Dealers vs. Consumers: Was TrueCar.com Forced to Favor One Over the Other?

Dealers vs. Consumers: Was TrueCar.com Forced to Favor One Over the Other?Before TrueCar.com shifted course in deciding not to allow rival car dealers to see each other’s bids, the website helped consumers by significantly driving down car prices.
But things changed when car dealers — the revenue drivers for the site — allegedly colluded ( legal language for “ganging up” ) against TrueCar in 2011 and 2012 over price competition.
The Federal Trade Commission is investigating whether dealers colluded to hurt TrueCar during that time, Automotive News first reported.
The investigation is now getting fresh play by Reuters and other media outlets mostly because TrueCar.com is getting a $30 million injection from an investing arm of Microsoft Corp co-founder Paul Allen, it was announced Thursday.
TrueCar still  lists the lowest price for new and used models, sometimes reducing the manufacturer’s suggested retail price by thousands of dollars. But the FTC, as a consumer protection agency, wants to know if car shoppers lost a more competitive edge in the potential collusion.
In a letter to dealers earlier this Fall, the FTC said it is investigating whether some companies in the “retail automobile industry” committed anticompetitive acts “by agreeing to refuse to deal with TrueCar.”
TrueCar CEO Scott Painter has said that the FTC investigation did not stem from a TrueCar complaint.
Painter told Automotive News that the company has completely restructured its business practices and “mended fences with dealers over the past 18 months.”
“It’s like calling in reinforcements for a battle that is already over,” Painter told Automotive News back in September.
Before TrueCar “mended fences” with dealers, the website’s dealer network had fallen from 5,700 dealers at the end of 2011 to 3,100 two months later as dealers complained over tumbling prices.
Dealers are the source of TrueCar’s revenue, and the company lost $9 million in January 2012 alone.
The alleged “ganging up” against TrueCar.com seemed to have had a lot to do with the website’s big shift, which included disabling the feature that allowed dealers to see what rivals were bidding for potential customers.
Dealers now see a customer’s name, phone number, email address and what kind of car they are interested in buying. Customers see prices from area dealers.
Meanwhile, TrueCar’s network has rebounded to 6,700 dealers.

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