Some dealers who complained about TrueCar in late 2011 and early 2012 were no doubt surprised this month to discover that the Federal Trade Commission is investigating them for potentially anti-competitive activity.
The FTC won't discuss the matter, but its letters to dealers and others show the FTC is exploring whether some auto retailers illegally colluded to boycott TrueCar services.
It's not clear where the case is headed. But if nothing else, it serves as a reminder of the need for dealers to avoid risk. They should ask themselves: Am I cooperating with others in a way that an outsider might see as damaging somebody else's business?
The likely FTC focus is a period when dealer resistance to TrueCar's fee structure caused the lead generator to change its business model. Dealers felt TrueCar's practices forced them to lower vehicle prices to compete. Almost half of TrueCar's participating franchises bolted within months. TrueCar changed how it operates and says its franchise count has grown to 6,500, more than before the controversy.
Dealers on the FTC's radar argue that they acted alone and criticized TrueCar because of worries that customer data it extracted from dealerships might leak to the wrong people.
Dealer associations and state regulators that jumped into the fray say that they thought TrueCar was violating state consumer and advertising laws and that they told dealers not to participate in an illegal business model.
What makes it a federal case?
Independent antitrust attorneys say the FTC likely has two concerns. First, TrueCar changed its business model after protests, a potential sign that it was harmed by dealers' actions. Second, the FTC may reason that if the old system benefited consumers by lowering vehicle prices, forcing TrueCar to change harmed consumers by raising prices.
The FTC also appears to be interested in dealers or their employees who posted comments about TrueCar on social media.
It's worth noting that the FTC has requested information rather than using its sterner subpoena powers.
Dealers already have compliance processes in place to avoid violating the law and ensure employees know what is expected of them. Now might be a good time to review and reinforce those policies -- and to make sure all employees take special care when commenting on others via social media.
Such precautions are not perfect, but they can reduce the likelihood of an investigation.