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UPDATED (1/2/13): OPINION: CARFAX’s Policies are Bad for the Dealer, OEM, Consumer, and Competition: 8 Recommendations to Fix It

By Jeremy Alicandri on Jan 2, 2013

 Note: If you would like AutoTrader.com, Cars.com, or your Franchise’s Manufacturer to end their CARFAX exclusivity agreements and allow dealer’s the right to choose a VHR provider, then please sign a petition for change:
www.FreeTheDealer.org

REQUIRED DISCLAIMER: This article is based on the opinions of the author and nothing contained herein should be construed as a matter of fact.

 

Consumers and OEMs have made VHRs mandatory….
In today’s transparent shopping environment, the “best practice” of providing a car shopper with a vehicle history report has become a mandatory requirement in most dealerships. While Vehicle History Reports (aka “VHRs”) are subject to material omissions and cannot replace the assurance of a thorough physical inspection, the reports serve as a relevant selling tool in the retail dealership environment - and as a buying tool in the wholesale market. Nearly every used car shopper will ask a dealer for a VHR prior to purchase, or simply choose to purchase the report online themselves. In addition, many auto manufacturers (aka “OEMs”) force dealers to purchase these reports as a requirement of the OEM’s used car certification programs.

 Note: In the interests of full disclosure, Cars.com/AutoTrader.com should disclose the full terms of their agreement with CARFAX - including compensation.

CARFAX, a wholly owned subsidiary of R.L. Polk & Co, is recognized as the VHR “market power leader” with the highest count of participating dealers – nearly 32,000. However, not every dealer chooses to purchase from CARFAX by choice; many dealers (like myself) purchase VHRs from CARFAX because exclusivity agreements mandate we either purchase from CARFAX, or face significant marketing disadvantages if we choose another VHR provider.

On October 4, I published a post titled “CARFAX is extorting my dealership.”  (http://www.drivingsales.com/blogs/jeremy/2012/12/05/opinion-carfax-is-extorting-my-dealership) In my post, I explained that BMW’s Certification Program recently allowed my dealership to purchase AutoCheck VHRs to meet our BMW certification requirement (since BMW was no longer exclusive to CARFAX). By switching to AutoCheck, I would potentially save over $15,000+ on my annual VHR costs. However, since CARFAX paid a stipend to Cars.com/AutoTrader.com to be the sole VHR provider on their sites, I could not leave CARFAX without harming my ability to advertise my pre-owned inventory on AutoTrader.com/Cars.com. Therefore, I was forced to pay CARFAX an additional $15,000+ year for the ability to compete on the two major online sources for my used car business.

My post, which received over 2,000 unique views and several comments, also drew the attention of a blogger named Philips Moore (who I believe to be a CARFAX executive since it’s the same name of their ‘Director, Strategic Insights’). The comment stated:

Jeremy understands the power of branding for his own purposes. He pays BMW a huge premium over an alternative auto maker so that he can leverage the investment BMW has made over the years in their brand. He pays Autotrader.com and Cars.com a huge premium over a lesser trafficked inventory site to leverage the investment they have made in their brands. I'm confused why he doesn't wish to apply the same logic to Carfax?

Does CARFAX’s branding justify charging dealers a premium?

CARFAX has poured millions into advertising campaigns that feature a distinguishable “CARFOX” icon. The role of the “CARFOX” is to protect the retail car shopper from the “evil car dealer” that sells flooded, lemon-branded, or damaged vehicles without proper disclosure to the consumer. And while Philip felt that CARFAX’s “brand value” justified charging my dealership an additional $15,000+/year for VHRs, I disagreed. I’ve already issued a rebuttal to Philip’s comment months ago, but I’ll explain in further detail why I do not feel CARFAX’s branding is superior to Experian, nor favorable for the franchised dealer or OEM.

There are seven reasons why I feel CARFAX’s branding is NOT favorable for a dealer or an OEM:

1. The Strategic Dangers of Co-Branding, The Commoditization of the OEM’s Certification Program, and the Erosion of the Brand’s Customer Experience

a.    The OEMs have made significant investments to create programs to differentiate the “superiority” of their brand’s certified vehicles. An OEM’s certified vehicle, by intent, is meant to substantiate to the potential buyer that the vehicle has been thoroughly inspected and scrutinized in order to meet the individual OEM’s certification standards. The notion that a consumer should trust a certified vehicle’s condition because of a CARFAX report is contradictory given the reassurance intent of an OEM’s certification program – and it also removes some of the competitive differentiation attempted by the OEMs to prove the superiority of their individual certification programs. Why? By not emphasizing the trust between the consumer and the OEM’s certification program, and instead attempting to prove trustworthiness via a third party that is also promoted by competing OEMs, I feel the OEMs are distracting their branding efforts from the reliability of their own certification programs and instead attempting to substantiate the reliability of their vehicles by promoting their association with CARFAX. This is a dangerous practice for OEMs since associations with CARFAX will also associate the OEM’s brand with issues that plague CARFAX.

I believe that OEMs commoditize their certification standards when they “amplify CARFAX” to a similar standard as their own certification programs. Here are my opinions:

  1. If a consumer perceives that a single VHR provider is promoted by several competing OEM’s certified programs, then each certified program loses a level of distinctiveness by commoditizing their “unique” certification standards.
  2. When promoted excessively by the OEM or dealer, the promotion of the VHR provider diminishes the trust level between the consumer and the OEM’s certification standards because the consumer is led to believe that the OEM’s certification program is unable to represent the vehicle’s true condition – hence the necessity of a third party report. (Note: It’s important that OEMs build trust within their brand’s entire customer experience in order to avoid future commoditization.)
  3. In the event the VHR is proven inaccurate after the vehicle is delivered, a common occurrence, then brand abandonment can result as the consumer will feel misled by the OEM’s VHR affiliation even though the vehicle met the OEM’s certification requirements.
  4. If the customer suffered from a previous negative experience with a VHR (with a trade-in value or as a seller/buyer), then the customer will likely doubt the manufacturer’s own certification standards as the customer will know the true limitations of VHRs and therefore naturally challenge the legitimacy of the manufacturer’s program.

What we can learn from BMW – the world’s most “valuable” car brand.
It’s well-known that much of BMW’s success came from their management of residual values via their certified efforts. Certification programs affect OEM’s residual values – which affects the OEM’s leasing competitiveness, consumer demand, and many other factors that affect new car sales.  Thus, since the branding of an OEM’s certification program will directly impact their new car sales, OEMs should be weary of the strategic consequences of brand dilution that can be caused by third party alliances.

Examples of what I believe is risky branding:

The better way to do it (by being VHR Neutral):

http://www.bmwusa.com/standard/content/cpo/certification.aspx

  • Essentially, in this example, BMW offers to provide a VHR as a convenience and additional reference for the customer. BMW does not promote any specific VHR provider – and also allows their dealers the right to choose either AutoCheck or CARFAX. Note: BMW has regularly been voted the world's most valuable car brand.

 

To be clear, as an industry best practice car dealers and OEMs should provide consumers with VHRs as additional selling tools – but OEMs should NOT co-brand with, or excessively promote, a specific VHR provider.

  1. AutoTrader.com/Cars.com commoditize the manufacturer’s certification standards by “amplifying CARFAX” (opinion):

1.     Example (AutoTrader): A Hyundai search on AutoTrader.com will show that the CARFAX icon receives equally prominent display as the OEM’s own certification icon. When the consumer views competing brands to Hyundai, which also feature the CARFAX logo, then the Hyundai certification program loses a level of differentiation by the consumer (opinion):

a.     http://www.autotrader.com/cars-for-sale/searchresults.xhtml?zip=11746&endYear=2013&startYear=2008&makeCode1=HYUND&listingType=certified&listingTypes=certified&sellerTypes=b&numRecords=25&searchRadius=10&showcaseListingId=330415185&showcaseOwnerId=100014414&captureSearch=true&Log=0

2. Example (Cars.com): When performing a search for Certified Mercedes-Benz on Cars.com, Cars.com provides a “CARFAX” report as an official selection criteria (with even more prominence than vehicle’s color or dealership reviews). Again, as explained earlier, the promotion of the CARFAX VHR to such a high standard can prove strategically detrimental to an OEM’s brand differentiation and equity.

  1. http://www.cars.com/for-sale/used/mercedes-benz/_/N-ma9ZfgcZqpsZly4Zm5d?sf1Dir=DESC&mkId=20028&rd=30&zc=11746&PMmt=1-0-0&stkTypId=28881&sf2Dir=ASC&sf1Nm=price&cpoId=28444&sf2Nm=miles&rpp=50&feedSegId=28705&searchSource=GN_REFINEMENT&crSrtFlds=stkTypId-feedSegId-cpoId-mkId-freeHistRptId&pgId=2102&freeHistRptId=34624

2. Lawsuits & Bad Consumer Sentiment related to Inaccurate Reports

a.   As Jim Ziegler explained,  (http://www.automotivedigitalmarketing.com/profiles/blogs/it-s-time-for-the-retail-automotive-community-to-rise-up-and-give) there are numerous lawsuits (including class action suits) that can be found by a web search of the terms “CARFAX” and “lawsuit.” In addition, there are many more online testimonials and articles that explain how a consumer (http://www.consumerreports.org/cro/2012/05/don-t-rely-on-used-car-history-reports/index.htm) or dealer (http://forum.dealerrefresh.com/f46/opinion-carfax-extorting-my-dealership-2902-3.html) suffered from a CARFAX report with errors or omissions –including consumers that lost value for their trade from innocuous repairs that shows as “accidents.” Thus, an OEM or dealer attempting to merchandise a used a car as being “CARFAX guaranteed” may result in the consumer distrusting the dealer/OEM because of a previous CARFAX direct/indirect experience.

Example from Jim: http://carfax.pissedconsumer.com/

3. Commercials that Spread the “Contagion of Mistrust” for Car Dealers

a.     I feel, along with many others, that CARFAX’s TV ads promote the contagion of mistrust for car dealers. These ads often feature the proverbial “used car salesman” and exploit the misnomer that a car dealer cannot be trusted – a stereotype that we do not need when trying to sell used cars.

Example: http://www.drivingsales.com/blogs/jdrucker/2012/11/28/how-carfax-missed-a-big-opportunity-in-advertising

4. Strong B2C Segment

a.     It is important to understand that CARFAX has a strong business-to-consumer sales channel for customers that purchase cars from private parties. While some may argue that their TV ads are supportive of CARFAX partner dealers, we can’t ignore that CARFAX is also promoting their own B2C interests in these TV ads. Therefore, in my opinion, the TV ads offer no “premium brand value” for participating dealers. (Note: As a direct result of the uproar over TrueCar’s TV commercials from 2011, TrueCar’s latest round of commercials are now “pro-dealer.”)

5. Comparing against AutoCheck’s Branding

a.     While many car shoppers may know CARFAX, I feel many more shoppers recognize that Experian is the company that supplies their personal credit report - the same company that is supplying the "credit score" necessary to finance the car they're researching – never mind the same score for other important life decisions (e.g. mortgage, college loans, etc...) It’s my opinion that CARFAX, in terms of overall brand trust or recognition, is not stronger than AutoCheck/Experian.

6. CARFAX In-dealership marketing materials and the “CARFOX” icon…

The OEM’s forced dealers to invest in brand compliant facilities, brand training, and other brand related investments. The OEMs demand dealers provide consistency in the various customer touch points in the dealership, and therefore create a consistent customer experience within the entire brand in order to prevent the “commoditization” of their brands. Thus, I feel that CARFAX’s in-dealership branding materials also conflict with, and do not complement, the OEM’s certified merchandising materials. While I can understand an independent dealer’s use of CARFAX merchandising materials to assure would-be customers of the independent lot’s attempt to provide “full transparency” for non-certified cars, I do not feel that a franchised dealer with a certified program should allow CARFAX marketing materials to take away any presence from the OEM’s merchandising materials and related brand criteria.

Moreover, I feel obliged to highlight the “CARFOX.” I find the icon to be a non-charismatic and obnoxious character that is irrelevant to building brand equity for ANY company. From a high-line standpoint, I view the CARFOX icon especially damaging to my premium brand - I certainly will not promote it. Finally, I feel that the 20+ foot high blow-up CARFOX displayed at the exterior of many dealerships is a tangible example of the “CARFOX” literally distracting the consumer from the OEM’s or dealership’s brand differentiation.

7. Dealers just need VHR Reports…they don’t need a star-crossed CARFAX-consumer love triangle

a.     Many CARFAX advocates feel that CARFAX does a better job of branding their reports to consumers via TV and other media. However, it’s important to note that the branding described is largely geared towards the consumer’s fear of used cars and also CARFAX’s B2C sales channel. CARFAX’s advertising aims to convince consumers that a CARFAX VHR is needed to protect the consumer. The advertising, which I believe is anti-dealer and anti-OEM, does not clearly assist dealers in using a VHR as a reliable selling tool – but instead it promotes the image that used car dealers attempt to hide information from the consumer. Moreover, for the most part, dealers are the party being forced to pay a premium to CARFAX for VHRs –not the consumers. Thus, dealers are not realizing an advantage from CARFAX’s advertising that they couldn’t also receive from another VHR provider. Franchised dealers want a VHR report that can be used to complement their brand’s merchandising materials and certification programs – they do not need a third party product that attempts to convince the consumer that it is more trustworthy than the dealer.

CARFAX’s Business Practices: Illegal? Anti-Competitive? Wrong?
While I do not feel that CARFAX’s branding is superior to any other VHR provider, my opinion may be entirely irrelevant. Why? Anti-trust law.  The Sherman Act does not allow a firm with superior market power to use their brand dominance or financial means, as an excuse to deploy anti-competitive behavior or restrict trade.

REMINDER: The content in this entire post represents my opinion. It may be inaccurate, wrong, and unqualified.

CARFAX has implemented "exclusive" business agreements with OEMs, online portals, and dealer groups in what I believe is an attempt to restrict competition in the industry and force dealers to pay CARFAX higher prices for VHRs(opinion) (See “How Carfax locks up car history” http://www.autonews.com/apps/pbcs.dll/article?AID=/20121210/RETAIL07/312109934/how-carfax-locks-up-car-history). Exclusivity agreements, in most cases, are perfectly legal. However, if the agreements do not create a market efficiency, and instead: restrict trade, create anti-competitive behavior, or lead to higher prices for consumers, then they are considered illegal under the Sherman Act.

Here are some examples of CARFAX’s questionable business tactics:

1.     Using Exclusivity Agreements on Cars.com/AutoTrader.com

a.     ACTION: CARFAX currently pays AutoTrader.com/Cars.com a stipend to be the sole provider of VHRs on these two sites. Currently, neither site will allow me to display AutoCheck VHRs for my pre-owned vehicle listings. Therefore, I’m forced to pay CARFAX an additional $15,000+/year in order to compete effectively on the two major used car marketplaces.

b.     EFFECT(OPINION): The exclusionary agreement between CARFAX/AutoTrader.com/Cars.com leads to higher prices for the dealer by excluding other VHR competition. In addition, other VHR providers suffer from the market power of CARFAX by potentially losing the ability to earn the business of dealers that heavily rely on Cars.com/AutoTrader.com to market used cars.

2.     Refusal to Allow AutoCheck to Appear on an OEM's Certified Page

a.     ACTION: I’m personally aware of at least one OEM(more may exist), that recently allowed it’s dealer body to use AutoCheck (in addition to CARFAX) to support this OEM’s VHR requirement. However, this OEM was forced to remove VHRs from its website because CARFAX would not allow CARFAX VHRs to be displayed on the OEM’s website if AutoCheck reports could also be displayed. In my opinion, there is no purpose for CARFAX to require this restriction except to engage in anti-competitive tactics.

b.     EFFECT(OPINION): This harms the ability of the dealer and OEM to provide consumers with VHRs to assist with the consumer’s purchasing decision. Therefore, this is detrimental to the dealer, OEM, and consumer. It’s also anti-competitive towards AutoCheck.

3.     Promotion of a “Free CARFAX Report”

a.     ACTION: CARFAX prominently advertises that CARFAX reports are free for the consumer. This is largely untrue. Dealers pay CARFAX for the reports, and in turn, dealers provide these reports to consumers. I believe that CARFAX’s promotion of free reports is negative towards dealers that don’t use CARFAX for VHRs because the consumer is led to believe that the dealer is “hiding something” since the reports “are free.” Thus, it’s my opinion, that CARFAX uses its market power in an attempt to force dealers to use their service.

b.     EFFECT(OPINION): Dealers feel “blackmailed” into paying CARFAX a premium for VHRs in order to prevent the appearance to consumers of having “something to hide.”

4.     Blocking a Manufacturer's CPO Listings from Appearing on Edmunds.com (and potentially other sites)

a.     ACTION: "It came to my attention that some OEMs are ALSO compelled into EXCLUSIVE arrangements with CARFAX that restrict any other VHR a dealer may be able to provide for CPO. Unfortunately, CPO units blocked by CARFAX either through mandatory exclusive relationships with other sites, or OEM agreements, will remain absent from Edmunds.com. That is a tragedy for both the consumers looking for those units and the dealers trying to sell them." – John Giamalvo, Edmunds.com

i.     From what I read about the Microsoft Internet Explorer case, the court found that Microsoft’s requirement that "all systems" sold by a hardware manufacturer requiring IE was clear evidence of Microsoft's attempt to force their IE product into the marketplace with a tie-in agreement. In comparison, I’m of the opinion that CARFAX is engaging in similar behavior by restricting “all” CPO units from being offered on Edmunds.com. I feel that a VHR agreement with an OEM, should not restrain trade by forbidding the placement of vehicles on a major online marketplace because an online marketplace chose to be impartial to any specific VHR provider.

b.     EFFECT(OPINION): Consumers loyal to Edmunds are not able to view all available used car inventory. Dealers lose potential sales and value from advertising with Edmunds. Edmunds is heavily influenced to switch to CARFAX in order to compete against rival online marketplaces. Thus, this is also anti-competitive behavior against AutoCheck.

5.     Requirement that All Dealers within a Group Sign Up

a.     ACTION: Allegedly, CARFAX uses its market power to require all dealers, within a group, to sign-up for CARFAX. Apparently, CARFAX will not allow a specific franchise within a group to choose a preferred VHR provider. While CARFAX supplied the excuse of “password sharing” for this requirement, it’s important to note that their concern can be addressed by other tactics(e.g. IP filtering). Moreover, in my experience, most VHRs are viewed by consumers via online marketplaces/dealer websites(these are called “ICRs”). Since nearly every OEM requires their dealers use a website unique to each brand, I believe CARFAX can quite easily restrict a multi-point group from sharing a single CARFAX account by simply not displaying ICRs for any franchise that did not sign up with CARFAX. Thus, it’s my opinion, that CARFAX’s requirement is just another example of CARFAX’s exclusionary tactics. (Reference: http://forum.dealerrefresh.com/f46/opinion-carfax-extorting-my-dealership-2902-3.html)

b.     EFFECT(OPINION): Dealer groups cannot compare AutoCheck or CARFAX to potentially conclude that they perform similarly. Since certain OEMs require CARFAX, dealer groups are forced to purchase CARFAX for the entire group because of the CARFAX requirement for a single franchise. Thus, dealers are forced to pay a premium to CARFAX, and CARFAX engages in more behavior that is anti-competitive against AutoCheck.

6.     Price Discrimination

a.     ACTION: While I do not believe CARFAX is violating the Robinson-Patman Act, I do believe their pricing policies should be reviewed. I personally know many dealers – ranging from independent dealers to new car dealers – that are all paying different monthly fees for CARFAX’s “unlimited VHR program.” A more careful examination of CARFAX’s pricing policies should be investigated to encourage more transparency. In my case, after I publically questioned CARFAX’s policies in my October blog post, my CARFAX rep promised me a $300/month price decrease – this was just after my rep told me that no further discounts were possible. In comparison, AutoCheck charges a uniform price for their unlimited VHR program.

b.     EFFECT(OPINION): Dealers are not assured that they are receiving the best value from CARFAX and certain dealers may be paying an unnecessary premium vs. other dealers.

7.     “Too Much Control” can disrupt trade

ACTION: After Hurricane Sandy hit the metro New York area, CARFAX placed a prominent disclaimer on every vehicle registered in “flood affected areas” with a message that warned customers to inspect the vehicle for potential flood damage. Immediately, as I was told, chaos ensued at wholesale auctions as dealers began avoiding units that were branded with the CARFAX disclaimer as it was a deterrent to retailing the car in the future. As a result, the Greater New York Auto Dealers Association and its New Jersey counterpart sent CARFAX a letter requesting the company change the disclaimer. Within a few days of posting the initial hurricane disclaimer, CARFAX issued a “milder” version of the disclaimer that was more subtle – and similar to a hurricane disclaimer that AutoCheck issued prior. To be clear, I can accept the need for a disclaimer, however it should be provided in a milder fashion so as not to negatively brand what is most likely an unaffected flood vehicle (which was my entire inventory).

EFFECT(OPINION): While more examples exist, CARFAX clearly proved that it contains significant market power. Power, that when used haphazardly, can also interrupt trade. CARFAX also proved that their brand can damage a dealer’s ability to sell, and therefore, it also proved that dealers should not be forced to pay a premium for their product.

Above, I’ve listed 7 CARFAX business tactics that I found to be worthy of further review; and while my understanding of Sherman Act is amateurish and unqualified, it’s relevant to compare the business tactics I described above with actual legal cases. For example:

Conwood v. U.S. Tobacco Corp., 290 F.3d 768 (6th Cir. 2002) cert. denied, 537 U.S. 1148 (2003). The Sixth Circuit affirmed a jury verdict and $1 billion damage award in favor of Conwood, holding that United States Tobacco Company (USTC) harmed competition when it used its position as category manager over moist snuff racks in retail stores to restrict point-of-sale advertising and shelf space of competitive products. The Court concluded that USTC had sufficient market power to foreclose rivals from achieving a competitive shelf presence on scarce retail space, thus allowing USTC to increase prices and restrict the growth of rivals. Notably, the Court ignored the fact that USTC entered into exclusive supply agreements with 10% of moist-snuff retailers. Instead, the Court focused on the exclusionary effects of USTC’s category managers, who were found to have engaged in a systemic pattern of tortuous conduct, including the destruction point-of-sale racks, repositioning products, and providing retailers with false information regarding consumer demand and sales.

Source: http://apps.americanbar.org/antitrust/at-committees/at-s2/pdf/articles/resources-exclusive-agreements.pdf

And

Coca-Cola Co. v. Harmar Bottling Co., 111 S.W.3d 287 (Tex. App.- Texarkana, 2003, pet. granted). A Texas appellate court affirmed a jury verdict awarding soft drink bottlers $14 million plus injunctive relief in their suit against Coca-Cola under the Texas Free Enterprise and Antitrust Act. The court found the evidence sufficient to uphold the jury’s finding that the Coca-Cola Co., which admittedly had a 75-80% share of the branded carbonated soft drink market in Texas, Oklahoma, Arkansas, and Louisiana, had restrained trade, monopolized or attempted to monopolize, and conspired to monopolize through a number of marketing tactics used as a package, including commitments to contracts of one year or more, the exclusion of rivals’ in-store and point-of-purchase advertising, exclusive flavor requirements, display requirements, and pricing requirements. Petition for review has been granted by the Texas Supreme Court, No. 030737 (Tex. Sept. 3, 2004).

Source: http://apps.americanbar.org/antitrust/at-committees/at-s2/pdf/articles/resources-exclusive-agreements.pdf

In the Conwood v. U.S. Tobacco Corp case, in my opinion, there are tactics by U.S. Tobacco that are eerily similar to CARFAX’s business practices. Specifically, using “market power” to stifle competition, or spreading false information in an effort to diminish AutoCheck’s ability to compete. (See “AutoCheck Gets Green Light to Sue Carfax:  http://www.courthousenews.com/2012/07/12/48334.htm) In Coca-Cola Co. v. Harmar Bottling Co, in my opinion, I believe the trait of restricting a competitor’s advertising and the “packaging and forcing” of marketing tactics is similar to CARFAX’s tactics.

Based on the feedback I received from other industry folks, there are likely more examples of CARFAX’s business tactics that warrant a further look. However, legal cases take time, and I prefer a quicker and simpler remedy.

Eight Industry Recommendations:

In September 2011, I wrote a 4,000+ word analysis that explained why I felt TrueCar’s business model was detrimental to the franchised dealer and OEM. By December 2011, I met with TrueCar’s CEO and top management, and I was able to provide constructive feedback that was combined with other recommendations to improve TrueCar’s business model. By April 2012, I was appointed to TrueCar’s Dealer Council. From my TrueCar experience, I’ve learned that when companies are willing to listen to suggestions, the end result can be a better product for the dealer.

Thus, I’ll take a “leap of faith,” and share some recommendations for the industry:

1.     AutoTrader.com/Cars.com, as well as any other used car marketplace, should immediately cease/desist on any action that prevents participating dealers from choosing a preferred VHR provider to represent their vehicles.

2.     CARFAX should immediately end any agreement that restricts the ability of an OEM to promote their certified pre-owned inventory, on any website or in general, because of the choice of a VHR provider for their certified program.

3.     CARFAX should cease/desist any televised commercials that portray car dealers as untrustworthy. Moreover, CARFAX should cease/desist any advertising that states that their reports are free. (Unless accompanied by a statement indicating the reports are free from a participating dealer - this applies online as well).

4.     OEMs should cease/desist any branding efforts that strongly align their certification programs with a single VHR provider. Additionally, manufacturers should eliminate any advertising that may confuse consumers into believing the OEM’s certification programs provide a similar level of assurance as a VHR provider (e.g. the AutoTrader Hyundai /CARFAX co-branding discussed earlier). It’s important that OEMs build trust within their brand’s entire customer experience in order to minimize the potential for the commoditization of their products.

5.     Experian should improve the look/feel of their reports. The reports can use a “facelift.”

6.     CARFAX should provide full disclosure to dealers explaining what they are doing with dealer DMS data. (TrueCar’s disclosure methods could be a valid model).

7.     CARFAX should re-examine their used car pricing tools to verify they are not detrimental to dealers and actually complementary.

8.     CARFAX should adopt a uniform and transparent pricing policy for participating dealers.

Conclusion: Competition is American; it’s moves entire economies forward, it improves industries, and it protects the consumer. We need competition.

Dealers need VHRs in order to buy/sell used cars. However, the concept of a single VHR provider that uses exclusionary agreements to stifle competition is unconscionable. Dealers should not be forced to hire a company that charges more than its competitors, spends millions on advertising that damages the reputation of the dealer body, and sells data that is subject to serious errors/omissions. Moreover, OEMs should be weary of the strategic consequences of aligning their valuable brands with potentially ill-fated third parties. In conclusion, the opportunity for more VHR competition will ensure that consumers and dealers receive a more accurate and valuable vehicle history report in the future.

 

Note: If you would like AutoTrader.com, Cars.com, or your Franchise’s Manufacturer to end their CARFAX exclusivity agreements and allow dealer’s the right to choose a VHR provider, then please sign a petition for change: www.FreeTheDealer.org

 

REQUIRED DISCLAIMER: I’m not a lawyer.  Anyone reading this analysis should not consider my above opinion, comments, text, or use of sources as either reliable or accurate. The above information is not factual, and is merely my amateurishly researched and unqualified opinion. You should not rely on the above opinion, or the above text, or anything I post online as it could be completely wrong. Your decision to read this this analysis is based on your own risk.

Comments

OUTSTANDING information Jeremy. Thank you!

Jan 2, 2013

Thanks Jim!

Jan 3, 2013

Good stuff! Any feedback from AutoCheck or Carfax?

Mar 1, 2013

Hi Steve,

There's been no official comment from CARFAX. However, from my understanding, AutoCheck is making design enhancements.

Jeremy

Mar 5, 2013

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    News broke recently about 5 dealership employees that were arrested and face federal charges of conspiracy, bank fraud, wire fraud, and aggravated identity-theft. This brings the total to 7 employees at the same dealership who have been indicted so far this year. Not very pretty. Now you may be thinking that these folks must have engaged in really outrageous behavior to get arrested, especially by the feds. You’re likely also thinking that this could never happen to you – and you may be right. But before you ignore this as something that only happens to people in other dealerships, you might want to read on. For a number of reasons I’ll get into shortly, my take on this latest government action is that there’s a profound change occurring in the car business legal environment – not only for dealers, but for everyone who plies their trade selling cars. I know, I know - you’ve heard this all before – but please stay with me for a little bit. It’s no secret that fo...Read post

  • When An Apology Isn’t An Apology

    Regardless of how hard you work to ensure that your customers have an excellent experience, mistakes happen. No doubt you’ve had customers complain about something – it took too long for their vehicle to be serviced, there was a miscommunication in pricing during the sale, or a general failure to deliver on promises (big or small). Whether the complaint is relayed to the frontline employee, or the customer felt the need to go directly to management, apologies are usually made.   The problem is that, at times, your customer feels that they have received an empty apology and can recognize this type of apology a mile away. These “nonpologies” don’t accomplish anything more than relaying indifference to the customer.   Examples of nonpologies are:   “We made a mistake.”   “We apologize for it taking so long.”   “I’m sorry you’re unhappy.”   The reason these apologies have no weight in the customer’s eyes is because there is no acknowledgement...Read post

  • When to search for new employees

    Here is the daily hiring and getting hired tip: We get asked a lot about when the best time is to hire. There is a sweet spot in the year. The greatest amount of layoffs are done between October 1st and Thanksgiving, and the heaviest volume of employers seeking applicants is just after New Year's. This means that from Mid-October to Christmas the largest pool of applicants is available, with the least businesses competing for them. That is the best time of year to search for your new team members.Read post

  • Hiring at Dealerships: 5 Signs It’s Time for a Facelift

    Whether you’re an aging celebrity in Hollywood or the storefront of a 50-year-old mom and pop store, facelifts are sometimes necessary for business. The same can be said about the hiring process at your dealership—if it’s seems outdated, then it’s probably time to restructure your system. Old habits die hard, but they can still go away. One of the most unwanted and hardest habits to kick at dealerships everywhere is turnover. According to an annual report conducted by the National Automobile Dealers Association, sales turnover at dealerships is around 62%. Although this is a serious issue amongst dealerships, it doesn’t have to be a permanent one. Just like solving any problem, you have to find the source first. Who you hire affects your turnover rate and therefore, makes your hiring process the main source. The first step towards refurbishing the way you operate hiring at your dealerships starts with identifying your main issues. The following are five signs that will tell you it’s time to update your hiring process: 1. You realize your turnover rate is high, yet you’re not concerned—if you’re worried about making money at your dealership, then you should be concerned about turnover. You actually spend more money on turnover than you ever would if you used a hiring management system. It pays off to research and analyze your potential employees. 2. You’re swimming in a pool of resumes—ok so maybe not an actual pool, but if you have a file packed with resumes, then yourRead post

  • It’s All a Matter of Perspective

    When did you last walk through the customer entrance of your dealership and look at what is truly being experienced by the customer?   Forget for a moment whether a sales consultant’s work area is messy, or if there are smudges on the windows. Let’s look a little closer at what a customer could see, hear or feel when they interact with your dealership in any department. What’s really taking place behind the doors may be a real surprise to you. Taken from a customer’s perspective, you just might be failing to meet their most basic expectations. As a result, you could be damaging your dealership simply by being unaware of what happens on a daily basis down in the trenches.                                                                Have you made an anonymous phone call to your dealership lately? Almost every store now utilizes some form of inbound call tracking. These systems all provide the ability to record...Read post

  • Help The Bargain Brothers Change the Public's Opinion of our Industry

    It is no secret that our industry is negatively viewed in the general populace. That people consider us no better than a 1920’s Snake Oil Salesman. This is why the Bargain Brothers reality TV show is so important for all of us in the automotive industry to get behind. Watch New Episodes of The Bargain Brothers Tuesdays at 7 (EST) on the BNN Network, or watch all the aired episodes online right now at http://www.bnn.ca/shows/bargain-brothers.aspx or on the BNN GO Mobile App http://www.bnn.ca/bnn-go-app.aspx.Read post

  • How to Use DrivingSales.com - A How-To Guide For New Users

    I wanted to write something for first-time users to DrivingSales, to ease them into the culture and experience that is found here. My goal is that, if new users are more comfortable on their first experience, we will convert a higher percentage into active users. After all, we are in the business of conversions, and the more people we have contributing, the more we will all get back from it. We are all in this together.Read post

  • And you thought Internet shopping was disruptive…

    Over the past 15 years or so the Internet has profoundly changed the automotive shopping process, I’m predicting that the changes to the automotive buying process will occur twice as rapidly and will be twice as disruptive to the industry. The shopping process takes the majority of your customer’s time, while the buying process is actually much more important – to both the customer and the dealership. Now major industry players like AutoNation, Sonic, and CarMax are rapidly moving to a more “transactional” web presence. In short, the major players are moving from mere shopping on the web to buying on the web. That doesn’t mean buying a car 100% online, it means allowing the customer to choose which functions of the sales process they want to complete online. My sense is the winners and losers in the business, five years from now, will be predicated by how well they assist buyers slipping from the online experience into the physical experience – and perhaps back again....Read post