FTC Shakes Up Automotive Advertising with Recent Enforcement Action

A recent FTC investigation of several car dealerships sent ripples through the retail sector of the auto industry.  A copy of the FTC’s press release is here.  The FTC’s investigation of these particular dealerships reveals a shift in enforcement posture regarding “deceptive and unfair trade practices” in two major ways.  First, the FTC now classifies a promise to pay off a consumer’s vehicle, “no matter how much [he or she] owes,” as a deceptive and unfair trade practice when the dealer applies the existing loan balance to the new purchase without appropriate disclosure.  This is big for auto dealers because this advertising message is quite common in auto advertising.  Second, and equally profound, is that the FTC referenced videos posted by some of the dealerships to YouTube in the enforcement action.  This is one of the first, and if not, the most public, occasion that a FTC focused such attention on a dealership’s videos on YouTube.

What can you learn from this enforcement action?  First, the FTC is willing to broaden the scope of what constitutes “deceptive and unfair trade practices.”  Moreover, state and local administrative agencies that have similar mandates as the FTC often follow the FTC’s guidance when interpreting their own state and local laws and ordinances against deceptive and unfair trade practices.  So, when examining your advertisements, keep in mind the regulatory climate and that eager state attorney generals may wish to adopt the FTC’s ruling to enforce similar actions in your market.  Also and ask yourself whether the language in your advertisement can be reasonably construed as deceptive and unfair.  Don’t wait for an administrative agency to rule against you if you have advertisements that are in a “grey area” of interpretation.

Another lesson you can learn is that your social media content is not immune from investigation.  Use equal diligence when reviewing a video loaded on YouTube, status update on Facebook, or tweet on Twitter, that you would with an advertisement in your local newspaper.  If your content is problematic, remove it immediately.

Finally, if something like this happens to your dealership, you have many options to combat the negative publicity.  One example is to take your message to your consumers directly, like Frank Myers, owner of Auto Maxx (one of the dealers under investigation by the FTC), recently did.  I applaud Mr. Myers for taking the initiative to air his side of the story and showing the importance of sharing your perspective on matters that directly impact your business. Here is the first video he posted soon after the FTC released its statement:

And here is the next video:

2 thoughts on “FTC Shakes Up Automotive Advertising with Recent Enforcement Action

  1. Pingback: FTC Releases Guidelines For Online Advertisements | Auto Law JD

  2. Pingback: FTC Continues Crackdown On Dealers | Auto Law JD

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s