The attorney general’s office said it based its findings on an analysis of dealership records for 2016 to 2018.
“Jaffarian has consistently engaged in the same or substantially similar policies and practices since at least 2016,” says the suit, which was filed in Essex Superior Court.
In a statement released in response to the suit, an attorney for Jaffarian said, “We emphatically deny the allegations in this lawsuit … Jaffarian takes a strong stand against discrimination in all forms.”
Jaffarian said it “has never received any complaint from any customer regarding discrimination” and plans “to vigorously defend itself against the lawsuit … in court.”
The sale of add-ons typically comes after a customer has negotiated a price to buy or lease a car, and arranged financing if needed. At that point, the financial manager typically quotes prices on various add-ons — such as paint protection, key replacement, service agreements and wheel and tire agreements — but customers “may not understand these prices are negotiable, the suit says. The finance managers actually have “unfettered discretion” in pricing add-ons.
“As a result two consumers may be charged wildly different markups for the same [add-on] product,” the suit says.
Dealerships generally make more money on the sale of add-ons products than on the sale of the car itself, the attorney general’s office said in the press release. Further, Jaffarian structures its compensation for finance managers to reward them for selling products at the highest prices, prompting managers to “steer consumers to purchase more add-on products and to place higher markups on those products,” the suit says.
“The higher the markups, the more a finance manager earns,” the suit says.
“In these circumstances, Jaffarian seeks and extracts disproportionately higher profits from Black and Hispanic consumers,” the suit says.
“One critically unfair phenomenon in today’s marketplace is price disparities based on the purchaser’s race of ethnicity,” the suit says. “Numerous studies demonstrate that those disparities are caused when salespeople are given discretion in pricing.”
The attorney general’s office says it studied more than 2,000 sales of add-ons at Jaffarian. By analyzing the first names, surnames, and addresses of the customers, along with census data, the attorney general’s office was able to “determine each consumer’s predicted race and ethnicity,” the suit says.
When selling add-ons to white customers, Jaffarian obtained an average markup of about $1,000. But for Black customers it was $1,500, and for Hispanic, $1,380.
The suit faults Jaffarian for failing to “provide any instruction or auditing to ensure fair, nondiscriminatory treatment of its customers.”
“Discretionary pricing policies that are not coupled with regular audits, trainings, and other controls to prevent conscious or unconscious biases from influencing pricing decisions has long been known to result in discrimination, particularly against consumers of color,” the suit says.
“Jaffarian knew or should have known that its pricing and compensation policies, alone and in combination, would likely result in unfair and discriminatory pricing that harms consumers,” the suit says.
The attorney general’s office says Jaffarian’s practices violate the state’s consumer protection act and the public accommodations law, which prohibits discrimination on account of race, color, and national origin in public places. In the suit, Healey’s office seeks an order blocking these practices, along with restitution and civil penalties.
“We applaud the Massachusetts Attorney General’s Office for taking action to stop these disturbing abuses,” said John Van Alst, staff attorney at the National Consumer Law Center, according to the press release “NCLC research shows that discrimination is widespread in the car sales and finance industry.”
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