First it was Honda that had issues with TrueCar. Now, it is regulators in several states, along with dealer associations that claim that TrueCar’s business model is at odds with “long-standing state laws designed to protect the interests of car dealers and shoppers,” as Automotive News [sub] reports. Says AN:
“Regulators in Colorado, Wisconsin and Virginia have issued bulletins to dealers or sent letters to TrueCar concluding that legal problems exist with TrueCar’s business model of charging dealers for leads that turn into a sale. And dealer associations in three more states — California, Kansas and Ohio — say members who use TrueCar may be violating state law.”
This looks like an opening volley of an all-out war. TrueCar said that it has been contacted by regulators in six states: Colorado, Louisiana, Nebraska, Kansas, Virginia and Wisconsin.
What seems to be at issue here is that TrueCar dealers collide with state laws governing advertising and so-called bird-dogging, or paying a third party a fee that is contingent on a sale, as state regulators and associations claim. Dealers could have to pay hefty penalties, and TrueCar’s business model would be destroyed.
The troubles couldn’t have come at a more inopportune time. Or maybe, they have been timed to inflict maximum pain. In September, TrueCar raised more than $200 million from investors. On January 1, TrueCar was scheduled to become Yahoo.com’s partner for auto shopping. TrueCar agreed to pay Yahoo $150 million over three years.
When Ed wrote about Honda vs. TrueCar, he opined that the “conflict could have profound impacts on the ever-changing face of the new car market.” It sure can.
The Internet changed the way we shop for cars, and the bird dogging fees pay for it. Buying services other than TrueCar can and will be next if this matter gains traction. Countless blogs that feed buying services with customers (TTAC does not) could find themselves out of money. Writers who whip up quickie “car reviews” could be looking for new work. Customers who seek price transparency may have to look harder.