Federal investigators have closed an antitrust probe into car dealers that refused to work with TrueCar, the company said in a filing with the Securities and Exchange Commission.
TrueCar noted in its filing that it had cooperated with the federal investigation and “consider the matter to be closed.” The company also noted that even though the investigation was aimed at alleged collusion against TrueCar, it could have in fact been harmful to the car dealer relationships the company relies on.
Santa Monica’s TrueCar, a third-party car pricing information website and app, collects car sales data from dealerships, giving shoppers a chance to compare prices with regional averages. Many auto dealerships rely on TrueCar for car leads, but believe the price transparency service is cutting away at their profit margins. That tension has caused dealers to leave TrueCar en masse, sue the company and openly dispute its business model.
Lawsuits and stalled earnings growth led Chief Executive Scott Painter to announce on Aug. 6 that he would step down by the end of the year.
TrueCar shares are trading around $5.75 a share and have lost about 75 percent of their value since the beginning of the year, when they traded at nearly $22.
Resolving conflict between TrueCar and its dealer customers is important the company’s future, said Sameet Sinha, a senior analyst at B. Riley & Co. in San Francisco.
“If TrueCar loses any of these lawsuits they might need to change their business model dramatically, and that is what people are afraid of,” he said. “The fact the company was not able to address these – in fact telling people that, ‘Oh that was a thing in the past,’ when it wasn’t – is what led to Scott Painter’s resignation.”