Are car rental companies fixing their prices?

A lawsuit working its way through a U.S. District Court in California is raising a troubling question that could affect travelers: Are car rental companies fixing their prices? The suit, filed by the University of San Diego School of Law’s Center for Public Interest Law, alleges that auto rental firms in California have done just that. If the courts side with the consumer advocates, it could have national implications.

At issue is a tricky “gut and amend” legislative maneuver devised by car rental lobbyists in 2006. Under the amendments, the rental companies agreed to contribute $24 million to the California Travel and Tourism Commission, and in exchange were allowed to unbundle their 9 percent airport concession fees from their base rate, according to the suit.

What’s wrong with that? Well, nothing. It’s what happened next that the Center for Public Interest Law alleges is wrong.

Instead of paying the $24 million from their corporate treasuries, the rental companies added a 2.5 percent fee to each rental, basically passing the expense on to their consumers. And rather than separately itemizing the airport concession fee, the car rental companies added the fee to their pre-existing base rate, which amounted to a “price fix enrichment of tens of millions annually,” according to the suit.

Professor Robert Fellmeth, who directs the Center for Public Interest Law, says the sleight of hand has hurt travelers:

Now we learn how steep the real price was for this ‘bargain.’ Instead of a ‘we pay you something if you allow us to clarify a charge’
deal, consumers ended up paying for the industry’s ‘contribution’ to the California Travel and Tourism Commission plus a multi-million dollar illegal windfall to the rental car industry.”

There’s an insightful article in the Sacramento Bee that goes into more detail about this issue. Unsurprisingly, the car rental industry is dismissive of the complaint.

It shouldn’t be. I think it’s pretty obvious that car rental companies act together when it’s in their interests. It’s also clear that this behavior extends beyond the state of California. And that means the issue of price fixing among car rental companies could loom large in 2008 and beyond.

Christopher Elliott is the author of Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals. Critics have called it “eye-opening” and “inspiring” — it’ll “grab your attention and won’t let go.” Order your copy now on Amazon, Barnes & Noble or iTunes.

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