A Sacramento trade group representing more than 1,100 of the state’s new car dealers has accused Santa Monica’s TrueCar Inc. of operating as an auto dealer and broker without a license.
The California New Car Dealers Association brought the claim in a suit filed in Los Angeles Superior Court. In it, the association claims the online automotive marketplace skirts California Vehicle Code regulations concerning dealer licensing, brokering, advertising and disclosure.
“CNCDA is entitled to an injunction restraining TrueCar from further conducting business in violation of California law as a dealer without the necessary dealer’s license,” reads the complaint filed by Patricia Glaser of Century City law firm Glaser Weil.
While shoppers don’t buy a vehicle from TrueCar, they use the service to find out how much a specific type of car has sold for recently at nearby dealerships in TrueCar’s network. Car shoppers can then lock in a price based on that information.
TrueCar refuted the charges in a statement.
“We fail to understand how the CNCDA believes that it is serving the interests of its members by seeking a declaration that approximately half of those members are violating California law through their relationships with TrueCar,” the company said.
Dealerships have in the past boycotted TrueCar, fearing its business model was initiating price wars by encouraging dealers to underbid each other. At its lowest point, TrueCar only partnered with about 3,000 dealers.
But after TrueCar changed its system to show customers what others had paid for a similar car, it became one of the fastest-growing private companies in the region.