Suit Accuses Car Rental Firms of Price-Fixing

In December 2006, the average daily rate for a mid-size rental car booked via the Internet at Los Angeles International Airport was about $60. A month later, the rate had climbed to $79, according to a study by a consumer group, the Los Angeles Times reports.

A class-action lawsuit recently filed by the group alleged that the spike was the result of illegal price-fixing by rental-car companies–enabled by a new state law that allows the companies to change the way they advertise rates at many airports.

The amended law, which was drafted at the urging of rental car companies, was rushed through the Legislature with three minutes of debate in a late-night session only hours before legislators adjourned last year.

Consumer advocates contend in the suit that the companies are using the law as cover for a coordinated price increase, and that car renters have lost tens of millions of dollars as a result.

The law allowed car rental firms to remove an 11 percent airport concession fee from their widely advertised base rental rate and bill it as a separate cost on each invoice. But rather than rates immediately dropping 11 percent when the fee was removed, they went up, the lawsuit alleges, and consumers were billed the 11 percent fee on top of a higher base rate.

Car rental company representatives, including Hertz's Richard D. Broome, recently denied that they had fixed prices and said the legislation actually helped the consumer by separating out all costs that contributed to the final bill.

For the week of Jan. 25, 2007, after the state law took effect, the average daily price excluding fees for the seven firms quoted on the Internet for the same car was $64.88, the study found. The 11 percent airport concession fee was an additional $7.21, and the new 2.5 percent California Trade and Tourism Fee added $1.62. Taxes brought the total to $79.

According to the Los Angeles Times, the lawsuit was filed against seven firms, including Hertz Corp., Dollar Thrifty Automotive Group, Enterprise Rent-A-Car Inc. and Avis Budget Group Inc., as well as against the California Travel and Tourism Commission, which is accused of violating open-meeting laws in facilitating price-fixing by the firms.

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