Company Investigated for Alleged Car Dealer Kickbacks Re-inventing

Los Angeles, CAWhile investigations and allegations continue over whether or not online automotive referral service TrueCar accepted illegal car dealer kickbacks from their participating dealers, the online company has taken steps to re-invent itself. Pundits are dubbing the transformation “TrueCar 2.0.”

Prior to the rebirth, according to Automotive News (1/21/13), TrueCar was at the center of what was reported as cutthroat vehicle pricing generated by participating dealers bidding against one another in an undertaking described as a reverse auction, allowing each bidder to view the next lowest bid of a rival California car dealer.

Automotive experts summed up the original TrueCar model as unsustainable, with TrueCar deals pegged at about the lowest six percent of new-car transactions across the country.

Were car dealers to have committed car dealer fraud by providing a kickback to TrueCar in exchange for the online car referral and subsequent sale, the profit margin for the dealer would be further diminished. Were a dealer to inflate the final price to compensate for a potential kickback, then not only is the kickback illegal but the purchaser suddenly has paid more for the vehicle that he might have otherwise, had the kickback not been in place.

Automotive News did not reveal why TrueCar changed its business model, and an interview with TrueCar’s CEO did not reveal whether allegations of car dealer kickbacks had any part to play. CEO Scott Painter said in an interview late in 2012, as reported in Automotive News, that TrueCar vehicle prices still ranged in the lowest 25 to 30 percent of transactions nationally (up from about six percent), and most of the shopping network’s original dealers had returned.

In an interview with LawyersandSettlements.com writer Heidi Turner, attorney Taras Kick revealed various investigations undertaken by several states involving allegations of car dealer kickbacks associated with TrueCar, and that The Kick Law Firm APC “is investigating whether that occurred in California because it is unlawful under California law for TrueCar to receive payment based on a consumer’s purchase of the car after being referred by TrueCar to the car dealer.” Without being a licensed broker, Kick said, TrueCar would have been in violation of California law if payments were accepted.

It was revealed that while no car dealer kickback lawsuits have been filed so far, investigations are ongoing and are focused on a timeframe prior to January 2012. Automotive News refers to “the 2012 meltdown,” and the observation that TrueCar is close to achieving its previous high watermark of 5,400 participating franchises, a number that was reached in late 2011, according to the report.

While various investigations are continuing, it’s a known fact that consumers are shopping online in ever-increasing numbers, either buying outright online or using online resources for research and sourcing. Unscrupulous vendors hoping to capitalize on this new consumerism often attempt to circumvent the law.

Illegal car dealer kickbacks are one such example of that.