Fair Driving: Gender and Race Discrimination in Retail Car Negotiations, 104 Harvard Law Review 817 (1991)

The struggle to eradicate discrimination on the basis of race and gender has a long history in American law. Based on the widely held belief that such discrimination will occur only in markets in which racial or gender animus distorts competition, regulatory efforts have been limited to areas in which interpersonal relations are significant and ongoing, such as housing and employment. In this Article, Professor Ayres offers empirical evidence that seriously challenges faith in the ability of competitive market forces to eliminate racial and gender discrimination in other markets. His Chicago based research demonstrates that retail car dealerships systematically offered substantially better prices on identical cars to white men than they did to blacks and women. Professor Ayres details the nature and startling degree of the discrimination his testers encountered and evaluates various theoretical explanations for their disparate treatment. Based on his conclusions, Professor Ayres explores routes by which “fair driving” plaintiffs might bring suits against dealerships and mechanisms through which regulators might effectively rid the retail car market of such discrimination.
The civil rights laws of the 1960s prohibit race and gender discrimination in the handful of markets – employment, housing, and public accommodations – in which discrimination was perceived to be particularly acute. In recent years, lawsuits have increasingly presented claims of more subtle and subjective forms of discrimination within these protected markets. Both legislators and commentators, however, have largely ignored the possibility of discrimination in the much broader range of markets left uncovered by civil rights laws. Housing and employment may be the two most important markets in which people participate, but women and racial minorities may also be susceptible to discrimination when spending billions of dollars on other goods and services. Of these unprotected markets, the market for new cars is particularly ripe for scrutiny because, for most Americans, new car purchases represent their largest consumer investment after buying a home. In 1986, for example, more than $100 billion was spent on new cars in the United States.
This Article examines whether the process of negotiating for a new car disadvantages women and minorities. More than 180 independent negotiations at ninety dealerships were conducted in the Chicago area to examine how dealerships bargain. Testers of different races and genders entered new car dealerships separately and bargained to buy a new car, using a uniform negotiation strategy. The study tests whether automobile retailers react differently to this uniform strategy when potential buyers differ only by gender or race.
The tests reveal that white males receive significantly better prices than blacks and women. As detailed below, white women had to pay forty percent higher markups than white men; black men had to pay more than twice the markup, and black women had to pay more than three times the markup of white male testers. Moreover, the study reveals that testers of different race and gender are subjected to several forms of nonprice discrimination. Specifically, testers were systematically steered to salespeople of their own race and gender (who then gave them worse deals) and were asked different questions and told about different qualities of the car.
At the outset it is difficult to choose how, linguistically, to characterize the results that black and female testers were treated differently from white male testers using the same bargaining strategy. The term “discrimination,” although surely a literal characterization, unfortunately connotes to many the notion of animus (even though in antitrust, for example, “price discrimination” is not taken to imply any hatred by sellers). “Disparate treatment,” in contrast, connotes to others a strictly technical legal meaning developed in civil rights case law. For the moment, the terms “discrimination” and “disparate treatment” are both used to refer to the result that sellers’ conduct was race- and gender-dependent; sellers took race and gender into account and treated differently testers who were otherwise similarly situated. These terms are not meant to imply that salespeople harbored any animus based on race or gender.
In recent years, the Supreme Court has struggled in the employment context to enunciate workable evidentiary standards to govern claims of subtle and possibly unconscious forms of discrimination. Although the 1960s civil rights laws do not reach retail car sales, the finding that car retailers bargain differently with different races might give rise to disparate treatment suits under 42 U.S.C. ss 1981 and 1982, which originated in the manifestation of disparate treatment, push us to define more clearly what constitutes discrimination generally.
Furthermore, the results highlight a gaping hole in our civil rights laws regarding gender discrimination. Although sections 1981 and 1982 prohibit racial discrimination in contracting and the sale of real and personal property, no federal laws bar intentional discrimination on the basis of gender in the sale of most goods or services. The civil rights laws of the 1960s fail to fill this gap, leaving unregulated a legion of markets in which women contract. Put simply, car dealers can legally charge more or refuse to sell to someone because she is a woman. Intentional gender (or race) discrimination of this kind might alternatively be attacked as an “unfair or deceptive” trade practice under state and federal consumer protection laws. In the end, however, courts might perceive that the quintessentially individualized and idiosyncratic nature of negotiation places such disparate treatment entirely outside the purview of either the civil rights or consumer protection laws.
The goal of Congress in passing the Civil Rights Act of 1866 was to guarantee that “a dollar in the hands of a Negro will purchase the same thing as a dollar in the hands of a white man.” The standard argument against enacting civil rights laws has been grounded in the conviction that the impersonal forces of market competition will limit race and gender discrimination to the traditionally protected markets, in which there is significant interpersonal contact. Yet the results of this study give lie to such an unquestioning faith in competition: in stark contrast to congressional objectives, this Article indicates that blacks and women simply cannot buy the same car for the same price as can white men using identical bargaining strategies. The price dispersion engendered by the bargaining process implicates basic notions of equity and indicates that the scope of the civil rights laws has been underinclusive. The process of bargaining, already inefficient in many ways, becomes all the more problematic when it works to the detriment of traditionally disadvantaged members of our society.
Part I of this Article describes how the tests of race and gender discrimination were conducted. Part II reports the results of the tests. An analysis of disparate treatment in price, sales tactics, and steering is combined with a regression analysis focusing on the determinants of final offers. Part III explores theoretical explanations of the results. Animus-based theories of disparate treatment are compared with theories of statistical discrimination and tested against the results of the study. Particular attention is paid to the role of competition at both the wholesale and retail level in limiting and channeling the form of race and gender discrimination.
Finally, Part IV explores the legal implications of the study. This Part considers whether and how “fair driving” plaintiffs could legally challenge this disparate treatment under consumer protection laws and sections 1981 and 1982. The Article concludes by considering the need for legal reform.