California Car Kickbacks Alleged

Los Angeles, CAAn online car referral company is alleged to have received illegal kickbacks from new and used car dealerships in exchange for referring customers to those automobile dealerships. These kickbacks would amount to several hundred dollars per vehicle if the customer purchased the car. Regulators in several states sent letters to car dealers stating that legal problems exist with this business model, and car dealer associations in other states, including California, say the practice may violate their state law.

The car referral company alleged to have been receiving these illegal kickbacks allegedly attracted potential customers by offering them a certificate guaranteeing a price from a particular dealer for the new or used car which the consumer wanted.

One method the referral company used, in the case of consumers searching for a car over the internet, would be to provide the information from its own website to go to a particular dealer for the car which the consumer wanted at a supposed guaranteed price from that dealer. The company would issue a certificate guaranteeing that price for the car with that dealer. Some consumers have complained the car would then not be available at the dealer for that price, or the dealer would try a bait-and-switch to a differently priced car. If the customer did buy a car, the dealer would then pay a kickback to the internet company for the referral. Such referrals are sometimes called “bird-dogging,” which is not permitted in California without appropriate licenses and disclosures.

The other manner in which the referring company allegedly operated was through the use of well-known corporations and well-established organizations with which it arranged a relationship to be that organization’s “car buying service.” Employees of the corporation or members of the organization would use the “car buying service” through their employer or membership organization, and be sent to a car dealership which supposedly had committed to selling the desired car at a “guaranteed” price. Consumers have complained, though, that dealers would not have the promised car or the guaranteed price. And if the car dealer did make a sale to the consumer, the car dealer paid a kickback to the referring company.

Consumers do not need to know that a kickback or inducement was given for the law to have been broken. By being referred to a specific dealership in exchange for contingent compensation, the consumer may have overpaid by having a kickback included in the transaction, or missed out on a better price or deal at a different dealership, believing he would get the best deal at the dealership he was referred to.

If you purchased a car in California through a third-party referrer or through an organization’s car buying service that offered a "guaranteed price" at a particular car dealer, you may have been a victim of an illegal inducement, in violation of California law. If the car was purchased between January 1, 2008 and January 31, 2012, you may be eligible to file or join a lawsuit against the third-party referrer.

You do not have to know that the kickback or inducement was given to be eligible to join or file a lawsuit. But if you purchased your car through a dealer that you were referred to by a direct car buying referral company or through your employer’s or organization’s car buying service, a kickback may have been involved in your purchase.