Over the past four years, TrueCar has changed its business model and leadership team to improve its relationship with dealers, but 2015 litigation accusing the company of false advertising could head to trial this year.
Car buyers were attracted to TrueCar based on the promise of no surprises at the dealership. In 2015, 108 dealers filed a lawsuit accusing TrueCar of falsely advertising haggle-free car-buying. The dealers argued that TrueCar's false advertising decreased their sales and hurt their reputations. The plaintiff dealers do not subscribe to TrueCar.
TrueCar asked for a summary judgment in July. Kevin Castel, a judge in the U.S. District Court in the Southern District of New York, last week denied TrueCar’s motion for summary judgement regarding its potential violation of the Lanham Act, a federal false-advertising statute that prohibits businesses from deceptively advertising their products and services.
The advertisements created a noncompetitive marketplace, said Len Bellavia, the dealers' attorney and founding partner at Bellavia Blatt & Crossett in Mineola, N.Y. Consumers were led to dealerships with false information, and dealers who did not subscribe to TrueCar lost sales based on consumers' confusion, Bellavia said.
Castel also said that the negotiation-free advertisement "describes a bait-and-switch transaction wherein a consumer is enticed to a dealership based on the prospect of a negotiation-free buying experience and guaranteed savings, only to be faced with negotiation and a different price than promised."
A trial date has not been set, but Bellavia expects trial to begin within six months.