The Sacramento-based California New Car Dealers Association, which bills itself as the nation’s largest state association of franchised new car and truck dealers, continues to pursue legal action against a popular Golden State car-buying site.
The CNCDA, which represents more than 1,100 dealer members, said last week that it amended its May 2015 lawsuit against Santa Monica-based TrueCar Inc., contending that the latter’s automotive pricing and information website is not in compliance with California laws governing auto sales.
CNCDA contends that TrueCar is not in compliance with California Vehicle Code sections requiring vehicle dealers and brokers to be licensed, and that TrueCar has produced false and misleading advertising. The amended complaint, filed in the Santa Monica arm of Los Angeles Superior Court, also added an allegation of unfair competition.
“TrueCar actually matches a buyer and a seller and gets paid for doing so. This is brokering, and TrueCar isn’t licensed as such,” insisted Brian Maas, CNCDA president.
The suit does not ask for monetary damages but seeks a ruling mandating compliance by TrueCar, which has steadfastly insisted that it is already in compliance with state laws. A court ruling is expected in the next couple of months.
In its formal response to the original May 2015 lawsuit, TrueCar said: “TrueCar is confident it can demonstrate the compliance of our business model with California law. We fail to understand how the CNCDA believes that it is serving the interests of its members by seeking a declaration that approximately half of those members are violating California law through their relationships with TrueCar.”
In an emailed statement, Johnny Stephenson, TrueCar’s chief risk officer, said CNCDA’s latest legal move represents a “third attempt to state a claim against (TrueCar), and we believe it is as fatally defective as the first two efforts. We expect that this complaint will be dismissed by the court just like the last one the CNCDA filed.”
The CNCDA alleges that TrueCar’s advertised claims of “no surprise or hidden fees” is false, because TrueCar receives a fee on each sale made through its website.
“The TrueCar business model simply doesn’t meet the legal structure in place to protect consumers,” said Patricia Glaser, a Southern California attorney representing the CNCDA. “TrueCar must follow the law like the rest of us.”
Started in 2005, TrueCar works with affiliated dealerships nationwide. TrueCar touts its ability to give buyers accurate information on what other consumers have paid for motor vehicles, giving prospective purchasers an accurate indication of the price of a given motor vehicle. Through its digital platform, TrueCar says buyers can get economically favorable offers from dealers and avoid on-site haggling.
TrueCar says CNCDA first amended its complaint in August last year, following a TrueCar motion to dismiss the complaint. Stephenson said TrueCar subsequently moved to dismiss the CNCDA complaint, citing various defects. Stephenson said the court dismissed the complaint last month but gave CNCDA an opportunity to again amend.
“As expected, the CNCDA has refiled,” Stephenson said. “We believe the CNCDA’s latest filing is exactly as meritless as its first two attempts, and we expect to again be fully vindicated by the court.” A court ruling is expected in the next couple of months.
Attempts to get on-the-record comments from some local dealers were unsuccessful. They cited the ongoing litigation.