Carvana Faces Class Action Over Licensing in California

(CN) – A California car dealership filed a class action lawsuit in Sacramento Superior Court Friday against online car dealer Carvana, claiming that the tech business has gained an unfair advantage over its competition by skirting around state regulatory requirements.

Keith Schrenk, owner of The Car Barn in Sacramento, alleges that his business has suffered due to Carvana’s business strategy that allows car buyers to view vehicles online and pick them up at car vending machines.

“The CARVANA Defendants are engaged in unlawful competition with legitimate licensed and compliant auto dealerships, and in fact markets itself as beating competition by flagrantly violating laws necessary to do business as a bona-fide auto-dealership in California without paying any entry or regulatory costs of doing business,” the complaint states.

Schrenk said his business has faltered as a result of Carvana opening up a car vending machine last year less than a mile from one of his dealerships.

“Plaintiff is informed and believes that CARVANA’s market entry and without paying the true costs of operating an auto dealership are the cause… in sales losses in 2018 and continuing this year,” he states.

Schrenk said he approached officials from the Department of Motor Vehicles to ask why the agency hadn’t enforced dealership and vehicle salesperson licensing with the company. The officials said they couldn’t enforce licensing since Carvana doesn’t have a physical location in the state, according to the lawsuit.

The lawsuit is seeking a permanent injunction to halt Carvana from selling cars in the state and restitution to proposed class members for “wrongfully obtained profits.”

Schrenk is represented by Timothy Cohelan, Isam Khoury and J. Jason Hill of San Diego-based Cohelan, Khoury & Singer.

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