According to a report by Automotive News, TrueCar's business model is under fire by this old guard, backed by long-standing legislation to protect their franchise interests. AN says government officials in Colorado, Wisconsin and Virginia have all raised issue with TrueCar, and that the company may face legal problems in other states, including California. TrueCar has responded by promising to make "meaningful changes" to its service by the end of the year, according to the report.
Nominally, TrueCar is an "Internet marketing company" that profits from the fees that dealers pay when they sell a car that was listed on TrueCar. But that practice may not be legal, especially in states that have consumer protection laws against brokering and what is known as "bird-dogging," or paying third parties for leads. There are also issues with TrueCar's marketing, which could be in violation of some state's rules prohibiting the mention of invoice price. Dealers who do business with TrueCar may risk steep fines or loss of license in some jurisdictions, but from what the report says, most regulators are putting businesses on notice first.
TrueCar has also raised the ire of at least one carmaker, with Honda recently reminding its dealers that if they want to get money through its dealer marketing program, they'd better not be advertising cars for below-invoice price on TrueCar.