FTC Advertising Offensive Continues

In January 2014, the Federal Trade Commission stepped up its recent, ongoing regulation of car dealer advertising and announced consent orders with nine dealers. Showing the agency’s nationwide reach, the dealers were in California, Georgia, Illinois, North Carolina, Michigan, and Texas. The FTC also announced it filed an administrative complaint against a tenth dealership in Massachusetts.ftc-clr

In March 2014, the FTC announced it had reached a consent order with the Massachusetts dealer. Under the agreement, the dealer acknowledged it advertised that consumers could lease a vehicle for $0 down and specific monthly payments when the advertised amounts excluded substantial fees. The consent order required compliance with the Consumer Leasing Act by clear and conspicuous disclosure of lease terms.

The compliance obligations imposed by an FTC consent order can be onerous and costly. It provides for FTC oversight of dealer advertising for twenty years. A dealer can be required to submit its advertising and report on its compliance efforts. Violating a consent order can subject the dealer to legal action in federal court where a variety of sanctions can be imposed, including civil penalties of up to $16,000 per day per violation.

What are you doing about your advertising to be sure it complies with federal requirements? Train managers in charge of advertising. Your advertising agency should also understand the risk you run. Here are things they should look for.

  • Does your ad involve a payment or other financing term that is a TILA trigger term? If so, the required TILA disclosures must be made.
  • Does your ad contain a lease payment or other Consumer Leasing Act trigger term? If so, the required CLA disclosures must be made.
  • Are all disclosures clear and conspicuous by being readable, understandable, noticeable, and clearly tied to the offers qualified?
  • Are all claims and offers truthful and not misleading?
  • Does the ad use industry slang or jargon not known to the public?
  • Is the advertised price net of manufacturer incentives or rebates that are not available to the general public? The price available to any member of the public must be the advertised price.
  • Is the advertised price the total vehicle price (no undisclosed add-ons or downpayments disclosed elsewhere) and is it available to any consumer?
  • Are new vehicles advertised identified by year, make, model and trim level?