Toyota Officials Reviewing Unfair-Pricing Lawsuits : Autos: The company is being accused of padding invoices with advertising fees that were actually kickbacks to dealers.
Officials at Toyota Motor Sales U.S.A. said they are reviewing an unfair-pricing lawsuit filed against the company Thursday in San Francisco, as well as a spate of others filed earlier this week.
The lawsuits allege that Toyota and its dealers inflated prices and misled consumers by adding to auto invoices a dealer advertising fee that was actually kicked back to dealers as additional profit on each sale.
The allegations against Toyota come just weeks after a handful of former top officials at American Honda Motor Co., also based in Torrance, were charged with bribery in the awarding of franchises across the nation during the 1980s.
Though they are unrelated, the allegations against the two auto giants are damaging to the whole industry at a time when it has been working to improve its image with consumers, said consultant George Peterson, president of AutoPacific Group in Santa Ana.
“If there is much more of this, then consumers are going to start feeling they are paying prices that are too high,” Peterson said. “They will start to question dealers’ credibility and ethics, and that’s a hit the industry doesn’t need right now.”
Toyota officials said they would not comment further on the lawsuits until today or Monday.
The first of the suits was filed last week in Contra Costa County Superior Court. Another was filed Wednesday in U.S. District Court in San Francisco.
A separate lawsuit was filed Wednesday in Los Angeles County Superior Court by a Santa Monica couple, Marvin H. and Helen M. Leaf, who allege that Toyota’s California distribution subsidiary covertly inflated prices of cars sold in the state from 1975 through 1991 by adding a small profit to the handling and shipping charges listed on state-mandated price stickers.
The Leafs’ lawyer, Thomas Anderson, said Toyota Motors Distribution Inc. added from $76 to $200 to the prices of about 2.5 million cars sold in California. The money was extra profit to the distributor--a subsidiary of Toyota Motor Sales--and was hidden as part of the total “inland freight and handling” charge shown in the window stickers, the suit alleges.
Because the increases were concealed, consumers were denied knowledge that would have aided them in negotiating a fair price when they bought Toyotas, the suit alleges.
Anderson has asked the court to expand the suit into a class action--meaning that he would be representing all 2.5 million Toyota buyers who he says were affected.
The two law firms that filed the kickback suits in Northern California are also seeking to be allowed to sue on behalf of all Toyota buyers who paid higher prices for their cars because of the allegedly improper advertising fee rebates to dealers.
Though Toyota officials would not comment on those charges, the president of the Southern California Toyota Dealers Assn. called the suits “groundless.” Such advertising fees, association President Norris Bishton said, have existed for years and are part of the typical cooperative advertising arrangement used widely in the auto industry and in other retailing businesses.
Bishton, a Los Angeles lawyer and owner of Toyota of Garden Grove, one the nation’s largest Toyota dealerships, said dealers do receive a portion of the advertising fee but that it is earmarked for advertising costs and is not a hidden profit or kickback.
