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Colorado agency opens investigation into TrueCar.com auto sales

December 20, 2011 |  5:49 pm

Ford cars for sale at an auto dealership

The agency that oversees auto sales in Colorado has launched a probe into the operations of TrueCar.Com, the fast growing Internet sales referral service.

Santa Monica-based TrueCar is already in a fight with Honda Motor Co., which has told its dealers that they will forgo advertising subsidies if they post deeply discounted prices on TrueCar’s website.

Colorado launched the probe after receiving objections to the buying service from the Colorado Automobile Dealers Assn. and an additional unspecified complaint. 

The state’s Department of Revenue is looking into what it described as advertising violations. The agency also said TrueCar might not have the correct license for conducting car sales through Colorado dealers.

In a statement, TrueCar said it is “addressing technical and procedural questions raised by regulators who may not know what to make of our service.... TrueCar invites and takes seriously questions about consumer protection, and is vigilant about ensuring that its partner dealers honor their commitments to buyers.”

TrueCar has grown quickly by signing up about 5,000 dealers nationwide who offer shoppers a no-haggle, up-front price on a vehicle. Dealers pay TrueCar $299 per new car sold and $399 per used car sold. The company is on track to collect about $100 million from commissions this year, according to TrueCar executives.

The online service features dealers who offer guaranteed pricing near or even below a vehicle's invoice, which many consumers believe represents the price the dealer paid for the auto. (Because of various back-end allowances and payments, the dealer cost is typically below the invoice.)

The TrueCar system also is used by several auto shopping referral services, including Consumer Reports and USAA, which provides financial services to members of the U.S. military.

Colorado regulators said that TrueCar’s violations include failing to include the stock number of a vehicle for sale, using the word “invoice” in advertising, not using big enough type for disclaimers and failing to advertise vehicle pricing that includes delivery and handling fees.

“There would appear to be the potential for a consumer who has been quoted a price for a specific vehicle and assured a guarantee arranging at the dealership to find the vehicle has already been sold… this may constitute a bait and switch transaction which is prohibited,” Colorado's Department of Revenue said in a Thursday memo obtained by The Times.

The agency has told TrueCar to correct the advertising violations and meet with the agency to discuss the licensing issue. Dealers have been told that if they use the referral company, they will be liable for any problems resulting from consumer complaints about a TrueCar transaction.

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-- Jerry Hirsch
twitter.com/LATimesJerry

Photo: Fords for sale at an auto dealership. Credit: Associated Press

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