TrueCar Inc. and the California New Car Dealers Association reached an agreement over TrueCar's billing model, thereby settling a lawsuit the association had brought against the third-party vehicle shopping site, the two said Thursday.
TrueCar has agreed to change its billing model in California from a pay-per-sale model with a cap to a flat-fee subscription model. The transition will be complete by Jan. 1, 2019.
TrueCar will also double the indemnity it provides to California dealers who participate on the TrueCar program, to $50,000 from $25,000 previously, the statement said.
In California, TrueCar's current subscription billing model also includes what it calls a "sales guarantee" as a retroactive adjustment. The flat-fee subscription billing model does away with the sales guarantee.
"This litigation afforded us the opportunity to thoroughly examine TrueCar's user experience and business practices," Brian Maas, president of CNCDA, said in a statement. "The agreement reached with TrueCar, together with the other adjustments to its business model made by TrueCar after CNCDA initiated this litigation, satisfactorily resolve our previously expressed concerns regarding the existing TrueCar business model."
The California New Car Dealers Association sued TrueCar in 2015, accusing the vehicle-shopping site of breaking California laws on dealer licensing, brokering, advertising and disclosure. The lawsuit sought a court injunction restraining TrueCar from conducting business as a dealer or broker.
TrueCar enables its shoppers to fetch guaranteed vehicle prices from its certified dealer network. In most states, dealers that convert TrueCar shoppers into sales pay the site $299 per new vehicle and $399 per used vehicle sold.
"TrueCar is pleased that the litigation has been resolved to the parties' mutual satisfaction, and we look forward to continuing to serve our dealer customers in the State of California," TrueCar CEO Chip Perry said.