fee structure challenged in several states

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A tricked-out silver Kia GT. sells referrals to dealerships, a practice that runs afoul of the law in some states. (Photo Credit: CC BY/NRMA New Cars/Flickr)

Virginia lawmakers have ruled that the automotive sales website violates state law, reports Automotive News. TrueCar will change its fee structure in Virginia to avoid concerns that it is “bird dogging,” or accepting money from dealerships in exchange for sales referrals. Bird dogging is illegal in the state. business practices run afoul of state laws

At least a half dozen states are considering tightening the regulatory reins on automotive sales partnerships between dealerships and third-party websites like TrueCar. Tuesday, Oklahoma asked to shut down operations in the state until legal issues could be resolved. The same occurred last month in Louisiana. On Jan. 6, TrueCar suspended service in Colorado, because new laws placed the company in the position of being in violation of state advertising rules.

Virginia is allowing TrueCar to continue to provide leads, just without the fee. In order to maintain working business relations in the state, TrueCar will charge participating dealers a subscription fee unrelated to sales numbers. This will bring the company into “complete regulatory compliance” in Virginia, noted a company spokesperson. CEO Scott Painter said in a statement that the company is prepared to do what is best for its partners.

“TrueCar is committed to never putting our dealer partners at risk,” said Painter. “(This) means we will always work closely with regulators to identify a workable solution or … suspend service.”

Repairing the damage

Lessie House, executive director of the Louisiana Motor Vehicle Commission, told Automotive News that she expects TrueCar to propose a new fee structure akin to a dealership subscription fee, but nothing has been discussed. Dealers who violate Louisiana law by engaging in a brokering relationship can face penalties of up to $5,000 per instance. In some cases, suspension or revocation of dealership license is possible.

TrueCar has announced that changes to dealer pricing and advertising strategy will occur on a state-by-state basis in the upcoming weeks. Television advertising will be “phased down” and the focus will be shifted from price to dealer proximity, selection and level of service.

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