AutoNation drops TrueCar in contract dispute

AutoNation Inc. is severing ties with TrueCar Inc. following a protracted contract dispute centered on access to customer information.

AutoNation, the country’s largest new-car retailer, informed TrueCar executives Thursday that its dealerships would stop using the Internet vehicle shopping service at the end of July. On Friday, AutoNation said it would move up the termination date to Tuesday, July 15. 

Today, 226 of AutoNation’s 240 U.S. dealerships use TrueCar’s services.

The split had been foreshadowed. In April 2014, AutoNation CEO Mike Jackson said the retailer planned to de-emphasize third-party lead providers such as TrueCar, AutoTrader.com and Cars.com, as it strengthened its own website and digital presence to build traffic and sales.

But Jackson laid the blame for the break at TrueCar’s feet.

“TrueCar has made some onerous demands in its new contract negotiations with us that are unprecedented in my 45 years in business and are unconscionable and unacceptable,” Jackson told Automotive News. “We cannot agree to them.”

In contrast, Jackson said he has no intention of dropping other third-party providers at this time.

TrueCar founder and CEO Scott Painter portrayed the split as the result of philosophical differences.

“Our partnership with AutoNation just turned into, in a very real sense, a choice for the consumer,” TrueCar founder and CEO Scott Painter told Automotive News. “It really makes them our competition.”

Consumers who want “truth, transparency, an up-front price” will do business with TrueCar, he said, while those who want to buy cars in a traditional manner will go to AutoNation.

Demand for all data

The biggest issue in the dispute: TrueCar demanded that AutoNation share all of the retailer’s customer information for all of its transactions, not just TrueCar-related deals, Jackson said.

That would mean turning over information covering a laundry list of 41 data points on the approximately 550,000 vehicles sold by AutoNation annually. Of those sales, AutoNation attributes just 3 percent, or about 16,500, to TrueCar.

“It’s none of their business,” said Jackson, adding that he will never give all of the company’s customer data to anyone.

Painter characterized the split differently, saying TrueCar gave AutoNation “a clear line in the sand” and demanded the retailer comply with its data-sharing terms, which he called “marketplace requirements we need to enforce.”

“This isn’t AutoNation dropping TrueCar,” Painter said. “This is a very deliberate step on our part. We went to them and said, ‘You must comply with the rules.’”

In fact, Painter said, TrueCar has “fired” more than “350 dealers” in the last 12 months for refusing to comply with the company's terms. That is more than the 226 AutoNation dealerships using TrueCar’s services.

TrueCar works with more than 11,000 dealers across the country.

Latest blow

For TrueCar, losing AutoNation as a customer is the latest blow in a series of high-profile challenges. The company is facing multiple lawsuits filed earlier this year by dealers, shareholders and the California New Car Dealers Association. TrueCar had rebuilt its dealer roster after nearly folding in 2012 when regulators in multiple states accused it of violating a variety of advertising and brokering laws.

TrueCar is a publicly traded third-party shopping site that enables shoppers to fetch guaranteed vehicle prices from its certified dealership network. In most states, dealerships that sell a vehicle to a TrueCar shopper pay TrueCar $299 for each new vehicle sold and $399 for each used vehicle sold.

AutoNation started using TrueCar in 2006 when it was called Zag. The latest in a series of contracts between the two companies expired March 1, Jackson said, and AutoNation has been on a month-to-month extension since then. The parties had been in negotiations over terms of a new contract since last fall.

Old request, new insistence

TrueCar had been asking for the customer data for all deals for years, Jackson said. But AutoNation resisted. In this round of negotiations, TrueCar leaders made it clear that they wouldn’t agree to a new contract without that data sharing.

TrueCar executives have told AutoNation they want the companywide transaction data for an audit function, Jackson said. TrueCar would then compare its database with AutoNation’s database and look for a match, so they could bill AutoNation for that sale. That alone is problematic, Jackson said. AutoNation argues that TrueCar is trying to lay claim to some sales generated by its competitors and AutoNation’s own marketing efforts.

“Customers go many places before and after a TrueCar visit, and just because they were momentarily on the TrueCar site doesn’t mean I should have to pay them $300,” Jackson said. “So there’s a big disagreement there.”

‘A competitor’

In Jackson’s eyes, it makes no sense for AutoNation to hand over that wealth of proprietary information.

“Let’s face it: TrueCar is a competitor,” Jackson said. “TrueCar has made it quite clear they’re not stopping at new-car sales transactions. They’re going to inject themselves into the arrangement of financing, they’re going to have a service product, they’re going to have a trade-in product. So they’re going for the entire spectrum of the auto retail business.”

AutoNation also objected to a recent move by TrueCar to mask the email contact information of customers coming through the TrueCar site.

Previously, the actual email contact of the customer was shared with the retailer. By changing the email to a generic @Truecarcustomer.com address, it makes it harder for AutoNation to determine whether the associated sale should actually be credited to another lead provider or AutoNation’s own marketing efforts, the retailer’s executives said. It also makes it harder to follow up with that that customer later on.

AutoNation online

But in the end, it was the conflict over the customer database that proved the biggest hurdle. Sharing that information with a shopping service like TrueCar would conflict with AutoNation’s own branding efforts, AutoNation executives said.

As it builds its own online shopping service, AutoNation is trying to reduce its dependence on third-party lead providers. The retailer launched its service, dubbed AutoNation Express, late last year and is rolling it out throughout the company.

AutoNation Express aims to better connect consumers with the company’s brick-and-mortar dealerships by allowing online shoppers to reserve a vehicle for purchase and eventually even finance and buy a car online. AutoNation has said it’s investing $100 million-plus on the effort in 2014-15.

In early 2014, when AutoNation first announced its strategy on third-party providers, those services were responsible for about 13 percent of the company’s vehicle sales. In the past 15 months, that metric has eased to 12 percent. Quitting TrueCar implies that number will slip below 10 percent, given TrueCar’s 3 percent of AutoNation sales.