TRUE CAR and ZAG Cyber Bandits, Parasites or Good for the Car Business?
Jim Ziegler asks...
I am hearing a lot of discussion about True Car and ZAG. I continually scratch my head and wonder if desperate dealers are doing the marketing limbo "How Low Can You Go?"
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?
Who owns these companies and what might be their ulterior motive? Sometimes I ask questions to which I already know the answer.
Am I wrong?
What do you think... JIM
Jim Ziegler's Guidance and Recommended Action Plan:
Ten Areas We Need to Concentrate on to Bring This Monster to It's Knees...
- Government investigation of ALL Data Aggregators taking consumer information from dealers' DMS. Sadly enough, dealers who do business with TrueCar are exposed to liability charges. Cut off all access to unecessary data, no matter who takes it from the dealers DMS and make it illegal to "resell identifiable consumer data" and "transactional data".
- Educate Your Fellow Dealers; If anyone takes financial transactional data, they expose the dealer that allowed it to violations, especially if it is passed on to other vendors or shared.
- Educate Consumers to what they're doing with their information...
a. You buy a car from a dealer, do you really want your personal information, and maybe even your financial information, passed along and sold and shared by "God knows who?"
b. These People Charge the Dealer $300 which the dealers have to build into the deal
c. Your Privacy and the Security of your Information could theoretically compromise your identity if you do business a company that takes data from the dealership. - Educate Investors and potential investors they could possibly be mislead if anyone is telling them this is a safe investment because of all of the dealers pushing back, associations pushing back, and government regulators in many states coming after TrueCar's business model as NOT compliant, in some cases they're saying it is Not Legal.
- AMEX, USAA and all of their affiliates do not want the bad consumer relations this push back is creating with their members and customers.
- Cancel your dealership's Affilation with TrueCar. Tell people with TrueCar certificates that YOU don't honor TrueCar and you feel the company is NOT reputable. Educate consumers as to perceived data exposure if they buy from a TrueCar dealer. Make sure that each consumer knows that using TrueCar actually increases their vehicle cost by $300 to $400.
- Make the dealers selling at huge losses take all of those deals. Big problem right now is too many Nissan Dealers and others are taking huge losers to get the factory money. The TrueCar reverse-auction business model will continually push those numbers down until the factory money is non-existent. Consumers need to hear from many dealers, "We don't do TrueCar"
- Keep calling your National and State Dealer Associations demanding they get involved and stay involved... No excuses.
- Get the Manufacturers into the game. If GM, Ford, Toyota, and other majors change the rules about how we advertise and do business to protect the dealers, we can cut off their ability to set pricing. So keep it up at every dealer meeting. Call your Dealer Council Members and protest to your factory reps. Tell the manufacturers, if they want showroom and facility improvements, we need the ability to make fair profits.
- Tell everyone you know. Educate other dealers and industry people. Watch the Painter interviews... I believe this is the first time a vendor has publicly announced they intend to bring down the dealers and hijack our business, taking our profits and starving us out with our own data. Painter has said manufacturers and dealers should go bankrupt and he, in his God-like way "will control distribution..."
When the TrueCar-Yahoo Deal kicks in we need to stand firm and "Just Say No" we don't honor TrueCar deals.
Read this article as a reference: http://www.autonews.com/apps/pbcs.dll/article?AID=%2F20110831%2FFIN...
AND, if you doubt the mission... read this... http://www.zag.com/websiteASSETS/whitepapers/ZAG-WhitePaper3.pdf
Comment
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Comment by Michael Paulson on January 6, 2012 at 3:54pm
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At very least, the hiccups ought to give AAA, USAA, Yahoo, etc. pause as their users are, for now, without a buying service in Colorado. Great news!
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Comment by Jim Kristoff on January 6, 2012 at 3:49pm -
Part 2.............
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Also, some states ban bird-dogging -- paying a third party a fee that is results in a sale. Some states ban brokering, which is charging a fee to a retail customer to find and negotiate the purchase of a vehicle.
TrueCar has said will comply with all state laws and is willing to change its Web site and methods.
In a Jan. 4 e-mail to its participating dealers, Stewart Easterby, TrueCar executive vice president of dealer development, said: "TrueCar continues to work directly with regulators to ensure compliance with all applicable laws so that neither we nor our dealer partners are subject to any fines."
TrueCar's changes
In a statement to Automotive News about upcoming changes, TrueCar said that it will warn shoppers in red type on its site when a price is below what it calls dealer cost.
The warning will contain a message that selling cars below dealer cost is not sustainable for dealers.
The statement also said that TrueCar CEO Painter and other executives will be meeting with "numerous dealers and state dealer associations over the next few weeks to listen to and address dealer concerns, plus provide clarity on how TrueCar operates."
TrueCar's Easterby adds in the letter that no state has mandated a prohibition of TrueCar services or have lawsuits been filed against TrueCar.
Potential penalties for dealers for running afoul of the various state laws cited by regulators and dealer associations include fines of up to several thousand dollars per occurrence and license suspension or revocation.
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Comment by Jim Kristoff on January 6, 2012 at 3:48pm
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Comment by Bill Rossi on January 6, 2012 at 3:29pm
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Mr. Gurley makes a great point. Look at how Carfax has made itself relevant to the industry through marketing directly to the public without adding any real value. How many vehicles do we now see with accident indicators that have had very little damage that otherwise would have gone unnoticed by the customer or us for that matter. We all know what this does to the value for the poor guy trying to trade. Imagine all of the prospects that are currently asking to see the Carfax arming themselves with a True Car price. I know dealers that are using them think they are getting incremental business, but the question you have to ask is could you afford to sell every car at the price you or another dealer advertising with them in your market is offering. I know there have been other sources for this information in the past but not one that has tied it all together and is as easy to use as True Car. Couple that with the nonstop advertising and quality of the ads(reminds me of CarMax) and the hook-up with Yahoo leaves little doubt that this is something we have not yet seen before. I have been in the industry for over 25 years and have dealt with Consumer Reports, Edmuns, Kelly Blue Book and many others but make no mistake, this is a whole new ballgame. Honda made a brave move but I can tell you that other manufacturers are scared to death of Painter’s control of the Lease Residual Guide and won’t be making any bold public statements to their dealers any time soon. A small percentage point swing in residual can cost them hundreds of millions in subsidies. I appreciate the help from the states but I believe True Car will adapt to overcome those setbacks. As so many have posted on this discussion it will be up to us at the dealer level to stop this potential train wreck. I don’t want to get political but when people start hiding their true agendas behind progressive buzzwords like fairness and transparency I get nervous!
Thanks to Jim and Keith for leading the charge.
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Comment by James A. Ziegler on January 6, 2012 at 12:37pm
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UH-OH New York State Dealers Association checking in with their dealers... Somebody's been a busy boy
Important - Questions Have Been Raised About TrueCar Business Model
January 5, 2012
NYSADA has received a number of dealer phone calls in the last couple of weeks questioning the business model used by TrueCar. We have been collecting infor-mation on this issue from other state associations and today participated in an NADA/ATAE phone conference with 58 other associations from across the country. Specific concerns have been shared by a number of states throughout the country including: Colorado, Kansas, Wisconsin and Virginia.
These concerns are broken down into three main categories. The possible viola-tion of federal privacy regulations by giving a third party vendor (in this case TrueCar) access to a dealerships DMS system. Possible violation of state advertis-ing guidelines and the violation of some states brokering laws. New York State laws do not prohibit automotive brokering, as long as proper disclosures are made. Therefore, we will focus on the first two issues.
Dealers should give serious thought as to whether it's a good idea to give any vendor or business partner access to their DMS system. This kind of arrangement raises a whole host of customer privacy concerns and serious questions about how best to protect customer information. Keep in mind that when you allow unfet-tered access to your customer's data you may also find your self drawn into a complaint about potential misuse. NYSADA strongly recommends that all third party vendor contracts should be reviewed by the dealer's attorney.
Dealers should also be concerned about possible advertising violations when us-ing a third party vendor. In New York State the dealer is ultimately liable for an advertising violation even if it is generated by a third party vendor or advertising agency. For instance use of the term invoice by a third party advertiser acting on behalf of a dealer could be considered an advertising violation.
It is important to reiterate a recent warning that NADA sent to all dealers. Under the anti-trust laws, organizing an effort to boycott a company is illegal. Whether to do business with any particular company is an individual dealer decision and should be made by each individual dealer.I am sure this will be of great concern to GRP Partners, TrueCar, Scott Painter, and Needham LLC
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Pennsylvania Auto Dealers Association checking in today with this letter to their dealers...
To: PAA Dealer Members
From: John Devlin, President
Over the past several weeks, PAA has been closely monitoring the activity surrounding TrueCar and has received phone calls from dealers regarding TrueCar’s program.
There are several subscription-based sales-marketing programs which require a dealer to pay an annual or monthly fee for vehicle sale leads. TrueCar’s program, however, provides that it is only compensated if the introduction it arranges between the dealer and customer results in a sale. Programs that set dealer fees tied directly or indirectly to a transaction involving the sale of a new or used vehicle appear to constitute the unlawful act of brokering. Pennsylvania law prohibits brokering as set forth below.
All dealers should carefully review their relationships with third party lead providers for compliance with all state and federal laws. When evaluating a relationship with a third party lead and/or sales provider, a dealer should consider the following:
1) Pennsylvania prohibits a person from acting as or holding themselves out to be a broker in the advertising, buying or selling of any new or used vehicle. A broker is defined as any person who, for any direct or indirect commission, compensation or other consideration, arranges or offers to arrange a transaction involving the sale of a new or used vehicle or establishes or offers to establish a plan or program involving the sale of a new or used vehicle and who is not:
i) a licensed dealer or a licensed employee of a new or used vehicle dealer; or
ii) a licensed representative or a licensed employee of a manufacturer or distributor.
2) Dealerships are required to know which third party companies are accessing their DMS, and ultimately where their customer information is going and for what purposes the information will be used. Federal law requires dealers to protect customer information and inform customers, through a privacy notice, what will happen with nonpublic personal financial information. Allowing various third party companies to access a DMS may not be in compliance with a privacy policy and a security process at a dealership.
3) A dealership should ensure that all third party companies with which the dealership has entered into agreements to market vehicles to customers are complying with all of the advertising laws and regulations regardless of the advertising medium (i.e. internet, print, television, radio etc.).
PAA will continue to monitor the situation involving TrueCar and other third party lead and/or sales providers. As additional information becomes available, PAA will update its members. If dealers have questions regarding the activities of a third party lead and/or sales provider, they should contact their attorney.
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Dealer Van Gurley Jr. Writes, (Jim)Thank You for 'fighting the good fight' on behalf of car dealers! I'm sick and tired of companies like True Car and even companies like Carfax who constantly berate the car industry, yet, most all of their income come's from the 'backs' of car dealers...It's time we take a stand against companies like this!!!
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Comment by Keith Shetterly on January 6, 2012 at 11:50am
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For the dealers who have signed up with Zag/TrueCar, let me parse what appears to be the CURRENT language in their contract around what they can do with your customers: "Zag will not use such information in order to initiate marketing-related communications to any of Dealer's customers other than those customers who have used or otherwise interacted with a Zag Program".
SO, this means they'll only use the information for their own marketing purposes IF the customer came through the Zag/TrueCar portal. Oh. Well. That's all of them.
To be very clear, I would not like it if any other entity does this, such as Edmunds, etc. and has the ability to combine this info with the customer info and deal info in the DMS. So far, I've not found such language in their paperwork, but if it turns up then I'll be just as against it in those cases.
What does this mean to a dealer? How does this proposed equation hit you:
Customer_name + email on the TC website.
Customer_name + email + address + phone + financing info + aftermarkets . . . seems like this might explain the "extra" info they appear to take (by reports) from the dealer's DMS.
Secondary marketing by Autotrader, for example, by email, etc. isn't the same risk. TC/Zag seem to know all about your customers AND your deals. Go ask, say, Edmunds, AutoTrader, etc. if they have that. Take a look at all your agreements for this leak.
If TrueCar builds their TrueFinance (or whatever that is), etc., is that a risk against you?
And one more thing: USAA claims that Zag/TrueCar is a licensed BROKER in California. I guess that's a non sequitur (irrelevant) step on this contract discussion . . . or is it? What laws apply to brokers?
It's very, very different to collect emails for marketing versus combining all this data, which certainly seems possible. And it seems the text of your agreement allows it, too.
Anyway, these are the things that bother me. They would bother me with any vendor or broker and will if and when I find them elsewhere. It isn't like TrueCar didn't draw a lot of attention with the anti-dealer comments of their CEO.
Tell you what. A lawyer wrote your agreement with TrueCar/Zag; perhaps an expert as has been described by their investor group as being available to TrueCar. So please go ask your attorney what it says you have signed up for. Ask about all your vendor agreements, in fact. And act accordingly to your best interest on his or her advice.
Thanks!
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Comment by James Easter on January 6, 2012 at 11:32am
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"TrueCar said, “We have admittedly seen an increase in dealer cancellations, but we are confident that we can earn these dealers back as our active engagement with regulators, coupled with our current and planned product enhancements, will allow TrueCar’s model to conform to the state regulatory schemes.” ------
NO YOU WON'T - NOT THE GETTEL & GATORLAND AUTOMOTIVE GROUP! All 14 stores cancelled, and it will be staying that way...Sayonara!!
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The following bulletin issued by the Chicago Automobile Trade Association today... I am sure GRP Partners, Scott Painter, and Truecar and Needham LLC participants will be interested in how the industry is reacting to these alleged pretenders.
CATA wary of TrueCar methods
January 6, 2012Dealer associations including the CATA are challenging the recent rise of TrueCar on issues of motor vehicle advertising regulations and suspect use of data in dealers’ DMS systems.TrueCar, the lead generation service which on Jan. 1 partnered with Yahoo.com for online auto shopping, counts a reported 5,200 dealership franchises in 49 states as clients that pay $300 to $400 to TrueCar for any vehicle sale that originates on its website.
But the CATA contended to the Illinois Attorney General’s office that TrueCar’s business model might violate several business practices, including the state’s Consumer Fraud and Deceptive Business Practices Act.The attorney general’s office is reviewing the matter but has not issued an opinion.The CATA is not involved in any communications that urge dealers to avoid or sever a relationship with TrueCar. But dealers across the country who signed on with TrueCar in 2011 are reconsidering their relationship. Tepid vehicle closings—and in the face of statutory infractions—have led some to walk away.
Shoppers using TrueCar.com choose a vehicle and see information labeled as invoice price and dealer cost. The shopper then specs out a vehicle, and participating dealerships near the shopper’s ZIP code offer prices which can be below TrueCar’s invoice price. TrueCar says the offer includes all fees but no taxes, and has no expiration date. The dealer pays TrueCar for every completed new-car sale.
One Illinois dealer accuses TrueCar of acting as an intermediary broker without franchisor or manufacturer standing, and said the certificates TrueCar issues free to customers but sells to dealers amounts to price-fixing and a contract to sell. Other dealers contend that TrueCar adds negative value because it wants to be paid more than what the dealership nets on a sale.
The Illinois AG’s office has been asked to examine Internet sales practices that potentially violate state advertising regulations related to coupons and free gifts. If a customer obtains from a lead generating service a certificate to buy a car at a lower price than the price offered to customers who do not use the service, the certificate could violate Section 2J.1 of the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2J.1).
Also, TrueCar enters its car-buying customers into drawings for $5,000 prizes. That could be a violation of Section 475.590 of the Illinois Motor Vehicle Advertising Regulations, which prohibits the use of free prizes, gifts, or other incentives in connection with the sale or lease of a vehicle, except as part of a manufacturer or manufacturer-approved advertising association program.
Other concerns focus on TrueCar’s access to a dealer’s DMS system and what information it extracts. If a third party misuses a dealer’s customer data, the business’s privacy notice may not sufficiently protect it, and the dealership could face a legal complaint over the misuse of customer data.
In a recent statement about legal issues that various states have with the company’s marketing methods, TrueCar said, “We have admittedly seen an increase in dealer cancellations, but we are confident that we can earn these dealers back as our active engagement with regulators, coupled with our current and planned product enhancements, will allow TrueCar’s model to conform to the state regulatory schemes.”
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