Destination charges have been increasing in the auto industry. Some customers aren’t too happy about it, especially the fact that automakers may be making a profit off of these charges that companies often try to separate from the vehicle’s price. Automotive News reports that a class action lawsuit against GM over customer concerns about GM making a profit over destination charges have been dismissed.
The suit was originally filed in 2021 in the Southern District of California and consisted of two plaintiffs, Robert Romoff from California and Joe Siciliano from New Jersey. Romoff purchased a 2021 Chevy Equinox and paid a $1,195 destination charge while Sicilino paid just $995 on his 2021 Cadillac Escalade. The suit said that the destination charge is “generally understood in the automotive industry to reflect the manufacturer’s average cost of delivering one of its vehicles to a dealership. Line items are intended to inform consumers of the reason they are being charged.”
But the plaintiffs claim that they were unaware that GM made a profit from the charges.
“For that reason, consumers do not generally expect line-item costs to include hidden profits.”
However, US District Judge William Hayes disagreed and dismissed the case. He argued that most consumers wouldn’t bat an eye at learning that the price of something they purchased resulted in a profit for the company that made it. He then quoted the Automobile Information Disclosure Act which requires that automakers disclose how much they make dealers pay them for delivery. He continued, arguing that the rule “no more suggests the absence of profit than the term ‘Destination Charge.’ Judges from the ninth and 10th circuit court of appeals agreed with him, weirdly saying that GM charges dealers and not consumers for destination charges. From Automotive News:
“There is no allegation that GM charged the dealers a lesser amount than is represented to consumers, enabling the dealers to earn a secret profit from consumers,” the judges wrote in their Jan. 30 decisions.
Disagreeing with the judgment, Romoff and Siciliano are appealing. They claim Hayes drew a conclusion about what most consumers would think too early in the proceedings and that he had a narrow view of what constitutes common sense in something like this. They also claim that Hayes ignored a California Court of Appeals case that a business charging more than what it actually costs for a service without customers being aware of it may be misleading.
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