Two weeks ago, Automotive News submitted questions to TrueCar.com about legal issues that various states have with the company's marketing methods. Here, unedited, is the company's Dec. 23 response: an introductory statement along with answers to the questions.
At the end is an additional statement from TrueCar on Friday, Dec. 29.
First, it's important to point out that consumers and dealers are embracing what we do. Since June, monthly visits to TrueCar.com have grown six-fold, successful sales through our dealer partners that are facilitated by TrueCar.com have quadrupled and the rate of TrueCar.com visitors requesting dealer introductions has increased significantly. Our Yahoo partnership, which will launch shortly, will give TrueCar and its dealers an even bigger platform to promote the value of transparent pricing.
But it's not just consumers who see the value of TrueCar. Since the end of October, dealer inquiries about joining the TrueCar network have risen 481 percent. The number of new dealers joining the TrueCar network each week has doubled since October and we have more dealers than ever in the pipeline waiting to join.
While we have admittedly seen an increase in dealer cancellations, but we are confident that we can earn these dealers back as our active engagement with regulators, coupled with our current and planned product enhancements, will allow TrueCar's model to conform to the state regulatory schemes.
Our success is directly tied to the success of our dealer partners, and TrueCar is relentlessly focused on helping those dealers close sales to satisfied buyers.
TrueCar is projecting that participating dealers will sell over 30,000 total new and used vehicles by using the TrueCar marketplace in December 2011, a 63 percent increase versus 18,096 total new and used vehicles in June 2011.
Finally, we have received an enormous amount of support and encouragement from our dealer partners in recent weeks. They know that a lot of the noise being generated right now about TrueCar was incited by a small — but vocal — group with a vested interest in the status quo. They recognize that the facts about TrueCar differ significantly from some of the statements in the press, and that well-informed buyers are an opportunity rather than a threat to dealers.
Automotive News: How many states have expressed concerns about the legality of dealers using TrueCar in their states or asked you for more information about your business model?
As TrueCar has grown and raised its profile, we find that regulators generally are doing their jobs and are reviewing our business model, which is new in the industry and, therefore, new to them. Several states have made inquiries and TrueCar is engaged in a dialogue with those regulators to ensure that TrueCar's business model will conform to each state's different regulatory requirements. At this point, six states have made formal inquiries. However, TrueCar will work openly with any and all regulators who would like to review our model. What remains important is that TrueCar takes compliance issues very seriously, and is committed to working towards a consensus with all state regulators that will help us ensure that TrueCar's model conforms to the various state regulatory schemes.
AN: Have you initiated meetings with or contacted any states yourself on this matter?
Over the last several years, TrueCar has been engaged, and is continuing now to engage, in a dialogue with regulators. The myriad state laws applicable to dealers on the books today generally were enacted prior to the dramatic change in information access brought by the Internet. TrueCar has a national and innovative business model that does not easily fit the mold, particularly given the historic regulatory framework. We have good relations with state regulators and are making progress in our ongoing dialogue.
AN: Are you planning or have you changed anything on your site to fix what some states are saying are advertising violations? For instance, the references to invoice price?
Regulators have given us constructive suggestions for improvement of our services. We are taking those suggestions seriously and making changes accordingly, but our core goals remain the same: transparency and up-front, competitive pricing.
AN: Are you planning or have you changed anything about your pricing model to dealerships to avoid violations of brokering and bird dog prohibitions? Would you consider going to a flat subscription fee model with no payments conditioned on vehicle sales? Have you already done that in any states?
This is an area where we believe there has been significant confusion and we are in active discussions with certain states to clarify our pricing model. That said, we are certainly open to changes that enhance our ability to comply with a particular state's needs and to more accurately reflect what we do.
TrueCar is not a broker, traditional advertiser or lead generation company. We do not arrange or negotiate sales for dealers, nor do we advertise vehicles for sale. Rather, TrueCar is an Internet marketing company — the dealer's window through the Internet to customers searching for vehicles.
We provide online information, technology and data services to consumers and to our dealer partners, including custom analytic and statistical reports based upon pre- and post-sale vehicle data. Dealers provide the pricing and engage in the transaction with the customer. TrueCar is simply the portal through which the consumer searches for and receives the dealer's information.
In exchange for these services, we receive a fee from the applicable dealer partner. We refer to this as "performance-based pricing" to differentiate it from lead generation services.
The sale of the vehicle triggers the post-sale analytics and reporting we provide the dealer as an essential piece of the TrueCar service; we are compensated by the dealer for the provision of those services, not as a broker of the transaction.
AN: Do you intend to get licensed in states that require it? Will you obtain licenses for your employees to satisfy the requirements for sales people to also be licensed?
TrueCar is not a broker, dealer, sales agency or buying service of any kind. Therefore, there is currently no state license that would apply to what we do. If a new category of Internet Marketing were created, with qualifying guidelines and rules of operation, we would be happy to be licensed pursuant to those rules. Until that time, the only alternatives for licensing do not cover what TrueCar does. Similarly, our staff does not sell or get involved with the selling of vehicles, so there is no professional license that would be applicable.
AN: Have you received any consumer complaints?
Consumers seem to love the transparency and easy access that TrueCar offers. We have not had any complaints from consumers about our core competencies or our business model.
AN: How many dealers have canceled TrueCar contracts in the last seven days?
We believe that any cancellations that have occurred by dealers are due to confusion about manufacturer and regulatory issues. As we work through those issues, we believe that dealers that cancelled will return.
AN: How will the recent state, Honda and Group 1 actions affect dealer recruitment by TrueCar? Are you revising total dealer recruitment below 10,000 in light of developments?
If anything, we see those numbers climbing over time. Once we are able to work through any misunderstanding of our model, comfort with the TrueCar concept will increase and the continuing consumer growth can be harnessed by dealers wishing to sell more units.
AN: Do state regulatory actions elevate dealer uncertainty over your business model, and how are you addressing that?
We are working in cooperation with state regulators to create certainty and clear up any regulatory confusion regarding our business model. We take regulatory comments by the states seriously and are working to find ways to meet those needs with the handful of states that have sought our explanation of the TrueCar model. Working together with regulators and bringing the ideas of the various states together can only improve the TrueCar model.
AN: How does TrueCar safeguard the data it collects?
TrueCar takes the security of customer data very seriously. As such, TrueCar's security systems have been developed to safeguard personal information to provide for the security and confidentiality of such information.
Furthermore, TrueCar's systems are engineered to protect against unauthorized access or use of such information. We work with institutional partners such as USAA, AAA, Bank of America, American Express and Consumer Reports, each of which has rigorous security requirements and have chosen to work with us because of the value we deliver.
On Dec. 29, TrueCar added this statement:
TrueCar is committed to operating our service in compliance with state and federal laws. Throughout our history we have worked with state regulators and where issues were raised, constructively found solutions to those concerns. TrueCar continues to work directly with regulators to ensure that at no time will our dealer partners be in violation of any laws by participating on the TrueCar network. In fact we're in the process of making meaningful changes to the service, which will be completed by the end of January 2012, in order to address specific concerns raised by regulators. In the meantime, no fines or penalties have been levied against TrueCar or any of our dealer partners as a result of these inquiries, there has been no mandated prohibition of TrueCar services in any state and there have been no lawsuits filed against TrueCar. We remain committed to regulatory compliance, transparency and the success of our dealer partners and consumers.