Dealer Insights - Jan/Feb 2014 - How To Guard Against Deceptive Advertising Charges
January 13, 2014
When it comes to advertising, dealerships must be vigilant to ensure that their ads don’t mislead customers. One area to pay especially close attention to is deceptively advertising a vehicle’s cost by failing to disclose all qualifications and restrictions that apply to an advertised discount.
FTC TAKES ACTION
The Federal Trade Commission (FTC) has charged dealerships in Cleveland and Baltimore with doing just this. It charged the Cleveland dealer with advertising that particular vehicle models were available at a specific dealer discount. But when customers arrived at the dealership, they discovered that the discounts weren’t available on all of the models advertised — only on the more expensive models.
The Baltimore dealership was charged with advertising that specific dealer discounts and prices were generally available to consumers. But when customers arrived at the dealership, they discovered that there were significant restrictions on obtaining the advertised discounts — for example, being a member of the military or a recent college graduate — or that the discounts were unavailable in full.
The FTC has ordered these dealerships to halt these deceptive ads, which appeared on their websites and in area newspapers, and has entered into proposed consent orders with them to settle the charges. The proposed orders are designed to prevent the dealerships from engaging in similar deceptive advertising practices in the future.
Specifically, the orders call for the dealers’ advertised prices or discounts to be accompanied by clear disclosures of any required qualifications or restrictions. The dealerships also must maintain and make available to the FTC for inspection copies of all advertisements and promotional materials for the next five years.
The good news for these dealerships is that they weren’t fined for these deceptive advertisements. But FTC fines of $50,000 or more in such circumstances aren’t uncommon — and such financial hits can cripple a dealership.
TAKE PROACTIVE STEPS
The best way to guard against FTC charges of deceptive advertising is to be proactive in reviewing for compliance all of the advertisements your dealership is placing. This includes all of your print, Web, billboard, radio and TV ads.
Designate someone at your dealership to become intimately familiar with the FTC’s rules and regulations governing deceptive advertising practices. This person should perform a self-audit by reviewing all of your advertisements through the FTC lens, looking specifically for anything the FTC might consider untruthful or deceptive in any way — such as failing to disclose all qualifications and restrictions that apply to an advertised discount. It might be impractical for your general manager to serve in this hands-on role, but he or she should at minimum carefully monitor your dealership’s advertising compliance efforts.
DOCUMENT YOUR EFFORTS
Regulators are primarily looking for willful disregard of rules and regulations governing deceptive advertising. The best way to demonstrate that you’re proactively guarding against this is by documenting your advertising compliance efforts.
If your review determines that your ads are in compliance, document this in detail and file it away in case of future FTC charges against your dealership. If it determines that your ads are out of compliance, take steps immediately to remedy them, and document this as well.
Dealer Insights - Jan/Feb 2014 Issue