Advertising is an easy target for the FTC.
February 19, 2024
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
As we mention in the Refresher Quiz, advertising is an easy target for the FTC. Though the Combating Auto Retail Scams (CARS) Trade Regulation Rule is being challenged before the Court of Appeals for the Fifth Circuit, it is anticipated that the CARS Rule, or some version of it, will go into effect some time in later 2024. It is for this reason, that dealers should be proactive in reviewing their sales practices to ensure they are ready with best practices to avoid FTC scrutiny. This column includes best practices related to advertising.
Dealers should already be following these advertising requirements:
- If you use a trigger term, you must make follow on disclosures. If you do not, the FTC has you on a clear-cut violation and it can compel you to stop activities it labels unfair and deceptive that are less clear cut in FTC consent orders.
- If limitations make a price or offer unavailable to all, the advertisement must clearly and meaningfully disclose the terms customers must meet to obtain the advertised benefits.
- Do not stack rebates that are not permitted to be stacked (i.e., first time buyer rebate with customer loyalty)
- False or misleading reviews from family members or employees to look like customers are prohibited
Additional Advertising rules under the CARS Rule include the following:
- The advertisement must include the “offering price”, which is the total cash price that you will sell or finance the vehicle only excluding required government charges. Dealers will not be able to have a vehicle advertised with “Call for Price”.
- Since Virginia’s processing fee is not a state mandatory fee, your advertised “offering price” will need to include your processing fee and disclose that the fee is voluntary and not required by Virginia law. Under current standards, dealers currently put the amount of the fee in a disclosure, which would be improper under the CARS Rule.
- The “offering price” will also need to include any electronic titling fee that you charge a customer for a third-party vendor to title the vehicle.
- Do not advertise MSRP only as the price of the vehicle unless that is the price you actually want for the vehicle. Often, manufacturers require dealers to advertise MSRP. Dealers will then include disclaimers and disclosures that there will be additional dealer markup or the processing fee added to the price. This will no longer be allowed under the CARS Rule. Although your advertisement can have the MSRP disclosed, the CARS Rule requires “Offering Price”.
- Do not discount a price for a rebate that is of limited availability. If you advertise rebates, they should be generally available to most consumers (i.e., rebates for high credit score consumers should not be advertised).
- Dealers cannot list vehicles for sale that actually are not available for sale. For example, if you do not have the title for a used vehicle, it should not be listed as available for sale.
- For an advertisement to be “clear and conspicuous”, the disclosure should be “unavoidable,” meaning that you cannot require the consumer to click to another page or open a separate box.