Canadian car buyers have been the victims of an illegal plot by automakers to inflate the prices of cars in Canada and discourage cross-border car buying, according to a $2-billion class-action lawsuit.

The suit, filed by the Toronto law firm of Juroviesky and Ricci LLP, accuses the automakers of conspiring "to lessen competition and to unreasonably enhance the price of new cars sold in Canada," according to the statement of claim.

Most of the big North American and Japanese vehicle makers are named as defendants in the suit, along with the Canadian Automobile Dealers Association and its U.S. counterpart, the National Automobile Dealers Association.

The suit was filed on behalf of four Toronto residents who said they paid much more for their vehicles in Canada than identically equipped models in the U.S. The statement of claim alleges that the "price for identical product from U.S sources could be 25 to 35 per cent lower on average than in Canada" after adjusting for the exchange rate.

The suit gives a number of examples of recent large price differences in the same vehicles when the Canadian dollar was trading above 98 cents US:

  • A Chrysler Grand Cherokee Laredo that was advertised for $29,215 in the U.S. and $36,215 in Canada
  • A Honda Odyssey Minivan that was advertised for $25,645 in the U.S. and $33,333 in Canada
  • A Range Rover Sport that was advertised for $58,500 in the U.S. and $78,300 in Canada

The lawsuit covers anyone who bought a vehicle in Canada between August 2005 and August 2007. It requires court approval to be certified as a class action.   

Among other things, the lawsuit alleges that the defendants reduced competition by:

  • requiring buyers to agree not to export their vehicles
  • failing to honour warranties in Canada if vehicles were bought in the U.S.
  • threatening or penalizing dealers who failed to follow the automakers' rules

The statement of claim's allegations have not been proven in court. In addition to $2 billion in general damages, the suit seeks $100 million in punitive damages.

A spokesperson for one of the defendants, the Canadian Automobile Dealers Association, told CBCNews.ca he hasn't seen any documentation and wouldn't comment on the lawsuit's allegations.

With the Canadian dollar near parity with the U.S. greenback, it has become easy to compare prices of similar vehicles on each side of the border.

A survey by automotive consultant Dennis DesRosiers earlier this month showed that the price gaps among smaller cars were not large, but that at the luxury end, Canadians were paying $11,000 to $13,000 more for the same vehicle than U.S. buyers were.

On Tuesday, Porsche became the first automaker to reduce its 2008 Canadian sticker prices to reflect parity.  It chopped the price of its Cayenne model by almost $5,000.

"We cannot ignore our customers and dealers in Canada who can look to the U.S. and recognize a substantial price difference," a release from Porsche Cars North America said.  

One of the lawyers who filed the suit was less than impressed by Porsche's action. "Their actions are too little, too late," Henry Juroviesky told CBC News. "I still don't think that their price decrease will account for the differential in absolute economic terms."

Five years ago, when the Canadian dollar was worth 62 cents US, the cross-border price differential was reversed. Canadian car prices then were often thousands of dollars cheaper than U.S. prices, after the exchange rate was factored in.