Dealers and trade associations questioned as part of a federal probe into whether there was a conspiracy to force TrueCar to change its price-slashing business model insist they were justified in cutting ties with the shopping site last year.
The Federal Trade Commission is attempting to determine if companies in the "retail automobile industry" violated competition laws "by agreeing to refuse to deal with TrueCar," according to an FTC letter sent to dealers and others this month and obtained by Automotive News.
TrueCar temporarily suspended operations in several states in early 2012, but there was no collusion, dealers and state association leaders say -- only a desire for TrueCar to conform to state laws and assure that it would not extract too much information from dealer computer systems.
Bruce Gould, executive director of the Virginia Motor Vehicle Dealer Board, said his group was duty-bound in early 2012 to warn dealers that TrueCar was operating illegally in the state, and that dealers risked penalties if they participated with TrueCar.
When TrueCar came into compliance in Virginia later in 2012 -- by shifting to a subscription-based system instead of charging dealers per vehicle sale -- Gould said the board gave the all-clear for dealers to return to TrueCar.
Dealers also say they dropped the shopping site out of concern that sensitive data pulled by TrueCar from dealer software systems to prove vehicle sales might leak into unauthorized hands.
Many dealers returned to TrueCar when the company assured them that only limited amounts of data were being pulled, said Jim Ziegler, a dealer process consultant in Atlanta who wrote a highly critical blog about TrueCar in late 2011.
Ziegler was among the dealers, dealer groups, associations and consultants that received a letter this month from the FTC requesting all e-mails and documents related to TrueCar.
The National Automobile Dealers Association received the FTC letter.
"We will fully cooperate with them, and we have no reason to believe that anyone at NADA or within the family is the target of the investigation," said executive director Peter Welch. "We have no reason to believe that NADA is the target of any investigation."
The FTC is not confirming the existence of the probe.
Car shoppers using TrueCar.com request price offers from participating dealerships. In all but a handful of states, TrueCar has a pay-per-sale model, which requires participating dealers to pay TrueCar $299 for every new car sold from a TrueCar lead and $399 for every used car sold on the basis of a lead.
TrueCar says it currently has a network of 6,500 participating franchises, double the 3,200 it had fallen to during the crisis.
TrueCar CEO Scott Painter said the company did nothing to initiate the investigation.
Far from opposing TrueCar, Gould said many dealers were upset with the temporary suspension of the company's operations in early 2012.
He said TrueCar was particularly beneficial in Virginia because of the many military installations in the state. USAA, a financial and insurance services association for active and retired military, is among the shopping site's association partners, which offer the TrueCar pricing program to members.
Still, the Virginia dealer board, which has not received an FTC letter of inquiry, would not give the all-clear to TrueCar until it switched to a subscription system rather than getting paid on the basis of vehicles sold, Gould said.
The pay-per-sale model violated car brokering laws in the state, he said. Today, TrueCar says it is in compliance in all 49 states in which it does business.
The Oklahoma Motor Vehicle Commission had similar concerns in early 2012 and warned dealers about doing business with TrueCar, said Roy Dockum, the executive director.
In Oklahoma, TrueCar voluntarily suspended operations until, as in Virginia, it switched to subscriptions from pay-per-sale, Dockum said.
One dealership employee who received the FTC letter had publicly criticized TrueCar on Ziegler's blog. The employee told Automotive News last week that he saw no evidence of dealers acting in concert against TrueCar. His beef was that TrueCar was mining data from the dealer's software, then using it to get dealers to bid against each other on price for prospective buyers.
TrueCar has denied it used dealer data for that purpose. Instead, the company has said it has multiple sources where it obtains pricing data.
But Earl Stewart, a Toyota dealer in North Palm Beach, Fla., and a member of TrueCar's dealer advisory council, said the FTC investigation is justified.
He said consumers got lower prices from TrueCar leads before the business model was changed to prevent competing dealers from seeing what rivals were bidding for a customer. Today, dealers can provide a guaranteed price to consumers but can't see what rivals are bidding.
Stewart said that he welcomed the competition, but that the dealer outcry against the company nearly caused TrueCar to go out of business.
When TrueCar was forced to change its business model, he said, "Consumers really got screwed."
Gabe Nelson contributed to this report.