Antitrust Law Daily Wrap Up, ADVERTISING—S.D.N.Y.: Claims that TrueCar mislead consumers with 'no haggle' ads proceed, (Jan 7, 2016)

By Linda O’Brien, J.D., LL.M.

Claims by non-affiliated auto dealerships that online vehicle buying site TrueCar, Inc. engaged in false advertising by promising that consumers who used its services could buy cars at TrueCar affiliated dealerships at guaranteed low prices, without price negotiations, and below factory invoice prices could proceed, the federal district court in New York City has ruled (Dependable Sales & Service, Inc. v. TrueCar, Inc., January 6, 2016, Castel, P.).

Dependable Sales and Service is one of 162 dealerships that are in the business of buying and selling new and used automobiles and trucks to consumers throughout the United States. TrueCar operates a website that enables prospective automobile purchasers to search for available vehicles offered by its affiliated dealerships.

In March 2015, the dealers filed a complaint against TrueCar, alleging claims for false advertising under the Lanham Act and unfair competition and deceptive business practices in violation of the New York Deceptive Acts and Practices Act. Specifically, the dealers claimed the site promises that consumers who use its services can buy cars at TrueCar affiliated dealerships at guaranteed low prices without price negotiations, when in fact the promised vehicles may not be available at the advertised price or financing terms. TrueCar moved to dismiss the complaint.

False advertising. The court determined that the dealers sufficiently alleged that TrueCar falsely advertised that its customers would enjoy a no haggle, negotiation-free purchasing experience. The complaint asserted that TrueCar repeatedly made those representations in its advertising and the statements were false since the website facilitated dealership solicitations to consumers, the purpose of which was to negotiate over the vehicle price. Although the ads contained disclaimers, they were inconspicuous and appeared in fine print.

In the court’s view, there was a factual dispute as to whether TrueCar’s advertising actually guaranteed savings or did not involve negotiations. Furthermore, the disclaimer must be considered in the overall context of the advertisement and the court could not determine whether a reasonable consumer would have been misled by a particular advertisement at the current stage of the proceedings.

The court also declined to dismiss the dealers’ allegation that TrueCar’s advertising misled consumers into believing that they could learn a vehicle’s “factory invoice” price through TrueCar when the advertised factory invoice price did not reflect manufacturer rebates, incentives, and other discounts provided to the dealer. Whether the “factory invoice” definition contained on TrueCar’s webpage and its statements that “users on occasion” pay less than the factory invoice price cured any allegedly misleading advertisements could not resolved on the merits on a motion to dismiss, the court noted.

However, the dealers’ claim that TrueCar used a “bait-and-switch” approach in its advertisements by misleading consumers into believing they could select a specific vehicle at a guaranteed price was dismissed. The complaint identified no statement or image that it claimed to be either literally or impliedly false. The court also dismissed the dealers’ claims that True Car’s advertisements falsely lead consumers to believe that TrueCar would calculate the financing terms of a vehicle purchase and the quoted price contained no “hidden costs or surprise fees.” TrueCar’s website expressly stated that loan payments were estimates and the dealers’ complaint failed to identify any alleged false statements to support its “transparency” claim, the court concluded.

The case is No. 1:15-cv-01742-PKC.

Attorneys: Leonard A. Bellavia (Bellavia Gentile & Associates, LLP) for Dependable Sales and Service, Inc. Benjamin M. Arrow (Kramer Levin Naftalis & Frankel, LLP) for TrueCar, Inc.

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

Cases: Advertising StateUnfairTradePractices NewYorkNews