On January 9, 2014, the FTC announced its “Operation Steer Clear,” which consisted of a series of 10 enforcement actions against 10 different dealers for deceptive automotive advertising. The dealers are located in California, Georgia, Illinois, North Carolina, Michigan and Texas. The remaining action involves a Massachusetts dealer. Nine of the dealers entered in 20-year consent decrees, any violation of which will result in penalties of $16,000 per violation (per day) and one dealer is litigating the enforcement action with the FTC.
Jessica Rich, the head of the FTC’s Bureau of Consumer Protection, did most of the speaking at the press conference announcing the enforcement actions. The gravamen of the wrongful advertising was using deception to lure consumers into showrooms. For example, one dealer used a form of sweepstakes scratch tickets in which nearly every one of 30,000 recipients scratched off a winning number but no prize was given to any consumer. Additionally, deceptive pricing and the use of footnotes or small print disclaimers to qualify pricing such as advertising a vehicle price or $0 down and putting in the middle of a footnote additional costs and fees. In one case, a car priced at $17,000 included a notation in the footnote that an additional $5,000 payment was required.
The FTC indicated it intended to bring additional enforcement actions and that these enforcement actions are intended to deter deceptive conduct and put all dealers on notice of the significant consequences. Ms. Rich indicated that the FTC affirmatively monitors dealer ads in all media (including the Internet and social media) as well as taking consumer complaints and referrals from other agencies including the CFPB.
She indicated that the FTC currently has many automotive dealer investigations “in the pipeline” and that this is a “priority area” for the FTC. She also indicated that the FTC believes deceptive dealer advertising to be a “significant problem.” She further indicated that if marketing or PR groups assisted the dealers in creating the deceptive ads, that they could be liable as well.
Ms. Rich advised dealers to “never have fine print disclaimers inconsistent with the prominent claim you make or which no one can understand. If you advertise a price, it must be available to all consumers” and nothing in the fine print can change that price. Fine print inconsistent with the main message or which is confusing is “patently deceptive.” She said “many, many dealers out there are engaged in similar practices” and promised there would be “a lot of enforcement against dealers now and in the future.” She also indicated the FTC shares authority over automotive lenders with the CFPB.
All in all, it seems like the FTC is going to take the offensive on dealer advertising in 2014.
Randy Henrick is Associate General Counsel and lead Compliance Counsel for Dealertrack, Inc. This article is intended for information purposes only and does not constitute the giving of legal or compliance advice to any person or entity. Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on your particular situations from a knowledgeable attorney or compliance professional licensed to practice in your state.