By Michael G. Charapp
Charapp & Weiss LLP
Dealers often face a dilemma when advertising prices of vehicles. Competitors unlawfully advertise at prices at which they will not deliver vehicles, which in today’s market are scarce. Dealer personnel feel they must meet or beat that price, and they advertise at a price at which they do not intend to sell the vehicle.
When confronted, dealer personnel claim they can do this if they use a disclaimer that the actual selling price of the vehicle may be higher because of prevailing market conditions. They believe the warning in the disclaimer solves the unrealistic pricing issue.
That is a myth, and it is busted.
It is basic law of the FTC and states that if you advertise a price, vehicles (or at least one if you advertise by stock number) must be available at that price. Advertising at a price intending to sell it for a higher price is an act of bait and switch, the cardinal sin for the FTC and under state unfair and deceptive acts or practices statutes.
For the FTC, bait and switch is a deceptive sales tactic in violation of section 5 of the FTC act that prevents unfair or deceptive acts or practices. Most state laws prevent the same activities. For example, the law in Virginia is typical and makes it an unfair, deceptive, or misleading act or practice to use bait advertising:
"Bait" advertising, in which an advertiser may have no intention to sell at the price or terms advertised, shall not be used. By way of example, but not by limitation:
a. If a specific vehicle is advertised, the seller shall be in possession of a reasonable supply of said vehicles, and they shall be available at the advertised price. If the advertised vehicle is available only in limited numbers or only by order, that shall be stated in the advertisement. For purposes of this subdivision, the listing of a vehicle by stock number or vehicle identification number in the advertisement is one means of satisfactorily disclosing a limitation of availability.
b. Advertising a vehicle at a certain price, including "as low as" statements, but having available for sale only vehicles equipped with dealer added cost "options" which increase the selling price, above the advertised price, shall also be considered "bait" advertising.
Far from curing the bait and switch problem, a disclaimer warning consumers that vehicles may be sold at higher prices because of prevailing market conditions will actually make the problem worse. Regulators will use that as proof that the dealership did not intend to sell vehicles at the prices advertised.
A disclaimer is used to explain the advertised terms. It cannot be used to negate the advertising. You must be prepared to sell vehicles at the prices advertised.