price or some other quality of service.
“Consumers benefit by competition in terms of lower prices, higher quality of goods, more choices, innovation and so on and so forth.”
Canadians already pay higher prices for vehicles than Americans, according to an investigation by CBC’s Marketplace.
In an email, a spokesperson for the Competition Bureau told CBC News it “has an obligation to do a thorough and complete examination of the facts available before reaching any conclusion about whether or not the Competition Act has been contravened.”
The spokesperson wrote: “The Competition Act prohibits agreements between competitors [with respect to] a product to allocate sales, territories, customers or markets for the production or supply of the product.
“This includes all forms of market allocation agreements between competitors to not compete with respect to specific customers or products.”
Watts said he no longer feels comfortable with the idea of buying his ATV at either Napa Power Sports in Elliot Lake or Northstar Recreation in Sudbury.
Given the lack of Honda dealerships near him, that means he will probably buy another make of ATV.
“We are either looking at Polaris or Yamaha,” he said.