Originally published on October 3, 2012.
Last month, after an extensive comparison of nearly 6,000 VINs, BMW of North America concluded that AutoCheck’s Vehicle History Reports were just as reliable as CARFAX reports. Finally, after years of only supporting CARFAX, BMW’s mandate for Dealers to use CarFax for Certified BMWs was over. This meant, that as a BMW Dealer, I could now choose either CarFax or Experian’s Service (AutoCheck) as my vehicle history report provider.
So why would I want to change?
The answer is simple. Last month, I paid CARFAX $2,575.49 to provide unlimited Vehicle History Reports for my dealership. In comparison, as part of a discount agreement with BMW, AutoCheck offers their version of the same service for $1098/month – a savings of over 50% per month - and at a price that was guaranteed for at least 1 year. Suffice it to say, I was delighted by the potential savings!
So, I immediately contacted my CARFAX rep with an ultimatum – I demanded that CARFAX either price their services more competitively or consider my contract cancelled. The response I received was unconscionable - my CARFAX rep explained that the monthly price would NOT be lowered and if I chose to leave CARFAX, then my ability to compete effectively on Cars.com and AutoTrader.com would be severely impaired.
How is this possible?
Evidently, CARFAX pays AutoTrader.com and Cars.com a huge stipend to be the “sole” provider of vehicle history reports on these two marketplaces. Apparently, as part of this agreement, AutoTrader.com/Cars.com cannot display AutoCheck Reports(even if AutoCheck is the provider at the dealer’s store), but they can display CARFAX reports for CARFAX participating dealers. As my CARFAX rep explained, with the vast amount of competitor’s inventory on AutoTrader.com/Cars.com, my decision to not show a vehicle history report (when my competitors are in fact showing these reports), would indicate to consumers that my dealership had “something to hide” and push customers away from my listings. I understand transparency and I knew she was right - I was livid.
It is my opinion, that CARFAX is using Cars.com/AutoTrader.com as means to extort dealers into paying higher fees for CARFAX’s services – all while Cars.com and AutoTrader.com receive a handsome tariff. Does this sound like an unfair, anti-competitive, or potentially illegal trade practice? I thought so.
This week, I spoke with Alex Vetter(VP of Cars.com) and Jeff Catron(Director of Dealer Strategy at AutoTrader.com). I explained to both executives, that is my opinion, that I’m currently being extorted by CARFAX. I explained that unless a fair resolution is offered, I intend to file a complaint with the FTC against all parties. They both listened to my feedback, and they said they’ll consider it closely, but they would not provide a definite decision. (Note: In my past experiences with Alex Vetter, he has always been fair and equitable in his dealings – I’m optimistic that Cars.com will protect the interests of the franchised dealer).
Why is this a big deal? Can’t you sell your inventory elsewhere?
Still today, I have a very favorable opinion of Cars.com, I receive plenty of business from the site each month. And while my opinion of AutoTrader.com is not favorable and regularly worsening(thanks to my opinion of their pre-IPO cash out), I can’t ignore that AutoTrader does in fact generate business for my dealership and still remains an online behemoth. At least as it applies to my dealership, leaving both of these sites would severely harm my effectivness in selling pre-owned cars. Moreover, as I explained earlier, in today’s transparent and instant information environment, the used car shopper will ignore dealers that cannot quickly and easily provide history reports substantiating the condition of their vehicles - especially when other dealers do. And in fact, according to our CARFAX rep, from January 2012 to August 2012 my dealership has received 17,466 ICR’s - or as she explained, the reports ran by consumers viewing inventory on AutoTrader.com and Cars.com. (Note: I asked for a specific breakdown, and CARFAX has not supplied this data. In addition, for comparison purposes, I sold about 700 used vehicles during this same period).
The exact magnitude of this problem is far reaching. There are nearly 18,000 franchised dealers in the US that may be in a similar or even worse situation. I feel that dealers should not be forced to pay an unfair premium to CARFAX in order to market their vehicles and compete online. Moreover, Cars.com and AutoTrader.com should align their business model with the interests of their most valuable customers - the dealers. We paid the monthly fees that allowed Cars.com and AutoTrader.com to flourish – we should not be penalized as a result.
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