SANTA MONICA, Calif. — The California New Car Dealers Association (CNCDA) today filed a lawsuit against TrueCar, alleging that the shopping site is not in compliance with certain sections of the California Vehicle Code pertaining to dealer licensing, brokering, advertising and disclosure.
The legal action, filed at the Los Angeles Superior Court Santa Monica branch, charges TrueCar with acting as a dealer and a broker when it does not have a dealer or broker license. The CNCDA believes that this means TrueCar is in violation of state consumer protection laws.
“So-called technology advances do not permit ignoring the law,” said Patricia Glaser of Glaser Weil, the law firm that filed the litigation on behalf of the CNCDA. “Quite simply, it is only acceptable to offer new services to consumers if [they] meet the legal structure in place, which was created to protect consumers. TrueCar, like the rest of us, must follow the law.”
CNCDA President Brian Maas added: “We will fight what we believe is this lack of transparency in the courts because it is clear to us and should be now clear to consumers that laws are being broken.”
A TrueCar spokesman said the company had not seen the lawsuit, adding that the company would comment once it’s reviewed the complaint.
This isn’t the first time TrueCar has come under fire for noncompliance with dealer licensing laws. In late 2011, dealer associations in California, Colorado, Indiana, Louisiana, Nebraska, Ohio, Oklahoma, Virginia and Wisconsin questioned the company’s compliance with such laws. The firm has said those issues have since been resolved, a claim Monica Baumann, director of legal and regulatory affairs for the CNCDA, denied, at least in California.
“The CNCDA is not aware of the California DMV ever looking into the issue, which is part of the reason the CNCDA executive committee supported this lawsuit,” she said in an email exchange with F&I and Showroom.
“In 2012 and again in 2014, after receiving a large number of inquiries from dealer members, the CNCDA requested that outside legal counsel at Manning, Leaver, Brude & Berberich review TrueCar’s business and prepare legal memoranda regarding its occupation license status and advertising practices,” she added. “… MLBB concluded that TrueCar does not comply with the law and puts dealers as risk."
TrueCar CEO Scott Paint has always maintained that his firm’s business model does not equate to a brokerage or buying service because TrueCar staffers do not engage in the selling of vehicles.
The vehicle-shopping site is also facing a mass action lawsuit filed by New York-based law firm Bellavia Blatt & Crossett. It claims that dealers have been injured by its business practices. The firm planned to file two separate lawsuits, one representing non TrueCar-subscribing dealers and a second representing dealers currently signed for the service. TrueCar has called the lawsuits “meritless.”
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