Antitrust Law Daily Wrap Up, ADVERTISING NEWS: Online vehicle buying site allegedly mislead consumers with “no haggle” ads, (Mar 10, 2015)

By Linda O’Brien, J.D., LL.M.

Online vehicle buying site TrueCar, Inc. has engaged in false advertising and deceptive business practices, causing loss of sales and goodwill to non-affiliated automobile dealerships, by promising that consumers who use its services can buy cars at TrueCar affiliated dealerships at guaranteed low prices without price negotiations when it fact the promised vehicles may not be available at the advertised price or financing terms, according to a complaint filed in the federal district court in New York City (Dependable Sales and Service, Inc. v. TrueCar, Inc., March 9, 2015).

Dependable Sales and Service is one of 117 dealerships that are in the business of buying and selling new and used automobiles and trucks to consumers.

The complaint states that TrueCar generates consumer traffic to its website through direct consumer advertising and promotions to membership-based organizations. Consumers visiting TrueCar’s website can select vehicles of interest and research price savings purportedly only available through TrueCar and its affiliated dealerships. The website provides a report and offers consumers the opportunity to “lock in” the listed savings through a TrueCar dealer. Consumers who provide their contact information can download a “guaranteed price certificate” for the selected vehicle.

According to the lawsuit, the advertisements on the website falsely claim that consumers using its services can buy an automobile with no “haggling” and “no negotiation,” and TrueCar benefits consumers by “removing surprises at the dealership.” However, TrueCar merely acts as a referral service that provides TrueCar affiliated dealerships with customer leads and contact information, the dealership charged. Contrary to TrueCar’s advertising claims, consumers must negotiate with TrueCar affiliated dealers to complete the actual purchase. Consumers must negotiate with TrueCar affiliated dealers over price, features, and financing, just as they would need to do with a non-affiliated TrueCar dealer. Additionally, consumers may be surprised to learn that the promised vehicle may not be in stock or not be available at the advertised price or financing terms.

TrueCar’s alleged false or misleading advertising includes: (1) false “no haggle” claims; (2) bait and switch advertising; (3) false factory invoice claims; (4) false financing claims; (5) false transparency claims; and (6) false rebate claims. TrueCar’s advertising has caused irreparable harm to the plaintiffs. The dealers have lost sales and suffered injury to their goodwill and business reputation as a result of TrueCar’s false advertising claims, the complaint charges.

The complaint also states that TrueCar’s advertising and business practices have been investigated in multiple states. In 2012, regulators in Virginia determined that TrueCar affiliated dealers violated state law by paying fees to TrueCar for consumer leads that turned into sales. Similarly, TrueCar temporarily suspended operations in Nebraska, Oklahoma, and Colorado in 2012 due to regulatory concerns relating to its advertising and business practices.

The plaintiffs assert claims for false advertising, unfair competition, and deceptive business practices in violation of the Lanham Act and New York Deceptive Acts and Practices Act. The action seeks injunctive relief, treble and punitive damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 15 CV 1742.

Attorneys: Leonard A. Bellavia and Steven H. Blatt (Bellavia Blatt & Crossett, PC) for Dependable Sales and Service, Inc.

Companies: Dependable Sales and Service, Inc.; TrueCar, Inc.

News: Advertising StateUnfairTradePractices NewYorkNews