Sonic, miffed by lawsuit, jilts TrueCar

Sonic Automotive Inc., the nation's third-largest dealership group, is ending its relationship with TrueCar at the end of this month, after the car shopping service sued Sonic in federal court for trademark infringement.

TrueCar filed the lawsuit in August in federal court in California, contending Sonic is committing trademark infringement by using the term "True Price" for a new pricing system. The lawsuit was served in December, and Sonic filed its response on Jan. 10.

Sonic President Scott Smith told Automotive News last week that the retailer would stop using TrueCar when its contract obligations run out at the end of January. About 20 of Sonic's 105 stores currently use the service, he said.

"I'm just not going to do business with somebody who's going to sue me," Smith said.

After the suit was filed but before it was served, TrueCar proposed discussions with Sonic, Smith said.

According to Smith, TrueCar CEO Scott Painter visited Sonic executives and suggested TrueCar would drop the lawsuit if the dealership group signed up all its stores to use TrueCar's service.

"What I don't like is the tactics he has employed in negotiating, in trying to get us to do business with them," Smith said. "For that, it's going to cost us both millions. It's going to cost my shareholders millions [in litigation costs], and it's going to cost his shareholders millions. And guess what? We're going to win."

Painter, reached by e-mail last week, initially responded to questions about the lawsuit by telling Automotive News that TrueCar and Sonic have a "good and sustained working relationship," and that he was confident the matter would be resolved.

When asked about Smith's comments, including those relating to the meeting after the suit was filed, Painter wrote: "It's unfortunate that Sonic would make that comment and equally unfortunate that you would print it. It mischaracterizes the facts, and we will not comment on ongoing litigation. For the record, I don't think this is 'news' -- it sounds like gossip."

Sonic is not afraid of litigation, Smith said, noting the retailer's long-running lawsuit with Mercedes-Benz that was settled in 2012. In that case, Sonic sued Mercedes-Benz USA, with Smith saying in an interview that the automaker tried to "extort" store upgrades by withholding approval of a Mercedes-Benz dealership acquisition by the retailer.

The trigger in the TrueCar case was Sonic's adoption of the term True Price to describe a vehicle pricing system it finished rolling out to stores in early 2013. Sonic's True Price program sets vehicle prices within $300 of the lowest acceptable transaction price, leaving a very limited negotiating band. Sonic said it filed for its True Price trademarks in 2012 and 2013.

In addition to trademark infringement, TrueCar's lawsuit accuses Sonic of unlawful business practices, false advertising and unfair competition.

In its complaint, TrueCar said it has been building rights in a "True" family of trademarks since September 2008. The company registered trademarks for several True-related terms in subsequent years.

TrueCar sent a letter to Sonic in April 2013 demanding the dealership group stop using True Price, according to court documents. It accused Sonic of intentionally creating confusion and trading off the investment TrueCar has put into its brand, those documents say.

"Sonic's use of the True Price marks is likely to cause and has caused confusion in the marketplace," the complaint says. "The resulting and continuing confusion will cause damage to TrueCar and will injure its reputation in the trade and with the public."

Smith said Sonic will honor TrueCar coupons if customers bring them in. He said the retailer has sold a couple of thousand cars annually through the TrueCar relationship, and characterized the value of the tie-in as "immaterial."

TrueCar customers are in the market already, Smith said. In many of its markets, Sonic is the exclusive dealer for certain vehicle brands. He noted that Sonic has the only BMW dealership in Greenville, S.C., for example.

Said Smith: "Those customers are going to come by anyway, so why be a part of it?"