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.

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: