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Colorado Bans TrueCar - Detailed Documentation from the Colorado Department of Revenue and the Colorado Motor Vehicle Dealer Board
Shown below are excerpts from the actual document released by the Colorado Department of Revenue:
Issued December 15, 2011
The Colorado Department of Revenue Auto Industry Division (Division) has reviewed the text below, which was submitted by the Colorado Automobile Dealers Association after the Division’s presentation to the Motor Vehicle Dealer Board (“Board”) at its meeting on December 8, 2011. The Division believes the text fairly and accurately describes the issues surrounding the relationship between Colorado motor vehicle dealers and TrueCar. The Division will take all steps necessary to fulfill its statutory duty to assist the Board in protecting consumers, investigating suspected or alleged violations of statutes or rules, and enforcing all licensing statutes and rules.
It has come to the attention of the Colorado Motor Vehicle Dealer Board (“Board”) and the Auto Industry Division (“Division”) that a number of new motor vehicle dealers licensed in Colorado have relationships with a company known as TrueCar. The Division has identified a number of advertising violations in TrueCar materials and on its web site, as well as other potential violations of the Motor Vehicle Dealer Act (“Act”) and related regulations.
Any Colorado licensed dealer that is using TrueCar to promote and list its vehicles to consumers is ultimately responsible for any such violations. The specific advertising violations identified are:
In addition to the specific advertising rule violations, the Board and the Division have concerns with the ability of TrueCar to access the inventory information of a licensed dealer. There would appear to be the potential for a consumer [who has been quoted a price for a specific vehicle and assured a “guarantee”] arriving at the dealership to find that vehicle has already been sold. The consumer may then be targeted for the sale of a different vehicle. In certain circumstances, this may constitute a “bait and switch” transaction which is prohibited by the Act as well as other Colorado statutes (and could be a criminal offense).
Moreover, concerns extend to the compensation structure that is based on a completed sale, meaning there appears to be unlicensed sales activity taking place—a violation for both the entity engaging in the unlicensed activity as well as a violation for the dealer that is engaging with that unlicensed entity.
As of December 8, 2011, neither TrueCar nor its employees were licensed by the Board. The Board has instructed the Division to pursue licensure by TrueCar as either a Used Motor Vehicle Dealer or to have individuals associated with TrueCar licensed as salespersons or both.
The Division also noted that licensed motor vehicle dealers who knowingly allow an unlicensed person to exercise any of the privileges granted to a licensed dealer are in violation of the Act and can be held accountable for the acts of such unlicensed
persons. [C.R.S. §12-6-109]
Should the Division receive any consumer complaint regarding the activities of TrueCar, the Board will look to the licensed, selling dealer and will hold the dealer accountable for any violations.
The Board and the Division requested the Colorado Automobile Dealers Association (CADA) to inform its members immediately of these compliance issues. Meanwhile, TrueCar has been directed by the Division to correct the advertising violations that are controlled via content on their site immediately and meet with the Division concerning licensure.
EDITOR'S NOTE: I have also attached the original Colorado Department of Revenue document to this ADM Forum discussion as a file attachment for ADM Members to download in its entirety...
My questions for this discussion are as follows:
Good questions Ralph. I remember reading in one of the threads that TrueCar is licensed in California. If that's the case, I expect that licensing anywhere else would probably be attainable. Although, I wonder if TrueCar would have to have a place of business in some other states? One thing is certain, if anyone has the resources to overcome these potential obstacles, TrueCar does.
An interesting question is this: if TrueCar is considered to be a broker, are all lead providers also brokers? For instance, the California Vehicle Code defines brokering as "an arrangement under which a dealer, for a fee or other consideration, regardless of the form or time of payment, provides or offers to provide the services of arranging, negotiating, assisting, or effectuating the purchase of a new or used motor vehicle not owned by the dealer for another or others". (the reason for the use of the word "dealer" is because a broker in California must have a dealer license).
Should be interesting...
Has TrueCar also signed up to be a body-parts broker, too? Did they buy up all the spine from weak dealers who need 3rd-parties to namby-pamby customers about price with their TrueCar "ad car"--so they are just angry when they show up at the dealer?? GOOD GRIEF! Have we forgotten how to sell without a crutch? I thought the Internet was supposed to FIX that!! ARRRGGGHHHHHHHHHH! GO SELL SOMETHING!!! :)
<This rant brought to you by Keith, ME, and is my opinion only and could be wrong. Am I?>
Keith I appreciate your approach all this time - stop relying on third party lead generators to draw in customers. Brian Pasch has been preaching this too - do your hard work online in SEO, SEM and ZMOT - then your customers will come to you through "click" store to your "brick" store. That is what Internet sales is all about, connecting with your community, responding to their needs and selling them the on value of buying from you.
Mark, I just can't understand an approach with a third party that swings the customer in price AND attitude against the dealer. How did we get so WEAK that we need such a thing??
Seems to me a dealer or licensed seller should have a location and inventory...
True if you want to be a dealer in Texas, that's for sure.
Okay then, where is the Texas Dealer Assn. in this skirmish?
I'm workin' on it.
Jim, if a company sells referrals for a fee (say $20 or so...) and it is up to the dealer to make a sale, or not... That is a lead provider. If a company sends customers to a dealership and gets paid a significant fee for the sale, if the customer buys a vehicle, that is a broker (or "Bird Dog" in my opinion).
Is this where a lot of Dealer Data ends up for sale to third parties????? I am told it is... http://epic.org/privacy/choicepoint/
While I was connecting at the Denver International Airport, I spoke with a Colorado Dealer Association official... I cannot disclose his name, but he pointed out that TrueCar has hired several VERY high powered attorneys and lobbyists who have very obvious conflicts of interest based on other clients they serve. This would appear to be part of TrueCar's strategy... To hire attorneys that may have been otherwise used in legal actions against TrueCar, thereby neutralizing the threat these auto industry attorneys might represent due to attorney/client privilege regulations. There is no doubt in my mind that TrueCar has enormous resources at their disposal and they will buy all the politicians necessary to keep their plans of collecting $300 on every car sold in America alive.
Your conversation with the Colorado Dealer official is a testament to True Cars' absolute resolve in their their determination to fully implement this program. Remember, as they have stated, they are just "cutting their teeth" on new cars before they move on to used, excuse me, pre-owned vehicles, leasing, service and all other transportation associated services.
Also, let's look at the potential impact of this business model long term and take into consideration the amount of money & resources this organization has at their disposal to throw at it. We might not be able to fully "Kill the Beast"...but we can keep the pressure on our state legislators to ensure True Car remains in full compliance and has to continue compensating their legal eagles.