By on September 16, 2013

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The United States Federal Trade Commission has launched an investigation into whether car dealers colluded against the online car shopping site, TrueCar, over price competition the site encouraged. Automotive News is reporting that a number of car dealers, including the Kelly Automotive Group in the Boston area, received letters from the FTC saying that the agency is looking into whether companies in the “retail automobile industry” committed anticompetitive acts “by agreeing to refuse to deal with TrueCar” during 2001 and 2012.

Documents and emails relating to TrueCar were requested.  At the time, many dealers openly criticized TrueCar’s business model, which encouraged dealers to offer discounts to compete for the business of car shoppers visiting the TrueCar site. Dealers complained about losing money on cars sold through TrueCar leads. TrueCar’s model at the time encouraged dealer to bid against each other on price. A number of dealers ended their relationship with TrueCar and the company subsequently changed procedures that put downward pressure on retail prices, bringing many of those dealers back. The company CEO, Scott Painter, made a point of saying that the FTC investigation was not provoked by a TrueCar complaint.

Mike Warwick, director of digital marketing at Kelly Automotive Group said he did not know why he was personally named in the letter to the dealer group, except that he had publicly criticized TrueCar and their business and pricing models on dealer oriented blogs during the period in question. An executive at a different dealership told the Automotive News that the letter they received mentioned comments he had made on blogs about TrueCar.

Painter took pains to distance himself from the investigation, no doubt to avoid further alienating dealers, saying that the company first learned of the investigation when they themselves were served with a letter from the FTC asking for documents. “I want to make this clear: We didn’t ask for it (the investigation), and we knew nothing about it,” Painter said. He also said the timing was odd in light of the fact that the company changed its practices and restored good relations with dealers. “It’s like calling in reinforcements for a battle that is already over,” Painter said, “It’s a pain for us and the dealers.” The company says that the number of participating dealers is back up to 6,500 stores after it dropped to about 3,200 in 2012.

The FTC would not comment on any investigation.

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52 Comments on “FTC Launches Investigation Whether Car Dealers Colluded Against TrueCar...”


  • avatar

    No matter what price a dealer shows (or is offered) the customer will always ask if we can sell it cheaper. I always think to the Muppet sketch of “got anything cheaper” for finding a flight to Pittsburgh.

    Not that I blame the customer, it’s their job to get themselves in a better position in one of the last negotiated purchases that avg folks make, but this fact does make TrueCar fairly useless once things fully play out.

    • 0 avatar
      Bill Wade

      On the flip side most dealers use every sneaky tactic they can to extort more money from the consumer.

      I really dislike the business model. Do I have to go fight Walmart when I go to their store? Walked into a dealership lately? I just purchased a new Camry. There’s a lot to look at, which color mostly. Hundreds of them lined up virtually all identical. There’s a dozen Toyota dealers here all with the exact same cars. Some have balloons, some inflatable gorillas, some with clowns dancing in front of the dealership just to get you in the door. Stupid, stupid, stupid.

      Once you’re in the sales army pulls out the 4 square and starts their game. Heck, last year buying a new company truck I couldn’t get the sales droid to give me a price, all he could do was say, “How much a month?” Absolute moron, I drove down to the next Chevy store where the salesman gave me a price and I gave him a check.

      My daughter purchased a new car last year. She had it for 2 weeks when the dealer called up and said the financing didn’t go through but they were able to rebook at 2 points higher. She’d already put over 1,000 miles on the car so I went down to the Nissan store with her and told them they could take it back. They were extremely upset and wound up honoring the contract when I pointed out her FICO score was over 800 and we’re not going to play this game.

      No, I have zero sympathy for dealers. You’ve earned your reputation and it’s going to be a long time (like never) to rehabilitate it in the eyes of the general public.

      • 0 avatar
        morbo

        +1,000

        Friggin’ leaches. For every dealer that might have a shred of honesty and integrity, a hundred snakes await in the tall grass.

        Me – “$10,000 for this used Ranger”
        South Shore Ford @ 0:01hr – “Best we can do is $13,500″
        South Shore Ford @ 1:00hr – “We can’t go any lower than $12,900″
        Me, after walking out 3 times – “$10,000 for this used Ranger”
        South Shore Ford @ 3:00hr – “Fine, you breaking us on this deal”
        Me, after seeing paperwork for $11,000 – “I said $10,000, I meant after taxes and I ain’t paying any of your fees”

        After wasting 4 hours I got my $10,000 truck. But seriously, why? I know it’s profitable to burn your customers who lack the fortitude or stubborness to engage in this game, but there must be a better way. I’m not an electric car fan, but I hope tesla f’ing breaks the dealerships with direct to consumer pricing.

        • 0 avatar
          Lie2me

          I always make my best deal on line if it’s a new car, then if the deal is not the same when I get there, I walk. No way am I going to let a dealer put me through the grinder for four hours on a car.

        • 0 avatar
          Hummer

          My father and mother are at two extremes on this, I’d expect my father to end with the best deal as he sold tractors, farm equipment, and IH trucks for a good 2 decades, after his father.

          But no my mother who I have never seen get angry outside of stupid stuff the rest of us did when we were little, scared the absolute piss out of me when I was buying my first car with their help. She had learned from her father. I learned so much from that experience looking back on it. She hates dealerships with a passion, she gets sick going into them, no joke.

      • 0 avatar
        challenger2012

        A co-worker purchased a new Mustang ( 8 or 9 ) years ago, with an Extended Warranty. He told me he got the Extended Warranty for $395. I asked if I could see the contract to see what was covered and deductions, for I was thinking of buying a Mustang as well. He pulled out the Extended Warranty and the Bill of Sale for the car. Instead of $395 of the Bill of Sale, it was $595. The car dealer gambled that my co-worker would be so excited upon getting his new car, he would not see the 395 to 595 increase. 2 years later after the deal, it is hard to prove that the price should have been 395 instead of 595.

        • 0 avatar
          challenger2012

          When I was looking at Mustangs, Camaros and Challengers in 2012, I had as a trade, a 2007 Mazda 6. I went to a Chevy dealer to look at Camaros. A Chevy salesman talked to me for almost 1 ½ hours. He showed me the service department, the parts department, and introduced me to the management of the dealership. We then talked price. He said he was going to cut me a deal. He offered me $2,000 less for my trade than what I had gotten at another dealership. Buyer beware.

      • 0 avatar
        afflo

        “You’ve earned your reputation and it’s going to be a long time (like never) to rehabilitate it in the eyes of the general public.”

        And today, the idea that you have to spend hours grinding the dealership to get a fair price on a car is ingrained in our culture.

        I hate the four-square. I will literally walk out of the room if they do not stop it the moment I call them on it. In the end, you’re arguing one number – the difference between trade-in and sale price, or without trade in, the sale price. Sales tax, title and registration is a given. The difference is the only number that matters, and that’s the one number you can use to play them against each other.

        By the way – moving from California to Texas is like stepping back in time at the dealerships. They still do the giant Sunday-Sunday-Sunday voice on TV/Radio ads. The “Do you make ___ a week? You can have a NEW CAR!!!” ads are still on the radio and TV. If you want the salesman to open a car, the don’t have the lock boxes on the cars – you have to wait while they go back to the main office and dig around for the key.

        And worst, they still put those 80′s stickers and badges with the dealership name on the back of the car. I hadn’t seen one for years in California, but they’re still around here. Why on earth would people agree to taking delivery of a car with a glued-on dealer ad? Sniffing fumes from the unsheathed gas-pump nozzles?

        • 0 avatar
          bball40dtw

          I just bought a used car that had 3 extra badges on it. I took delivery of it knowing that I was breaking out the hair dryer and goo gone as soon as I got home. I guess I could have made the dealership do it, but there were some other above and beyond detailing issues I wanted to work on too.

          If it was a new car, I’d make them take it off, along with the dealership license plate holder. Unless they are paying me a monthly advertising fee, they can keep their plastic piece of garbage.

        • 0 avatar
          afflo

          On more thought – I wonder if it’s a regional thing – I grew up in Florida, and always saw them there. For five years on the west coast, I didn’t see any (unless they were on older cars originally purchased back east). Now in Texas, I see them everwhere.

          It’s possible that it’s a East Coast-Middle America thing. I commented once on it at a California lot, and the salesman looked at me like I’d grown a third arm (“It’s not 1985, man, we don’t do that stuff.”)

          • 0 avatar
            Christian Gulliksen

            For as long as I’ve been around (i.e. since the 70s) Californian dealerships have limited their branding to license plate frames. The usual thing these days is to remove the frame — unless you bought a car in Beverly Hills and want everyone to know it. The only cars with dealer badges/logos came from another state or Carmax.

          • 0 avatar
            danio3834

            Reminds me of one of Jack’s dealership stories from way back about the Taurus II.

            Hilarious what some dealers slap on a car.

            http://www.thetruthaboutcars.com/2012/02/avoidable-contact-who-really-runs-the-dealership/

        • 0 avatar
          CJinSD

          I live in San Diego, which is in California. Our car dealers do all the things that you denigrate Texas dealers for.

          • 0 avatar
            afflo

            Maybe it’s more regional on a smaller scale than I thought.

            Pin-stripes are another thing – I hadn’t seen them for years except on older cars, and around here you see them on brand new cars.

      • 0 avatar
        SCE to AUX

        I didn’t know it was called the four square, but I recently got that treatment when shopping for a car for my son.

        1. The dealer didn’t have the car they advertised online. But we drove the higher model anyway just to get a feel for it. The higher model was already $3700 higher, and I told the salesman we would never close that gap.

        2. The 4-square came out, and the salesman couldn’t understand that I wasn’t interested in payment numbers. Moreover, besides no reduction from MSRP, they ADDED some stuff like coatings and warranties for another $1800 – all in fine print. Now we’re $5500 apart, minimum.

        3. I repeated my target price multiple times, and they continued showing me lower numbers, but they weren’t even close.

        4. We walked after 4 hours. He lost a sale inside a very busy dealership. My son was disgusted, but I wanted him to get a taste of the system.

        5. The next day, we went to a different dealer and bought a slightly used car (different brand, but twice the car for less money) with no hassle. I told the 2nd salesman we weren’t interested in discussing payment amounts, only the transaction price. They never added hidden charges, and the process was quite smooth.

      • 0 avatar

        Sounds like the market doing what the market is supposed to do. You didn’t like what you found at the first dealer, so down the road you went until you found one who satisfied you. Would you be happy if everyone paid the same price or would you still want the privilege to shop for an even better deal? All you have to do is convince the FTC and price fixing can become real, and everyone will pay the same.

    • 0 avatar
      carguy

      @Franz: The problem with the dealer business model is that they add very little value to the buying process. Apart from showing the car there is not much that they do. They make their money from obfuscating the true cost of the deal and up selling customers into dubious products and services. They are fully aware of that and have used their considerable lobbying power for legislation that protects their franchises. I say let’s remove all those special protections for car dealers and let customers decide what the best way to buy a car is.

  • avatar
    gmichaelj

    ” Painter said. He also said the timing was odd in light of the fact that the company changed its practices and restored good relations with dealers. ”It’s like calling in reinforcements for a battle that is already over,” Painter said, “It’s a pain for us and the dealers.” ”

    Typical small businessman: thinks the FTC should be concerned about him!

  • avatar
    Land Ark

    I’m confused, TrueCar used to have dealers bid each other for the sale. Apparently they don’t do that anymore. So what do they do now?

    • 0 avatar
      sexyhammer

      +1. the article begs the question. Painter states they’ve changed their practices to lessen the downward pressure on pricing, so are they a glorified listing tool for dealers now? funny when you consider the “user” is the consumer, yet they want everyone to know the lengths they’ve gone to improve their product for the other side.

      • 0 avatar
        mklrivpwner

        “TrueCar can help dealers avoid selling at a loss, he said. The costs of traditional marketing, commissions, overhead and depreciation can add up to $2,000; by using the site, dealers can cut those costs significantly while offering customers an attractive deal and making a profit, Painter said.”
        http://www.cnbc.com/id/100582285

        Basically, dealers aren’t paying for the 4 hours that the sales team bounces you around for each sale, so they can sell for less and still turn a profit.

    • 0 avatar

      TrueCar is now engaged in a process that helps dealers make money on car deals, rather than to facilitating a race to the bottom. Dealers woke up and figured out they were paying TrueCar money to screw them. And the FTC thinks that might be collusion.

  • avatar
    philipbarrett

    “Plus our $750 processing fee”
    “Does that include sales tax?”
    “What?”
    “Sales tax, as required by our state, $750 seems like a very round number”
    “Oh, I think we can waive that fee”

  • avatar
    7402

    I hope the FTC and TrueCar pursue this all the way. I’m sure TrueCar has the infrastructure in place and can flip a few software switches to be back online in their original form very quickly. They were bringing transparency to a very opaque process and making it easy for buyers to find a better price.

  • avatar
    tikki50

    The day when car companies stopped offering the build your own model where I could put whatever damn option I wanted to on my car was the day I didn’t need a dealer anymore. I can shop for TV’s just fine and thank’s to the manufacturer’s simplifying the selection of a 40K car to a few options, I would and do gladly give the dealer the middle finger. Its too simple now, what are we getting from the dealer other than being screwed in some hidden way? Nothing, oh wait some hack of a mechanic in the back, no thanks.

  • avatar
    SCE to AUX

    Someone get Elon Musk some popcorn.

  • avatar
    PrincipalDan

    True Car is one of my favorite Monopoly Money sites (I can dream about a car that I might desire and what it would cost in the real world as opposed to the MSRP.) Hope they emerge victorious. When I eventually purchase a new car I’ll certainly use True Car as a research resource if not the forum for the purchase.

  • avatar
    Lie2me

    I don’t understand the value of True Car. I just went to their site and looked at some cars and they were quoting the same prices that the dealers where showing as their on line prices. Where’s the advantage?

    • 0 avatar
      parabellum2000

      During my recent shopping experienced, I found the same. In most cases I was able to exceed Truecar’s best price just by e-mailing the dealership. I think it only have value for poor consumers.

    • 0 avatar
      kvndoom

      TrueCar USED to be a awesome free tool. You could use it to find out what the dealership really paid (“invoice” price they give you is just another lie in the salesman’s toolkit), all current incentives, etc.

      Then dealerships put immense legal pressure on the site to change its business model. Now it’s no better than any other site out there.

      http://www.thetruthaboutcars.com/2012/01/truecar-with-guns-to-its-head-says-uncle-will-change-business-model/

  • avatar
    boost135

    Loved Truecar when it actually had teeth to place downward pressure on pricing In Nov of 2010, I picked up a new 10 Mazda RX8 Sport for $17,100. I’m sure there were people paying more for lightly optioned 3′s just walking on the lot.

  • avatar
    hreardon

    While I’ve never had a horror (entertainment?) story about buying a car, I feel that the model is completely broken and the value-add of a dealership is virtually nil.

    Now that all said, if you dislike haggling over a car, used or new, simply pay the price on the factory windows sticker.

    • 0 avatar
      ajla

      If only it was that simple. You really think a dealer would let a full price, no haggle buyer off the hook?

      You won’t just pay the full asking price. You get to pay the full dealer fee, full “Premium Platinum” extended sevice contract price, and full window etching, pinstripe, window tint price. And have mercy on you if you have a trade or need financing.

      Saying “yes” to everything at a car dealer gets expensive.

    • 0 avatar
      PrincipalDan

      True Car is still haggling, it’s just another tool for haggling. I think in the technological age we live in people ought to be allowed to haggle and bargain however they want. Email, text, phone, in person, 3rd party mediator… etc.

  • avatar
    AdamVIP

    I used truecar for my last purchase but I didnt use the truecar price.

    Truecar is great for getting in touch with the internet departments of the dealers. I knew what car and options I wanted and had 3 dealers bid for the exact same car that I found in a dealer that was too far away from me. They all came in lower than the truecar price they initially supplied and I got a great deal.

    I don’t think Ill ever buy a car in dealership again if I can help it. The internet departments were all friendly and they all knew the next guy was just a click away so they gave me great pricing right off the bat.

    The older I get the more I value my time and I dont like to waste it screwing around with dealer tricks.

    • 0 avatar
      Lie2me

      This has been my experience as well with negotiating car buying over the internet. On the rare occasion that I got the asshat that wanted me to come in to talk price… click, next

    • 0 avatar
      Hillman

      The problem is the hold up situation that arises when you travel to an out of area dealership. The agreed upon price becomes a few hundred dollars higher and the dealer knows you will likely take the price increase and go away.

      • 0 avatar
        Lie2me

        That has not been my experience yet. Every time I’ve gotten an online price that I accepted it has been honored. My most recent purchase involved traveling a hundred miles to get the car the whole time I was wondering “will this be the first time I get messed with when I get there?” Nope, everything went just like it was suppose to

      • 0 avatar
        AdamVIP

        My dealer wasn’t that far away but in my case the dealer had the paperwork all ready the minute I stepped in. I literally got to the dealership, let them know who I was and I sat down and signed the paperwork.

  • avatar
    DGA

    Last two new cars I bought, I got through emailing the dealership’s internet department, through the auto manufacturer’s site, after building what I wanted. Both times I got the vehicle for better than I thought without ever haggling. Both times they were vehicles that were pretty rare; they had one in 6-states, and the other one in 4-states. They just emailed me the price right off the bat and said, this is it, that it the bottom number. Walked in, cars were ready, signed the papers and drove off. The entire time we bantered over mutual interests and that was the extent of it.

  • avatar
    jim brewer

    I’ll spare you my horror story, but yeah, it was pretty unpleasant, although I got what was a good price at the time. I know because they practically threw me off the lot when we were done.

    Oddly, my sale didn’t show up on Truecar (it would have been an outlier to the far left of the bell curve) so I wonder if their statistics aren’t skewed a little that way.

    I’m with Principal Dan, though. You dial in the closest big city, and the second bar from the left is the true price (I figure the far left price is someone’s brother-in-law). Wish I had known about Truecar before I went in.

  • avatar
    Dave M.

    Being the resident auto aficionado for family and a building of 200, I coach, arrange, review and/or campaign in probably 40 car purchases a year (I really have to figure a way to make a living at it once I retire!). I was newbie-ripped off on my first car purchase many years ago, and I swore I would never let that happen again.

    The games are amazing; but the internet has been an incredible equalizer.

    1. I want you (the dealer) to make some profit because if you don’t keep your doors open you can’t handle my warranty work.

    2. The majority of dealers blow big ones, and I often easily see how some people get physically sick when they have to car shop. Mediocre car like Saturn did well for this very reason; it also explains why CarMax does too. Not that their products suck, but that they get a premium price for a low-key experience (disclaimer – I got my Saab from CarMax…off-lease, low mileage, specialized package, strong warranty).

    Just this afternoon I wrapped up a sale, my 3rd for a family member since June.

    What I learned today: Lexus dealers are cleaner, calmer, fancier-snacks Toyota dealers in disguise. Case in point – I negotiated a very reasonable deal on a 2013 RX350 for my MIL. Got it by email. Didn’t discuss trade, payments, or anything else. Went to dealer, drove the car, she loved it, we sit down to discuss trade (not really discuss – I want $10500. You’re going to clean it up and sell it for $14000. I’m okay with that. Get on with it). Ok, settled that. Let’s do some paperwork.

    That’s when the $1400 added package was tossed in. Wheel locks, window tint, cross bars and a pin stripe. No thanks, we don’t need that. They all come with it? It’s done at the port? Then why isn’t it part of MSRP? Well, that doesn’t matter because this email guaranteed price doesn’t show that. We’ll wait for one to come in. (Actually we didn’t have to – the sales manager called this morning and asked what it was going to take to land the deal and I said “Honoring the original deal. Plain and simple.” They then did and gave an extra $500 off for our trouble. Funnily enough the saleskid Saturday night saw the color drain from my face when they started the $1400 bullshit and asked me “Did I do something to offend you?”. Why yes, you did.

    Typical Gulf States Toyota/Lexus. Last year Toyota tried that shit with my FIL’s Tundra. When the salesgeek mentioned the add-ons getting put on ‘at the port’ off the boat, I asked him what port since the Tundra plant is 177 miles west of us.

    Dealer and brand with consistently less bullshit than everyone else? Subaru. Not that there aren’t any connivers, but I’ve referred over 20 to specific dealers and all have been very pleased with how smooth things went. When I recently bought my own, it was smooth and painless, and the salseman even advised against the Subaru trailer hitch, saying that a stronger model with a larger coupling was available from UHaul for less than half the price. The only balk I got was in the finance office where the paper shuffler wanted to know why I was refusing the extended warranty.

    Strongest advice I give:
    1. Be reasonable about your budget.
    2. Be reasonable about your trade.
    3. Be honest with the salesperson and demand they do the same.
    4. Don’t get horny over a specific model at a dealer (it’s like shopping when you’re hungry. Big mistake.)
    5. Don’t be afraid to walk or better yet sleep on a potential purchase.

  • avatar
    cdnsfan27

    Truecar is not a dealer’s friend. They charge us for leads and customers expect below invoice prices and are never satisfied no matter what we do. We have stopped using Truecar. I have found the best deal is when the buyer are equally happy/unhappy. We charge a fair price, don’t pack on add-ons and have outstanding customer service.

    In what other business does the consumer feel entitled to know the seller’s true cost????

    • 0 avatar
      aristurtle

      >>In what other business does the consumer feel entitled to know the seller’s true cost????

      All of them. Even the most naive customers now realize that Best Buy has a 2,000% markup on HDMI cables, for example. Welcome to the future, where you can look up widely available information on the Internet in order to close the information gap.

      • 0 avatar
        cdnsfan27

        But do you ask Best Buy to sell you their product below invoice?

        • 0 avatar
          aristurtle

          No, there’s nobody in the store who has the authority to haggle with customers (in many big-box stores even the store manager doesn’t outrank Friend Computer, you need to go to the regional manager for that), so I order from a retailer on the Internet where the profit margin is closer to 2% than 2000% for the same exact product.

          However, auto dealers spent decades lobbying state legislators to ensure that this practice wouldn’t be legal for car purchases, so here we are.

          Maybe some day in the future I’ll just go to the Tesla Motors website, configure a car, choose a financing option, and have it delivered right to my house, without needing to involve any unnecessary middlemen! Unfortunately this would require a whole bunch of state legislatures to become significantly less corrupt so I’m not holding my breath for it, you know?

          • 0 avatar
            cdnsfan27

            Sorry my friend but even if you say that is what you want I don’t believe you. My dealership group represents 7 different brands and I’ve had customers want to test-drive 1 or 2 from each, finally pick one then walk because they believe the inflated value of their trade on KBB, or I won’t throw in extras like window tinting. The car business is the only business I know where the customer expects to buy your product below your cost.

    • 0 avatar
      afflo

      Other large purchases?

      In the case of other large scale purchases, it’s either known (real estate transactions are a matter of public record), or there is a real service or improvement attached. They are middlemen who have used legislation to guarantee themselves a profit.

      There are services that a dealership offers – the ability to test-drive cars, and the manufacturer warranty service. The latter would be easy to manage – the manufacturer could certify a local garage as a certified warranty service center. In fact, multiple manufacturers could use the same garage if they so desired.

      The test-drives are a bit trickier, but surely the manufacturers could work around that somehow – perhaps partnering with rental agencies, who already have fleets of late-model cars sitting around. Go online and express your interest in a car on the corporate website, and have THEM arrange a test-drive for you at Enterprise, Alamo, etc. Try out a few cars, then order the car you want through a web-portal.

      Why on earth would I agree to pay an extra lump of cash in profit on a large purchase to a middleman without questioning it?

    • 0 avatar
      Pch101

      If dealers are going to promote themselves based upon claims that they sell cars at or below invoice, then dealers should expect the smarter customers to ask to see the invoice.

  • avatar
    Dave M.

    “The car business is the only business I know where the customer expects to buy your product below your cost.”

    Legions and decades of unscupulous dealers did that.

    Not so much below cost, but reasonably priced. MSRP is suggested; never mind dealer invoice and holdback and all the other ways dealers have of profiting from a high ticket item that a customer does once every 3-5-10-15 years.

    The typical car sales form has, what, 10 lines of price entry (including TTL)? Only buying real estate is more complex.

    And like buying a house, a car is an emotional purchase. The seller/agent has every advantage. The internet has helped level the field somewhat.


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