Can a “no-haggle” offer include negotiation? maybe not

Dependable Sales & Service, Inc. v. Truecar, Inc., No. 15-cv-1742,
2016 WL 79992 (S.D.N.Y. Jan. 6, 2016)
 
Plaintiffs, 162 auto dealerships, sued TrueCar for false
advertising under state and federal law. 
TrueCar’s website tells prospective car buyers search that it has more
than 9,000 affiliated auto dealerships nationwide and that more than 500,000
customers have purchased vehicles from “TrueCar Certified Dealers.”   Dealers’ identities are revealed only after
consumers enter their names and contact information, at which point dealers
contact consumers to solicit them. “As a result, instead of taking the
‘haggling’ out of car sales – as TrueCar advertises – TrueCar’s business model
facilitates and encourages haggling.”  Consumers
allegedly may ultimately pay prices higher than those offered through the
TrueCar website.  Likewise, consumers may
download a “Guaranteed Savings Certificate,” which allegedly doesn’t accurately
reflect the eventual price TrueCar customers pay.
 
The court granted in part and denied in part TrueCar’s
motion to dismiss based on lack of falsity. 
First, TrueCar argued that its ads promising a haggle-free,
negotiation-free buying experience weren’t false.  Example claims: “There’s zero negotiation
….,” “You get a negotiation free guaranteed savings and hassle free buying
experience,” and “Because I used TrueCar there was no haggling about the price.”  However, plaintiffs alleged that TrueCar instead
facilitates dealership solicitations to consumers, the purpose of which is to
“haggle” and negotiate over the vehicle purchase.
 
TrueCar argued that “TrueCar’s user experience does not
involve negotiation,” and that “the customer is immediately entitled to the
Guaranteed Savings with the click of a mouse,” as “a lump-sum discount.”  This was a factual issue that couldn’t be resolved
on a motion to dismiss. Nor could any effects of TrueCar’s website disclaimer
be assessed.  The disclaimer stated:
  
Guaranteed Savings represents the
amount that a TrueCar Certified Dealer selected by you guarantees that you will
save off the Manufacturers’ Suggested Retail Price (’MSRP’) on any in-stock
vehicle that is the same make, model, and trim as your Ideal Vehicle. The
Guaranteed Savings is based on a vehicle without factory or dealer installed
options and includes generally available manufacturer incentives. … Each
dealer sets its own pricing. Your actual purchase price is negotiated between
you and the dealer.”
 
“While a disclaimer may be so plain, clear and conspicuous
as to bar a claim as a matter of law, this is not such a case.”  There was a factual question whether “[t]he
few words of disclaimer are lost when the ads are considered as a whole” or
were effective.
 
Nor could the court determine at this time that the claims
were puffery.  TrueCar argued that “haggling”
was an opinion-based concept.  But there
were conflicting definitions, which the court couldn’t resolve on the
pleadings.  TrueCar cited one definition
of haggle as to “bargain in a petty, quibbling, and naggingly quarrelsome
manner,” while plaintiffs’ definition was “to talk or argue with someone
especially in order to agree on a price.” The complaint plausibly alleged that lay
consumers understood “no haggle” to mean that the given price is the actual
price, and that no negotiation is required. 
(What does the presence of CarMax in the market mean for consumer
expectations?)
 
Other supporting allegations also made the puffery defense
inapposite at this stage: TrueCar made other claims such as “No Negotiation,”
“No Surprises,” “No hidden costs or surprise fees. Ever.,” “the
negotiation-free car buying and selling mobile marketplace,” “we provide true
up front pricing information and a network of trusted dealers that guarantee
savings without negotiation,” “it’s negotiation free guaranteed savings and a
hassle free buying experience,” and “the negotiation-free car-buying platform.”
TrueCar didn’t explain how these statements concerning negotiation were mere
puffery.
 
However, the court dismissed claims going to alleged “bait
and switch” tactics.  Plaintiffs alleged
that the ads led consumers to think they could get a specific car at a
guaranteed price. But not all TrueCar-affiliated dealers who contact consumers
have the desired make and model in their inventory, and instead offered different
vehicles, amounting to bait and switch.  But
the complaint didn’t specifically identify the false statements that supported
a bait and switch claim.
 
TrueCar’s ads also allegedly misled consumers into believing
that they could learn a vehicle’s “factory invoice” price through TrueCar, and
that they would be able to buy a vehicle for less than the amount originally
paid by the dealer. However, the advertised “factory invoice” price allegedly
didn’t reflect rebates, incentives and other discounts that the manufacturer
provided to the dealer. One ad, for example, had a graph identifying a “TrueCar
Price” of $24,450, an “Average Paid” figure of $25,386, a “Factory Invoice”
price of $25,970 and a Manufacturers’ Suggested Retail Price of $26,445. The
accompanying text, “Information is Power,” said, “As a data company, we study
millions of purchase transactions every year. … Within minutes, you can get
upfront pricing information from TrueCar Certified Dealers and know how those
prices compare to the current market.”
 
TrueCar argued that any reasonable consumer would believe
that dealerships profit from their auto sales. But plaintiffs didn’t claim that
TrueCar failed to disclose that fact; they alleged that the “factory invoice”
price cited in advertisements was misleadingly high and misled consumers about
the extent of their purported savings. 
TrueCar also cited a webpage describing factory invoices for the Toyota
Corolla, which said that the factory invoice “does not include discounts,
dealer incentives, or holdbacks ….” On a motion to dismiss, the court couldn’t
resolve whether this definition cured any misleading ad.  Finally, TrueCar argued that the graph wasn’t
misleading “because TrueCar users on occasion will pay less than the factory
invoice price.” Not on a motion to dismiss they don’t.

The court dismissed a few more claims, one about financing—the ads allegedly
led consumers to believe that TrueCar would calculate the financing terms of a
vehicle purchase, including monthly payments. TrueCar’s website contains a
feature that calculates an “Estimated Loan Payment” for the particular car
selected by the consumer, but it displays financing terms that “are not
available to all consumers.” But the express “Estimated” showed that TrueCar
wasn’t offering actual financing terms. 
(But if they aren’t “estimates” of what someone with bad credit would
pay, why is “estimated” nonfalse?)
 
The court also dismissed claims based on statements about
transparency, such as “you can trust that everything is upfront and out in the
open. No hidden costs or surprise fees.” Plaintiffs alleged that TrueCar
conceals costs and fees, because dealerships affiliated with TrueCar paid
TrueCar for every car sold, and those fees are inevitably passed to consumers.
That didn’t plausibly allege that claims of no hidden costs/surprise fees were
false.  A fee that’s included in a price
quoted to a consumer isn’t hidden or surprising.
 
Finally, plaintiffs alleged that TrueCar’s ads were false
because they indicated that consumers would receive the full discount
advertised by TrueCar.  But some rebates were
only available to certain customers, such as loyalty rebates or rebates offered
to recent college graduates or members of the military. The complaint alleged
that some TrueCar customers expressed confusion after receiving the impression
that they would be eligible for all rebates advertised by TrueCar. Again, the
complaint didn’t sufficiently identify the relevant ads to put TrueCar on
notice of the claims against it.
 
Finally, the court refused to dismiss the claims for failure
to allege injury.  TrueCar argued that,
even if consumers were misled, they knew the truth before they bought their
cars.  If a consumer tried a non-matching
car and decided to buy it, the deception would have dissipated.  The court rejected this argument as going to
the merits.  It is also legally
irrelevant, I think.  I’ll
let the Supreme Court explain
:
 
We find an especially strong
similarity between the present case and those cases in which a seller induces
the public to purchase an arguably good product by misrepresenting his line of
business, by concealing the fact that the product is reprocessed, or by
misappropriating another’s trademark. In each the seller has used a
misrepresentation to break down what he regards to be an annoying or irrational
habit of the buying public—the preference for particular manufacturers or known
brands regardless of a product’s actual qualities, the prejudice against
reprocessed goods, and the desire for verification of a product claim. In each
case the seller reasons that when the habit is broken the buyer will be
satisfied with the performance of the product he receives. Yet, a
misrepresentation has been used to break the habit and, as was stated in Algoma Lumber, a misrepresentation for
such an end is not permitted.

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