In full transparency, the following is a media release from Sen. Elizabeth Warren’s office. She was elected by voters in the Commonwealth of Massachusetts to serve the state in Washington DC in the US Senate. She is a Democrat. (stock photo)
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WASHINGTON DC – United States Senator Elizabeth Warren (D-Mass), a member of the Senate Finance Committee, wrote two separate letters to the White House Competition Council and Lina Khan, Chair of the Federal Trade Commission (FTC), regarding corporate profiteering in the automobile sales and rental industries.
As Americans deal with record high prices throughout the economy, Senator Warren is calling out bad actors who are raising the prices of car rentals and sales to pad their bottom line. Senator Warren is calling on the White House Competition Council to conduct a review of anticompetitive behavior in the rental car industry and provide recommendations on how to create a competitive marketplace to reduce consumer costs. In her letter to Chair Lina Khan, Senator Warren raises concerns that predatory price gouging by automobile dealers is driving up consumer costs for new cars.
As of 2018, only three companies claimed over 95% market share in the car rental industry in the United States. Enterprise Holdings, which is made up of Enterprise, National, and Alamo, holds a 33% market share, while Hertz Global Holdings – Hertz, Dollar, and Thrifty – controls 36% of the market, and Avis Budget Group controls 26%.
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Over the past year, these rental car companies have flourished: Avis reported new record net income and earnings in November 2021, and Hertz went from bankruptcy in May 2020 to a record-high profit margin in the third quarter of 2021.
Enterprise Holdings is a private company that releases little information to the public, but it reportedly increased U.S. revenue by nearly $1.5 billion in 2021, up 10.5% from 2020.
While companies have been raking in profits and rewarding executives with bonuses and stock buybacks, they have allowed customer service to suffer to further increase profit margins. They have been responsible for cutting their fleets to create low-inventory and high prices.
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Additionally, their poor customer service, and fraudulent practices, have left customers stranded when reservations fell through, and trapped customers with excessive fees. They have also repossessed cars from paying customers, and repeatedly had customers arrested in a disturbing pattern of reporting cars stolen. In December 2021, almost 200 people filed a suit accusing Hertz of “falsely implicating customers in car thefts,” asking for approximately $530 million in damages. Hertz has filed approximately 3,365 police reports for car theft against customers in the past four years.
“Although these trends in the rental car industry were exacerbated by the coronavirus pandemic, they closely follow the playbook rental car companies have used for over a decade: build market share through consolidation, use monopoly power to increase prices, and cut services to increase profit margins,” Senator Warren wrote in her letter to the White House Competition Council.
In the letter to Lina Khan, Senator Warren raises concerns over automobile dealers’ long history of deceptive advertising practices and consumer fraud, and dealerships’ potential violation of consumer protection laws to drive up prices and fatten their own profit margins, and contribute to inflation.
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Americans have long accepted that they will face a complex buying environment when they purchase a new car, viewing advertised Manufacturers’ Suggested Retail Prices (MSRP) as merely a suggestion and negotiating to pay as much below MSRP as possible – all while navigating high-pressure sales tactics, mysterious fees, confusing offers for their used cars, and financing proposals that put them at risk of scams.
But rip-offs have become endemic in the last year, when the new car shortage hit buyers, dealers, and manufacturers and resulted in “consumers routinely paying hundreds, often thousands, more than the listed price.”
While auto dealer profiteering has reached new levels in the last year, it is not a new problem. In May 2020, Federal Trade Commission (FTC) Commissioner Rebecca Kelly Slaughter warned of “tricks and traps” that were prevalent in the “profoundly broken” automobile-financing industry. In the wake of the coronavirus pandemic, these practices appear to be spiking across the country.
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Car dealership markups are increasingly exorbitant, including average markups of $4,048 for GM’s luxury Cadillac line and $2,289 on Hyundai’s Kia vehicles, on top of the manufacturer’s suggested retail price (MSRP). State Attorneys General across the country have reported increases of complaints against car dealerships for deceptive practices, “bait and switch” tactics, and outright fraud.
“Given the alarming increase in deceptive practices and predatory pricing in the automobile sales industry, the Federal Trade Commission should open a broad review into how widespread these practices are, and whether a rule regulating drip pricing and other unfair and deceptive practices in the automobile industry is necessary,” wrote Senator Warren in her letter to the FTC.
Read the Letter to White House Competition Council .
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