FTC Continues Crackdown On Dealers

I recently wrote about the Federal Trade Commission’s (“FTC”) vigorous enforcement of consumer protection and privacy laws against automobile dealers.  In these previous enforcement actions targeting dealers, the FTC found that advertisements related to negative equity were deceptive and unfair, and that dealers failed to take adequate steps to safeguard consumers’ nonpublic personal information from tampering via Peer to Peer (“P2P”) networks.  Now, two dealers entered into consent agreements with the FTC to settle claims of unfair and deceptive trade practices related to advertisements placed by the dealerships online and in print.

The FTC charged that dealers in Maryland and Ohio “violated the FTC Act by advertising discounts and prices that were not available to a typical consumer…[and] misrepresenting that vehicles were available at a specific dealer discount, when in fact the discounts only applied to specific, and more expensive, models of the advertised vehicles.”  The Maryland dealer’s website “touted specific “dealer discounts” and “internet prices,” but allegedly failed to disclose adequately that consumers would need to qualify for a series of smaller rebates not generally available to them.”  The Ohio dealer “allegedly failed to disclose that its advertised discounts generally only applied to more expensive versions of the vehicles advertised.”  To settle these actions, the dealers agreed to comply with the FTC’s order for twenty years, and maintain records of advertisements and promotional materials for the FTC’s inspection, upon request, for five years.

Once again the FTC demonstrated its willingness to extend protections offered by the FTC Act against deceptive and unfair practices to online advertisements placed by dealers.  The FTC’s scrutiny of dealers’ advertisements clearly is not limited to “traditional” media, such as television and newspaper.  Furthermore, the Maryland and Ohio dealer used advertising methods (combining rebates and stating a percentage discount from MSRP) that dealers use frequently.  Therefore, dealers must endeavor to curtail the use of terms and methods that the FTC has determined are deceptive and unfair.

If you have not done so, you should download the FTC’s “.com disclosures,” which offer guidance on what you must disclose in your online advertisements.  Your state’s Attorney General’s office may provide similar guidance.  For example, New York’s Attorney General publishes advertising guidelines for New York dealers.  While your state’s Attorney General may not have issued guidance regarding online advertising, you should not interpret this absence as carte blanch to advertise however you wish.  Each state has enacted its own version of the FTC Act, and many state Attorney General’s closely watch the FTC and adopt it’s posture related to enforcement of consumer protection laws.  So, even if your state’s Attorney General has yet to act, chances are that advertisements like the ones cited above may be deemed deceptive and unfair under your state’s law should a consumer or the Attorney General challenge the advertisements.