TrueCar Facing Another Major Lawsuit

TrueCar is being sued by some of its shareholders. The suit, filed in Federal Court in Los Angeles alleges that the organization misled investors over what exactly they do. The shareholders are seeking damages for investments made from May 16, 2014 through May 20th 2015. This suit from shareholders is the latest in a string of legal disputes for TrueCar.

TrueCare shareholders are seeking an undisclosed amount in damages since they feel misled about their recent investment into TrueCar. In a press release, dated May 28th, TrueCar vows that the allegations are “meritless,” and plans to rigorously defend it’s company against the allegations. In the release, Jonny Stephenson, the Chief Risk Officer at TrueCar explained, “Disruptive technology and business models like Uber, Airbnb, and now TrueCar, have been challenged on many fronts, including legal.”

TrueCar has made headlines in recent weeks for its involvement in lawsuits filed by both dealers and a dealer group. We reported on March 10th that 117 dealers in New York have sued TrueCar for $250 million. That high-dollar lawsuit claims TrueCar created unfair competition and used false advertising. That lawsuit reads in part, “TrueCar’s advertisements falsely claim that consumers using its services can purchase an automobile with no haggling and “no negotiation” and that TrueCar benefits consumers by removing surprises at the dealership.” Frustration has been created when consumers show up with a TrueCar price and won’t budge since TrueCar advertises “no haggle” pricing. There has also been frustration from dealers since consumers also show up with a TrueCar price and use it as a starting point for further haggling. Nonetheless for some dealers, even if they don’t like the low margins that come from TrueCar customers, have noted that TrueCar leads tend to convert.

A dealer group in California recently sued TrueCar. The California New Car Dealers Association sued TrueCar for acting as a dealer and broker without a license to do so. TrueCar was very public in their defense of their business, even issuing a press release on the issue. Part of that release refuted claims that TrueCar acts as a dealer or broker. The press release explained that the California Legislative Counsel Bureau has recently determined that a web-based service that operates like TrueCar is neither a broker nor dealer.

Do you think that TrueCar operates as a dealer or broker? Should the recent legal action be viewed as a byproduct of a disruptive technology? Finally, what has been your experience with TrueCar?