Detroit Bureau on Twitter

TrueCar Yields to Critics and Regulators

Facing mounting legal hurdles, pricing service plans “sweeping changes.”

by on Jan.17, 2012

TrueCar founder Scott Painter is promising "sweeping changes" to the site's business model.

Scott Painter has never been one to readily yield to his critics, but with state regulators taking aim and a series of huge legal battles looming across the country, the Internet car sales pioneer has backed down, announcing “sweeping changes” to the way his latest venture, TrueCar.com, operates.

The service has generated significant buzz – and plenty of traffic – since its launch, promising to provide consumers with what it has claimed to be the most accurate pricing data online.  Dealers, in turn, were provided an alternative model to attract customers.  Instead of paying for leads, as is the case with most online auto sites, they only paid a $300 fee whenever a car was actually sold.

News Now!

TrueCar’s approach has generated strong support in some quarters – but plenty of criticism elsewhere.  And angry dealers, always a force to be reckoned with, were able to rally support in a number of states where TrueCar appeared to be running afoul of strict franchising laws.  Notably, states like Texas and Virginia bar so-called “bird-dogging,” or auto brokering, where a third party steps in to help a customer get a better price.

Hoping to get regulators to back off and soothe angry dealers, Painter announced TrueCar will now make “sweeping changes” that could significantly alter the way it does business in at least some states.  The “pro-industry” moves will mean the elimination of the cost-per-sale model in some states.  The website will no longer refer to “invoice” prices but switch to the term “discounts to MSRP.”

The firm has also temporarily halted operations in four states, Colorado, Louisiana, Nebraska and Oklahoma, while it works out a new model that won’t run afoul of state laws.

Meanwhile, shoppers will now have to create an account with TrueCar and log in whenever they want to receive pricing information – an approach that could reduce usage as competitors, such as Kelly Blue Book and Edmund’s, do not require logging in.

Whether the changes TrueCar has proposed will work remains to be seen.  Some dealers say they’ll only be happy to see the California-based start-up shut down entirely.  Others privately express support for the web service, which now says it will press for changes to restrictive state models that don’t reflect the realities of shopping in the Internet era.

“We are in the business of innovation. As such we have to embrace change as part of what we do,” wrote Painter, adding that, “The feedback we have received, both good and bad, will enable us to better serve our dealer partners and the industry overall.”

TrueCar signaled it was ready to yield when it announced a tentative shift in its dealer payment model in Virginia last week.  It will follow with revisions in California and other parts of the country, it said, adding its goal is “100 percent national compliance.”

The company’s decision to yield raises as many questions as it answers:

  • Will regulators accept the changes?
  • Will TrueCar be able to make peace with dealers – and get those who walked away from the service to now sign back on?
  • And will it continue to be viewed by car shoppers as an easy place to get the most detailed and accurate pricing information – which they can then use to negotiate the lowest price for a new vehicle?

Clearly, dealers are hoping that the revisions to the website itself will fudge the pricing data a bit, making it more difficult for customers to hammer them down.  But that’s precisely what TrueCar had been promising, which is why it rapidly grew to become one of the industry’s most powerful pricing services.  Losing that edge could do as much damage as the lawsuits state regulators had been threatening.

Tags: , , , , , , , , , , , , , ,

Comments are closed.