Editor’s note: This version clarifies three lines from the story published in our June 1 print edition.
LOS ANGELES -- TrueCar's promise to consumers is "Never overpay." For critics of the company, the rejoinder seems to be "Never forget."
Three years after a nearly fatal dealer revolt and regulatory crackdown prompted it to change its ways, TrueCar continues to be haunted by suspicion among dealers and broader questions about its business model.
Three recent lawsuits against the company -- the latest coming last week -- illustrate the challenge TrueCar faces in rehabilitating its standing with dealers, even as it enjoys growing popularity among consumers seeking a simpler way to buy a car.
Earlier this year, a group of dealers outside the TrueCar network sued the company in New York, claiming that its no-haggle pricing promise amounted to false advertising; an amended complaint filed May 22 lists dealers representing 174 franchises as plaintiffs.
The California New Car Dealers Association filed a lawsuit May 20 alleging that by arranging transactions at specific prices, TrueCar was operating as a dealer and broker, without the proper licenses.
And the shareholder lawsuit filed last week cites the claims in both those cases -- and the resulting damage to TrueCar's stock price -- in accusing TrueCar of misleading investors about its business practices. The suit, filed in federal court in Los Angeles, seeks class-action status on behalf of shareholders whose stock declined in value.
TrueCar is adamant that it has done nothing wrong and promises to fight each lawsuit vigorously. TrueCar's chief risk officer, Johnny Stephenson, noted that the suits weren't filed by disgruntled consumers, government regulators or manufacturers. "We've invested tremendous resources in our compliance" with laws governing vehicle sales, Stephenson said.
But the game of legal whack-a-mole shows that the reinvented TrueCar is still paying in some ways for its past sins, and remains vulnerable to legal challenges over its basic business practices. It also threatens to undermine the company's carefully crafted image as an agent of trust and transparency in the shadowy world of car buying.
"TrueCar before was focused on the emotion of [consumer] greed," conceded John Krafcik, who became TrueCar's president in May 2014, just ahead of its initial stock offering. "We have complete awareness that many dealers still have a 2012 point of view about our service, so we spend a lot of time helping them understand that we've changed."