<p>Dealers could face fines over CarGurus' advertising practices. At issue is the way the company lists used-car prices on its site, including projected savings below market value and price drops.</p>

AUSTIN, Texas —The Texas Department of Motor Vehicles Enforcement Division issued a cease-and-desist letter to CarGurus and the Texas Automotive Dealers Association (TADA) last week, stating that it will take enforcement action against dealerships if the automotive shopping site does not revise its advertising practices within 30 days.

At issue is the way CarGurus lists the prices of used vehicles on its website, including projected savings below market value and price drops. “… A savings claim or discount offer is prohibited except to advertise a new motor vehicle,” the DMV’s letter, obtained by F&I and Showroom, read, in part. “No person may advertise a savings claim or discount offer on used motor vehicles.”

The Texas DMV Enforcement Division says that unless CarGurus removes the “offending advertisements” within 30 days, it will take action against dealerships with inventory listed on the site to the tune of $10,000 in administrative penalties each day a violation occurs, as well as other disciplinary actions.

Industry pundits like F&I and Showroom and Auto Dealer Monthly columnist Jim Ziegler have been critical of CarGurus’ business practices, claiming, among other things, that the firm displays dealers' inventory on its site without their knowledge.

“I personally view CarGurus as the most hostile, anti-dealer website yet,” Ziegler wrote in a June 2013 column. He also placed the blame on other lead-generating sites like Cars.com for feeding dealer inventory to CarGurus.

“Another thing I don’t like about CarGurus.com is the site rates dealers and their deals,” Ziegler wrote, in part. “Labels, from my understanding, include ‘Great,’ ‘Good,’ ‘Fair’ or ‘Bad’ dealers. What gives the site the right to do this? And what standard is it using to rate these deals?”

On Wednesday, CarGurus Director of Legal Allison Beakley contacted Texas dealers alerting them to a call between the company and the DMV’s Director of Enforcement Bill Harbeson and Corrie Alvarado, the enforcement attorney who signed the cease-and-desist letter. The call is scheduled to take place today, April 30.

“We plan to resolve this issue promptly and prior to the 30-day deadline,” Beakley wrote. “In addition, we will update you by Tuesday, May 5, of the results of our call with the Texas DMV and the status of the issue.”

A CarGurus spokesperson, who confirmed the firm works with more than 6,000 U.S. dealers and gets inventory feeds from more than 100 sources, including inventory hosts, vehicle OEMs and other third-party lead providers, said the company is working with the Texas DMV to resolve the issue.

“We are working closely with the Texas Department of Motor Vehicles on this issue, and we expect to have a resolution very soon,” read the statement the CarGurus spokesperson issued to F&I and Showroom. “Once resolved, we will communicate immediately with our dealer customers in Texas.”

Copied on the Texas DMV’s cease-and-desist letter to CarGurus was Karen Phillips, executive vice president and chief counsel for the TADA. In an interview with F&I and Showroom, she said the association won’t be involved in today’s discussion between the Texas DMV Enforcement Division and CarGurus.

“That’s between the two of them,” she said of today’s call. “I did send out the information to my membership to let them know what was going on.”

Phillips added that dealers are subject to the jurisdiction of the agency for their own advertising and if they have an agreement with CarGurus to market their inventory, but she doubted dealers would be held responsible for any advertising violations if CarGurus posted their inventory on its site without their knowledge.

“If an entity has web-scraped their information and the dealer doesn’t know about it, then I’m certain that the agency will take that into account,” she noted. “And I think that might be an issue where if I were to receive a complaint from the agency, and I could show that I had not signed up with whatever service provider that is, because I don’t have a contract with them, then I think the agency would take that into account when deciding whether or not to go forward with the complaint.”

Originally posted on F&I and Showroom

About the author