Santa Monica-Based TrueCar Accused of 'Bait and Switch'

Santa Monica-based TrueCar—a company that bills itself as "the authority in new car prices"—is being accused by Colorado's Department of Revenue of advertising violations and of bait and switch transactions. 

An online referral site for consumers looking to buy new cars, TrueCar caught the attention of the Colorado Automobile Dealers Association earlier this month. In a memo to its dealerships, the association said that TrueCar might be engaging in unlicensed sales activity.

The state department of revenue and the association allege that TrueCar is attracting customers by quoting them for a specific vehicle, only to have them arrive at the dealership to discover the car was already sold. 

"The consumer may then be targeted for the sale of a different vehicle.  In certain circumstances, this may constitute a 'bait and switch' transaction," which is illegal in Colorado, the memo states. 

TrueCar was founded in 2008 by CEO Scott Painter, 43, the former head of CarsDirect.  

The company is poised to be come Yahoo's exclusive partner for car shoppers starting Jan. 1. At the cost of $150 million, TrueCar signed a three-year deal to replace site Cars.com, according to Automotive News. 

As for the potential advertising violations, TrueCar is accused of misrepresenting the full price of vehicles, for example by not including delivery and handling fees; of not providing an expiration date or time limit on its offers; and of using too small of font in displaying its disclaimers. 

In a statement to the Los Angeles Times, TrueCar said it is "addressing technical and procedural questions raised by regulators who may not know what to make of our service.... TrueCar invites and takes seriously questions about consumer protection and is vigilant about ensuring that its partner dealers honor their commitments to buyers."