Antitrust officials are investigating the friction between TrueCar.com and dealerships after the website changed its pricing system, which formerly pitted car dealers against each other.
Dealers around the country may have ganged up on the website for its competitive system, which collected bids and influenced dealerships to keep cutting prices, similar to a reverse auction, Reuters reported.
After dealers complained, the website's system shifted to where dealers could no longer see rival prices. TrueCar, which provides price data to shoppers and sales data to media, lost dealers and money under the old system, but the site has since regained its footing.
Despite the fact that dealers and TrueCar have smoothed things over, the Federal Trade Commission commenced an investigation in September, sending letters to dealers asking them to preserve documents.
The agency will investigate whether some dealers violated antitrust laws by "by agreeing to refuse to deal with TrueCar" in 2011 and 2012.
Industry columnist Jim Ziegler, who wrote about TrueCar in September 2011 and is the self-titled "catalyst" for the system change, wonders why the FTC is reacting this late in the game.
"If they had done this when it was a hot issue, it would make a lot more sense," he told Reuters, adding that the investigation was unnecessary because the dealers weren't conspiring together.
"I know a lot of dealers canceled them, but it was all individual decisions," he said.
Whether or not the dealers were making agreements, they were leaving TrueCar in droves back in 2011 and 2012 due to costs. Besides reducing prices to the extent of losing money, dealers agreed to pay $299 per sale on new cars and $399 per sale on used cars to be part of the TrueCar database.
The site's network of dealers fell from 5,700 at the end of 2011 to 3,100 just two months later, according to Reuters.
"Are we so bad at what we do that we have to line up and pay vendors to lose money? And, who is giving these people access to your data that is used against you?" Ziegler wrote in the November 2011 column that was published several places.
TrueCar's network of dealers has since jumped to all-time high at 6,700 dealers.
"We are not in the business of speculating on the business model of how cars are sold at the dealer level," TrueCar Inc chief executive Scott Painter told Reuters this month. "That's up to them. Our job is to help dealers and consumers find each other and have the information to make a good match."
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