Va dealers using TrueCar are in violation dealer board says!

[Eley Duke]

This just came across after the Va dealer board meeting this morning! Dealer Board Makes Determination Regarding TrueCar Pricing Model Today the Motor Vehicle Dealer Board reviewed the TrueCar's current pricing structure based in part on referrals and sales. The Board made the determination that dealers who utilize TrueCar services and pay TrueCar based on the current pricing model are in violation of VA Code and face regulatory action including assessment of civil penalties and license suspension or revocation. Futher the Board cautioned dealers that until the Board has reviewed changes proposed by TrueCar, dealers are in jeopardy of further violations and penalties if the changes are deemed in violation of the law. The Board will be officially notifying dealers of it's decision today and will consider additional recommendations from the Board staff concerning TrueCar at its March meeting. Thank you.

Sincerely,

 

[Jeff Kershner]

Thanks for sharing Eley!

Isn't this a big ZAGG / Military region as well? OUCH!!

 

[Eley Duke]

Thanks for sharing Eley!

Isn't this a big ZAGG / Military region as well? OUCH!!

It sure is Jeff, Hampton Roads has the largest military concentration in the nation. I am not sure a exact number of military, but its over 150,000 active duty, and well into 300,000+ when you count in families. To give you an idea, there are 70 ships, 12 subs, 500 aircraft and who knows how much else when you add in special forces and support. Its huge, and they buy lots of cars!

Count in northern Va where there are tons of military based operations, offices, and people living and it really adds up!

 

[JamieS]

Wow!

 

[bzweifel]

Last week MADA sent all Maryland dealers an email that said basically the same thing as the VA memo that Ed posted [with more details, and specific law statues that are being violated]My higher ups dropped zag at the end of December; Almost everyone in my region has followed suit.

TrueCar Dealer Alert 1-4-12​

To: All Maryland Dealers From: Redacted Re: TrueCar/Zag Date: January 4, 2012 It is the opinion of MADA that any vehicle referral program which requires a dealer to pay a fee only upon the sale of a vehicle violates Maryland's dealer licensing law. It is MADA's understanding that this is TrueCar/Zag's pricing structure. Maryland licensing law is very clear. In order to be a licensed dealer you must have a physical location and to be a new car dealer you must have an unexpired franchise agreement for the vehicles you are selling. Maryland law further states that you may not sell vehicles unless you are a licensed salesperson and in order to get a license, a salesperson must be employed by a licensed Maryland dealer. Section 15-314(d) states that a dealer or an agent or an employee of a dealer may not do any vehicle sales business with or through any person who is required to be licensed under this title if he knows that the person is not licensed. These statutes have been upheld in court - Detroit Automotive Purchasing Service vs.Lee. Numerous attorney general opinions have stated that car buying/referral services are unauthorized to the extent that they receive or expect to receive a commission or other compensation for their referrals. MADA met with TrueCar/Zag officials at the June convention in Williamsburg and outlined our concerns that this payment method (dealer pays vendor only upon sale of vehicle) would be considered a commission paid to an unlicensed person for the sale of a vehicle which would put Maryland dealers in violation of the licensing law. We were told by TrueCar/Zag that changes were being made to the program; however, we are not aware of any changes as of this date. MADA recently met with MVA and we expect a bulletin from them in the near future confirming long standing case law and attorney generals' opinions. In conclusion MADA believes that any program in which the dealer pays on a per vehicle sales basis for a referral violates Maryland licensing law and would subject Maryland dealers to fines by MVA. Any questions you may have can be directed to Redacted or me in the Association's office (xxx-xxx-xxxx). ************************************************************************************ All contact info removed

In my opinion, none of this would have happened if Zag didn't piss so many people off.

It's funny that Zag only had 3 main flaws, none of which are the "pay per deal" structure that they are going down for:

-The 'secret' DMS mining.
-They never listened to what the dealers were saying.
-Their reps encouraged an atmosphere that lead to net losses on sold units.

Dealers let all of this slide for years. It took $200,000,000 of VC investment and 100's of NFL football ad spots taunting dealers for people to realize that this could not continue as a viable business plan for the dealers.

This reminds me of Al Capone murdering, smuggling, extorting, book making etc... Only to go to jail for tax evasion. People will find a way to take you down if you piss enough people off.

All of this could have been prevented if Zag took a business 101 class. The first rule is "know who your customers are". Zag mistakenly thought that the internet car buyers were their customers. They ignored the dealers.

Future advice: The customer is the person writing you the check.

 

[Eley Duke]

Latest Update on Yahoo Finance

[h=1]TrueCar Changes Billing Model in Virginia in Order to Ensure Immediate Regulatory Compliance[/h]