A lawsuit by 117 new car dealers in the U.S. District Court for the Southern District seeks more than $250 million in damages from online car buying company TrueCar, Inc. The lawsuit charges TrueCar with false advertising and unfair competition. Automotive law specialist Leonard Bellavia, who represents the plaintiffs, discusses the case in this report.
Bellavia explains that TrueCar is a lead referral service for car dealers. TrueCar advertises itself as offering assistance to buyers to acquire cars at below invoice prices and with no haggling. TrueCar’s demographic is people who like to do things online. However, Bellavia says, buyers who use TrueCar do not avoid haggling. On the contrary, a prospective buyer’s contact information is sent to three competing dealerships, who immediately become inundated with emails, texts, phone calls, and letters from car dealers. The no-haggle experience “is broken promise number one.”
Bellavia says TrueCar also suggests the availability of pre-established prices and of vehicles by color and equipment the buyer has looked for. Buyers who travel to one of the dealers will likely find that the cars they have requested are not available in exactly the colors or equipment options they have specified. Also, the price TrueCar quotes is usually based on every conceivable rebate and discount possible, even though no one person could qualify for all those price breaks—things such as military rebates, first-time buyer rebates, college graduate rebates, and “conquest” rebates. Consumers are thus set up for disappointment.
Participating dealers are in the position of telling buyers that, even though TrueCar told them something, it’s not correct. On the other hand, TrueCar’s position is that it provides good lead referrals to participating dealers, who should be happy that a buyer has been sent their way. Bellavia says that, under the Lanham Act, this approach is forbidden. Also, the U.S. Supreme Court held in 2014 in the Lexmark case that an injured party does not have to be a direct competitor of the party make doing false advertising in order to have standing to sue. That decision is what led Bellavia to pursue this action on behalf of the unhappy dealers who are plaintiffs.
Bellavia notes that, in addition to consumer unhappiness, TrueCar is causing damage to dealers who end up disappointing would-be buyers. Unhappy customers will tell their friends, and they may never come back to the dealer who sold them the car. Bellavia says that there will be two lawsuits involved: The one that was filed was for dealers who aren’t TrueCar participants. There will be a second lawsuit for TrueCar dealers. The present lawsuit seeks money damages for lost sales because buyers are being drawn away from local dealers by the promise of getting a deal that doesn’t really happen. Bellavia estimates that the damages per dealer will be about $400,000 to $1 million by the time the lawsuit is tried, before the trebling of damages under the Lanham Act. Bellavia believes the number of plaintiffs in the lawsuit will grow to about 2,000.
Leonard A. Bellavia is the senior and founding partner of the law firm of Bellavia Blatt & Crossett, PC. Mr. Bellavia is a nationally recognized authority in the field of automotive franchise law. Mr. Bellavia spent his life in the automobile business, as his family once owned one of the largest dealer groups in the New York area. Mr. Bellavia represents thousands of automobile dealerships across the country in all aspects of commercial litigation and buy-sell transactions, and has been instrumental in negotiating the sales of hundreds of dealerships. The Legal Broadcast Network is a featured network of the Sequence Media Group.