Contributors

Christian Scali

Founder and Managing Shareholder

The Federal Trade Commission (FTC) has again targeted automobile dealers for allegedly deceptive advertising. Two Las Vegas dealerships agreed, on June 29, 2015, to settle FTC charges of misleading sale and lease advertisements. The proposed consent orders—which would last for twenty years and carry a penalty of up to $16,000 per violation per day—prohibit them from misrepresenting any further sale or lease offers. The FTC alleges that the dealers’ newspaper and Facebook ads misled the public by omitting, or misrepresenting, required price terms and other mandatory disclaimers. If you are familiar with the CNCDA’s 2015 Advertising Law Manual, authored by The Scali Law Firm, you already know that the FTC and other regulators are targeting dealers nationwide over advertising violations. Sometimes they focus on major omissions (such as omitting crucial terms, like downpayment amounts) and sometimes they act on less clear violations (such as disclaimers that aren’t sufficiently clear or conspicuous). Your best bet is compliant advertising, as illustrated by the FTC’s recent allegations against two Las Vegas Dealers.

The FTC’s complaints included several alleged deficiencies that we have often seen in non-compliant advertising: missing Regulation M and Regulation Z terms (e.g. the amounts of downpayments and security deposits); contradictory terms (e.g. “$0 Down Available” in large print with fine print requiring a trade-in of at least $2,500) and advertised prices that very few people would actually qualify for (e.g. a price based on $1000 Trade Assistance and $600 Active Military discount and a $600 College Grad discount). The FTC also contends that the existing disclaims in the ads were not readable – which must be at least in the larger of 8-point font or a type size that is ¼ the size of any advertised price terms. And lease offers allegedly did not clearly state that they were lease offers (instead of appearing to be a sale ad). The Vegas dealers failed to do this in several print and Facebook ads for leases, which also contained unreadable disclaimers (and the issues we mentioned above). The FTC’s complaints should also remind dealers of another major point we made in the CNCDA’s 2015 Advertising Law Manual: posts on Facebook (or other social media websites) are advertising, subject to the same rules as any other ad a dealer may run. We have recently seen several California dealers fail to include even basic Regulation M and Z terms when advertising vehicle lease or sale prices on Facebook. This is a dangerous gamble as the Las Vegas dealers now know.

The best way to guard your dealership from allegations of deceptive advertising is to be proactive about compliance. The CNCDA’s 2015 Advertising Law Manual provides a useful overview of advertising best practices. It also addresses the different media in which dealers advertise today, including websites, social media, direct mail, television and radio. But dealers should also consider implementing a compliance program, especially when doing significant internet, text, digital and social media marketing. Compliance in this area incorporates privacy, employment law and data security, requiring a compliance officer to have knowledge of various areas of the law or the ability to navigate those laws through a program developed by an attorney versed in these areas. We urge dealers not only to take advantage of compliance training, but to have a knowledgeable automotive industry attorney assist in the creation of your compliance program. Training can identify and remedy specific issues that you face and ensure that all employees are on the same page when it comes to advertising. And a knowledgeable automotive industry attorney can help you educate and train a compliance director, who can implement several crucial compliance programs including advertising, F&I, red flags, and data protection. We aren’t betting that regulators will stop targeting dealerships anytime soon, and you shouldn’t either.

You can download the FTC’s press release regarding its recent actions against Las Vegas dealers, including the complaints containing clippings and screenshots of the allegedly deceptive ads.