SOURCE: California New Car Dealers Association

California New Car Dealers Association

August 12, 2015 14:00 ET

California New Car Dealers Association Files Updated Legal Action Against TrueCar for Non-Compliance With State's Laws as Case Against TrueCar Is Strengthened by TrueCar's Own Statements Others in the Marketplace Identify TrueCar as an Auto Broker/Auto Dealer

SANTA MONICA, CA--(Marketwired - Aug 12, 2015) -  Today, the California New Car Dealers Association (CNCDA) strengthened its legal action against Santa Monica-based TrueCar (NASDAQ: TRUE) for its noncompliance with various sections of the California Vehicle Code ("CVC") pertaining to dealer licensing, brokering, advertising and disclosure, by incorporating statements made in recent weeks by TrueCar leadership and others active in the automotive marketplace.

In an updated filing today in Los Angeles Superior Court's Santa Monica branch, CNCDA asks the court to rule that TrueCar must adhere to the same CVC rules and regulations as other auto dealers and auto brokers throughout the state of California and that TrueCar's current operations "violate the CVC sections pertaining to dealer licensing and auto broker endorsements." This updated legal action by the CNCDA follows recent legal actions against TrueCar by both TrueCar and non-TrueCar auto dealers in California and New York State, charging TrueCar with deceptive advertising and unfair competition. 

In response to CNCDA's first legal filing, TrueCar's Executive Vice President and Chief Risk Management Officer Johnny Stephenson stated;

"...So tweaking the business in order to address a legal issue is not new to the company. And we'll continue to do that, if we had to. And then ultimately, if it were determined that there were some core thing that we do that we didn't want to tweak, then we'd go get a brokering license, which is an available option in California."

This admission by TrueCar that it is can and will follow the law strengthens CNCDA's legal action where we have asked the court to define, in Stephenson's words, "the core thing that we do."

CNCDA's updating filing makes even clearer that TrueCar is not entitled to charge California new car dealers fees for arranging the sales transactions because it is in violation of the law. In this new filing, CNCDA asks the court to order that TrueCar cannot continue to charge California deals and to enjoin TrueCar from doing so.

In a Los Angeles Times article on July 2, 2015, TrueCar CEO Scott Painter, who recently announced that he would be stepping down to be replaced by a new CEO, stated that "Our competition is the non-TrueCar dealers." 

"We believe that statements such as those by Mr. Painter saying 'Our competition is the non-TrueCar dealer' are a clear indication that Mr. Painter's company is operating as an auto dealer/auto broker," comments Brian Maas, President of California New Car Dealers Association. "CNCDA is asking for a very simple and clear ruling by the court that TrueCar must comply with the rules and regulations that all auto dealers and auto brokers in the state of California are required to follow. We continue to be very clear that TrueCar, like the rest of us, must follow the law,'" Maas added.

On August 6, 2015, TrueCar CEO Scott Painter announced his resignation as CEO and acknowledged that he "...sometimes had a strained relationship with the very dealer community we exist to serve." 

"Based on its conduct, the CNCDA believes that TrueCar acts as a 'dealer' and a 'Broker.' If the court confirms we are right, then TrueCar is in violation of existing consumer protection laws, since TrueCar is unlicensed and fails to disclose to the car buyers that it is paid a fee by the dealer for the sale. Perhaps a new leader of TrueCar will understand its obligation to comply with the law," says Maas.

Others share the CNCDA's view that TrueCar is an autobroker. Recently, stock analysts who follow automotive retailing referred to TrueCar as a "broker." In "Profits Matter: Why This Isn't The Bottom For TrueCar," Seeking Alpha wrote on July 27, 2015: "We affirm further downside remains for this reeling auto broker with a dim future." The article continues: "Beyond all the hype surrounding TRUE's growth potential and the auto broker market at large, it is far more important to note that TRUE has been, still is, and will continue to be unprofitable."

The California New Car Dealers Association (CNCDA) is a statewide trade association that represents the interests of over 1,100 franchised new car and truck dealer members. CNCDA members are primarily engaged in the retail sale and lease of new and used motor vehicles, but also engage in automotive service, repair and part sales. 

Contact Information

  • For Information Regarding California New Car Dealers Association:
    Kim McPhaul
    Director of Communications & Marketing
    916.441.2599