Santa Clara, CA: A $1 billion proposed unfair business practices class action lawsuit has been filed against Autotrader.com Inc. alleging the publication inflates the effectiveness of its online advertising results so as to induce dealerships into purchasing Autotrader' advertising services or upgrades.
Filed by dealership owners and operators Fairfield Motors Inc., Adjess Motors LLC and Alfred Stein Inc, the lawsuit contends that Autotrader has been inflating the number of times their vehicles appear in search results or are clicked on by consumers by as much as 100 percent.
"Autotrader' marketing and advertising communications emphasize, as the primary selling point to dealers, a number of statistical metrics that are designed to convey the purported efficacy and benefits of the Autotrader' online advertising. However, the 'advertising reach' metrics that Autotrader used to induce the plaintiffs and other dealers to purchase its online advertising services were false and misleading,"the lawsuit states.
In their complaint, the plaintiffs assert that third-party advertising websites, like Autotrader, allow dealerships to post their inventory online in such a way that consumers can easily search for and compare specs on listed vehicles. While consumers can use the site for free, dealerships must buy advertising packages that provide for them to post varying numbers of vehicles.
According to the complaint, while Autotrader emphasizes the benefits of its online advertising it has in fact set up its website to double count the number of search results and vehicle pages viewed by consumers. This effectively inflates the number of hits the dealerships get on search results pages, or SRPs, and vehicle details pages, or VDPs.
The lawsuit further contends that a technology employee or outside consultant hired by Autotrader notified Autotrader' staff that its software was double counting certain hits, but that the company did not notify its clients.
"But for Autotrader' misrepresentations about the effectiveness of its advertising services, the plaintiffs would not have entered into the online advertising agreement in the first instance and, thereafter, if not for each succeeding misrepresentation by Autotrader, the plaintiffs would have terminated or failed to renew their agreements,"the lawsuit states.
The complaint asserts Racketeer Influenced and Corrupt Organizations Act (RICO) violations and claims for deceptive and unfair trade practices, breach of contract and warranty, breach of the covenant of good faith and fair dealing, unjust enrichment, fraudulent inducement and negligent misrepresentation, among others.
The plaintiffs are represented by Leonard A. Bellavia and Shaun M. Malone of Bellavia Blatt & Crossett PC. The case is Fairfield Motors Inc. et al. v. Autotrader.com Inc., case number 1:15-cv-06017, in the U.S. District Court for the Eastern District of New York.
