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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:
If Truecar is an opt in service and dealers can choose to participate, or not, I'm curious what the real issue is here? The way I see it is that they are selling deals to dealers for $300 and they are getting those deals to the dealers by guaranteeing the consumer gets a low, haggle free price. If the consumer gets the car at the quoted price, and they are treated well, then they'll probably get their car serviced there and maybe even buy their next one from them. Seems to me like a win-win. It also seems to me that a dealer who didn't want to participate could easily replicate the service just for their dealership, log in, find car, compare pricing, print coupon, come to dealership and write a check. What am I missing?
Allan, I think you pretty much summed up what everyone at TrueCar keeps saying... What seems to have many dealers and industry pundits up in arms are the following issues:
1. TrueCar uses DMS data extraction to predict who will buy a car from your dealership and then claim that deal so they get paid without actually adding any value... a Handshake T.O. (IMHO)
2. TrueCar aggregates confidential deal and transaction data to drive gross profits lower by showing the lowest priced deals that any dealer has taken, whether they participate in TrueCar or not.
3. TrueCar has repeatedly stated that they will be responsible for eliminating the excessive numbers of dealerships in America through transparency and market forces (reverse auction effect)
4. TrueCar advertises vehicles at below dealer triple-net cost so they can get customer data, and despite ruining the customer's satisfaction with the buying experience by forcing the dealer to convince customers to pay more, they still want their $300 fee for lowballing and claiming the lead.
5. TrueCar uses dealership originated data to assess additional cost structure to each deal and drive prices and gross profits down.
There's a whole lot more to this brouhaha about TrueCar, but those are 5 issues that are top of mind to me.
Ahh, now I get it. Sounds like it could be a game changer, and not in a good way. So I wonder what dealers can do to curb the tide?
Alan: Check out this blog Dealer Data Wars! which I wrote, ironically, December 7th!
This is where a lot of Dealer data seems to land for sale... http://epic.org/privacy/choicepoint/
There are dealers in our market that are using TrueCar in questionable ways similar to what the state of Colorado objects to; I hope that this will get them out of our state, or at least cause TrueCar to both revise their methods and actually enforce the rules they supposedly have. Until this happens, we're staying away, and I recommend the same to everyone else.
Cleveland Dealers Association just issued this to ohio Dealers...
See the following statement made by them this morning;
GCADA wishes to remind member dealers that such an arrangement could potentially violate Ohio Revised Code § 4517.20.
The relevant law on this issue is found in Bureau of Motor Vehicle Code, Ohio Revised Code Section 4517.20, which states in part that: “No motor vehicle dealer shall directly or indirectly, solicit the sale of a motor vehicle through a pecuniarily interested person other than a salesperson licensed in the employ of a licensed dealer…nor shall a dealer pay any commission or compensation in any form to any person in connection with the sale of a motor vehicle unless the person is licensed as a salesperson in the employ of the dealer.”
If a dealer is found in violation of this section, there are numerous types of legal penalties against the dealer for such practices. In addition to criminal sanctions, a dealer can face a Dealer Licensing Board hearing for revocation and/or denial of a dealer’s license due to such violations. Participation in the sale of a motor vehicle by an unlicensed salesperson is also a violation of the Ohio Consumer Sales Practices Act, a statute carrying penalties of rescission, treble damages, non-economic damages, attorneys fees, as well as potential civil penalties and attorneys fees in an action brought by the Ohio Attorney General’s Office.
The Wisconsin Department of Transportation, Division of Motor Vehicles has sent a letter, dated December 14, to TrueCar informing them that their business model violates Wisconsin law. The department instructed TrueCar to inform all of the Wisconsin dealers participating in TrueCar’s program that the program is not in compliance with Wisconsin law and either discontinue operations in Wisconsin or change their program. The department identified the method of payment (the $299-$399 per sale) as an illegal commission and a bird dog fee.
Out of curiosity, I just went to TrueCars website, asked for a dealer in Colorado (after providing a ton of personal (false) info, and they came back referring me to THREE dealers, all well known and all within a few miles of me. If this has been banned in Colorado, how do these dealerships get away with being members of same? Anyone know?