The agency that oversees auto sales in Colorado has launched an investigation into the operations of TrueCar.Com, the fast-growing Internet sales referral service.
Santa Monica-based TrueCar is already in a fight with Honda Motor Co., which has told its dealers that they will forgo advertising subsidies if they post deeply discounted prices on TrueCar's website.
Colorado launched the inquiry after receiving objections to the buying service from the Colorado Automobile Dealers Assn. and an additional unspecified complaint. The state's Department of Revenue is looking into what it described as advertising violations. The agency also said TrueCar might not have the correct license for conducting car sales through Colorado dealers.
In a statement, TrueCar said it is "addressing technical and procedural questions raised by regulators who may not know what to make of our service.... TrueCar invites and takes seriously questions about consumer protection and is vigilant about ensuring that its partner dealers honor their commitments to buyers."
TrueCar has grown quickly by signing up about 5,000 dealers nationwide who offer shoppers a no-haggle, upfront price on a vehicle. Dealers pay TrueCar $299 per new car and $399 per used car sold.
The online service features dealers who offer guaranteed pricing near or even below a vehicle's invoice, which many consumers believe represents the price the dealer paid for the auto. (Because of various back-end allowances and payments, the dealer cost is typically below the invoice.)
The TrueCar system also is used by several auto shopping referral services, including Consumer Reports and USAA, which provides financial services to members of the U.S. military.
Colorado regulators said that TrueCar's violations include failing to include the stock number of a vehicle for sale, using the word "invoice" in advertising, not using big-enough type for disclaimers and failing to advertise vehicle pricing that incudes delivery and handling fees.