FTC’s “Operation Steer Clear” Targets Auto Dealers’ Deceptive Trade Practices

On January 9, 2013 the Federal Trade Commission (“FTC”) announced enforcement actions against nine automobile dealerships over allegations of deceptive and unfair trade practices.  The FTC alleged that these dealers violated the FTC Act, which prohibits businesses from making false or misleading statements regarding products and services.  The complaints filed by the FTC also included allegations that the dealers violated the Consumer Leasing Act and the Truth in Lending Act by failing to disclose fees, interest rates, and other credit related terms.

Of particular interest is the FTC’s complaint involving a dealer’s advertisement of a purchase price reduced by a down payment.  For example, the dealership advertised a 2008 Chevrolet Tahoe for $17,995 and included in the disclosure that the price was “after $5000 down.”  Even though the advertisement disclosed that the price was conditioned upon the consumer making a down payment of $5000, the FTC alleged that the advertisement was deceptive because the vehicles “are not available for purchase at the prices prominently advertised” since consumers “must pay an additional $5000 to purchase the advertised vehicle.”  Based on anecdotal observation, this practice is far more common than many dealers may believe.

Dealers should closely review their own advertisements to see whether they may be deemed deceptive.  If you have advertisements that show a price contingent upon making a down payment, you should  avoid making these kinds of offers.  If you advertise lease or installment payments, you must make sure that you properly disclose any “trigger terms,” such as APR, duration of the loan, and any additional fees associated with the purchase or lease.  Payments that are “No Money Down” must really be no money down.  If the consumer must pay more to obtain the advertised payment or price, then the offer may be deceptive.

FTC Releases Guidelines For Online Advertisements


The Federal Trade Commission (“FTC”) recently brought enforcement actions against dealerships regarding their online advertising practices.  The most discussed enforcement action targeted dealers who made claims related to negative equity online.  Afterwards there was some confusion as to the extent of the FTC’s application of consumer protection laws to online advertisements.  Last week the FTC issued guidance that clarified its position on what kinds of online advertisements would be considered deceptive and unfair.  While you can obtain a copy of the publication by clicking here, I have provided a brief overview of key parts of the guidelines below:

  • The same consumer protection laws that apply to commercial activities in other media apply online, including activities in the mobile marketplace. The FTC Act’s prohibition on “unfair or deceptive acts or practices” encompasses online advertising, marketing, and sales.
  • Your advertisements should contain disclosures located close to “trigger terms” like sale price, payments, etc.  It is not enough to include a hyperlink to a separate webpage with the disclosure.  You also should evaluate the effectiveness of these disclosures by staying abreast of where consumers look and do not look on your webpage.
  • If limitations of a particular online media make disclosure unfeasible, you should consider not using that media to advertise offers containing “trigger terms.”  For example, the social media website Twitter limits communications to 140 characters.  Any advertisements on Twitter that contain “trigger terms” must include disclosures that fit within the character limit.
  • Your disclosures must be legible regardless of the device consumers use to view the advertisement.  You will need to make sure that consumers can view your advertisements and disclosures on a variety of devices, such as desktop computers, laptop computers, tablets, and smartphones.

Image Courtesy of The Rude Baguette

Some Tips From A Private Seller’s Video On YouTube

I hadn’t checked out my Tumblr account in a while so I decided to log on and look around.  I found this advertisement posted to YouTube in 2010 that I reblogged.  At the time, I was struck that this private seller (a term we use in the auto business to describe individuals who sell their vehicles to other individuals and do not go through dealerships) came up with an effective advertisement for his BMW.  I think the video and the lessons car dealers can learn from it have held up well over the years.  Here are my takeaways:

  • Full Disclosure:  The seller clearly communicates what shortcomings the car has, any mechanical defects and anything else that a potential buyer may find material.  When sellers provide more information, buyers are likely to feel more confident in selecting one vehicle over another.  Are you effectively disclosing the good and the bad (if any problems exist) with your inventory? 
  • Creativity:  The seller certainly thought outside the “fifth concentric box” to make this ad stand out.  Everything from narration, shots of the vehicle, clever ways to highlight features/issues (see: signs) and music make this video very memorable.  What are you doing to try to cut through the clutter?
  • Contact Information:  The seller provides his contact information in the video itself and the listing.  Potential buyers would have no difficulties understanding how and where to contact the seller.  Do your ads clearly notify how buyers may contact you?

FTC Revises Green Guides: What Dealers Should Know

Earlier this month the Federal Trade Commission amended its “Green Guides,” which address claims made by marketers of products’ environmental attributes. Since dealerships fall within the types of businesses regulated by the FTC, it is important that you are aware of the Green Guides and take them into consideration when creating and placing your advertisements. The Green Guides are not new laws or rules created by the FTC. Rather, the Green Guides outline what kinds of additional trade practices the FTC considers deceptive and/or unfair under Section 5 of the FTC Act.

Advertisements that fall within the Green Guides include claims made about products’ environmental attributes or claims made regarding your dealership’s sustainable business practices or certifications such as “LEED” (or Leadership in Engineering and Environmental Design). Sustainable business practices include recycling initiatives, reductions in water and energy consumption, and utilizing renewable energy like solar and wind. Generally, the FTC considers broad, unqualified general environmental claims like “green” or “eco friendly” unfair and deceptive trade practices. To avoid claims that an advertisement is unfair or deceptive, advertisements claiming a vehicle is “eco friendly,” for example, will need further disclosure of specific environmental benefits that are clear, prominent and specific. Statements made regarding your dealership’s sustainability practices or certifications also trigger compliance with the Green Guides. If your dealership has received certifications or “seals of approval” for sustainable practices or for the property, and you chose to advertise such certifications or seals of approval, the FTC may consider such advertisements endorsements, thus requiring additional disclosure. Dealerships will need to disclose any material relationship between the business and the organizations granting the certifications or seals, and disclose the basis for the certifications.

 The FTC has demonstrated it is willing to actively pursue claims under Section 5 of the FTC Act against businesses that engage in unfair and deceptive trade practices even when consumers do not initiate complaints against the businesses. The FTC’s recent enforcement action against dealerships advertising negative equity claims is one example of this trend. You should consult the Green Guides to see whether the FTC may consider your current advertisements unfair or deceptive.  

Online Advertising Compliance…It’s Not That Complicated

Today I perused the table of contents for Automotive News, as I try to do every Monday, to see if any articles caught my attention.  For those who may not be that involved with the automotive industry, Automotive News is the trade publication of record, more or less.    While typically focusing on news related to manufacturing, Automotive News has lately broached topics more pertinent to what’s on the mind of many owners of dealerships these days; online advertising and sales.  Today was no exception, and the article, titled The Wild West of Online discussed how new efforts to advertise online were running afoul of state and local laws in many jurisdictions.  The dealer quoted in the article, Mike Duman of the Duman Auto Group, hails from my home state of Virginia.  The Commonwealth (as many Virginians like to refer to the state) has particularly stringent laws regarding automobile sales and advertising.  For example, sales associates in Virginia are licensed by the state’s Department of Motor Vehicles.  Virginia also does not allow ‘bird dog fees’ which, in industry parlance, are fees paid by a dealer to an unaffiliated or unlicensed third-party as commission for a referral.  In contrast, my adopted state of New York forgoes such requirements, neither requiring sales associates to obtain licenses nor forbid bird dog fees.  As one may expect, variances between state to state regarding what is and is not permissible gives dealers and vendors problems.

To me, this issue really isn’t that complicated.  Unless otherwise stated by applicable law or administrative rules,  you should evaluate the legality of online advertisements in the same manner and using the same tools you would for advertisements placed in “traditional” media such as television, radio and direct mailing.  If you’re talking about a particular deal in a Facebook post, you should be prepared to offer disclosures required in your state.  If it looks like an ad, and it sounds like an ad, your state’s regulatory agencies are probably going to treat it like an ad.  Don’t rely on the vendor to tell you what is and isn’t kosher.  Merely doing something online does not shield you from requirements to comply with the law.  To the contrary, as more state and federal agencies catch on that the real action is happening online, they will examine your online activities with close scrutiny.  Don’t be caught unaware of what kinds of advertisements vendors are placing on your behalf and whether or not these advertisements comply with the law.

Worth noting, but largely absent from the Automotive News article cited above, is what happens with disputes arising from cross-border sales and what actions trigger your dealership finding itself within the jurisdiction of another state’s courts.  The circumstances triggering conflict of law and jurisdictional questions are not as far-fetched as you may think.  Suppose you have a dealership in Virginia and advertise a vehicle on eBay, a national listing website.  A customer in Illinois sees the vehicle and contacts your dealership.  You exchange emails and telephone calls, and the customer eventually agrees to purchase the vehicle.  What happens when the customer takes the vehicle back to his home in Illinois and a problem arises?  Do you answer to Illinois courts now regarding jurisdiction, or would the plaintiff have to bring suit in Virginia?  The answer is, as most are, complicated and depends largely on the facts of the transaction.  Needless to say the law is in a state of flux as more and more people shop in different states than their home states.  But, that’s a discussion for another post.

Source:  Automotive News

Image Source:  SheKnows

Pay Per Click Science 101 by DealerOn

PPC Science 101: Lower Spend and Increase Leads from DealerOn on Vimeo.

Between school, work, blogging and family (in no particular order of importance), I’m trying to learn more about Pay-Per-Click (or “PPC”) advertising and how to maximize this medium to generate leads.  I’m dipping my toe into the vast ocean of the PPC discussion by reading Google Adwords for Dummies and ‘lurking’ on various e-commerce blogs/discussion boards on the topic.  Luckily, there are lots of great resources that are industry specific.  I found the video above after reading a thread posted on Kain Automotive Idea Exchange discussing PPC advertising and services provided by vendors to dealers to implement PPC campaigns as part of their advertising mix (a link to that thread can be found here, but only members of the website may view the thread).

This video was referenced in the thread on the Kain Automotive Idea Exchange.  I found it extremely interesting, and left the video with a lot more questions than I previously had (which is a good thing).  It’s a little long but may be worth a view if you’re looking to learn more about how to fit PPC into your dealership’s (or any business) advertising plan and some of the pitfalls of PPC campaigns that are poorly planned or implemented.  I’m still in the very early stages of learning about PPC, and as I find more resources I’ll pass them along.

If there are any sources you would suggest to anyone interested in learning more about PPC and implementing PPC advertising at their place of business, please share them in the comment section below.