FTC Announces Nationwide Sweep Targeting Deceptive Auto Dealer Ads

* This article was originally published on the Arent Fox Automotive team blog: Managing Automotive

On January 9, 2014, the Federal Trade Commission and the County of Los Angeles Department of Consumer Affairs held a press conference announcing a nationwide enforcement action targeting deceptive auto dealer advertisements. The enforcement action, dubbed “Operation Steer Clear,” resulted in the voluntary settlement of complaints against nine dealerships. Arent Fox counsel and Auto Advisory Services’ president, Rob Cohen, (who previously participated in a FTC roundtable discussion on consumer issues in motor vehicle finance and leasing contexts) attended the press conference.

“Using deceptive ads is a practice that auto dealers should steer clear of and by announcing these cases, we hope to bring attention to these tactics,” said Jessica Rich, the FTC’s Director of Consumer Protection. Ms. Rich then went on to name the 10 dealerships involved. Four of the dealerships named are located in California, only two of which are new car dealerships.

Although the complaints filed against the dealers did allege technical violations of federal law (i.e., the Consumer Leasing Act/Regulation M), the bulk of the FTC’s scrutiny is something much less complicated. Specifically, the FTC is focusing on contradictory disclosures made in advertisement fine print. In describing these contradictory disclosures, Ms. Rich stated, “These dealers ran print, internet and video ads that promised car leases with no money down, but guess what, there were fees, downpayments and taxes, in one instance totaling almost $5,000, that were buried in the fine print.”

When asked if the sweep was ongoing and if more dealerships were involved, Ms. Rich responded by saying “We have many other investigations in the pipeline. This is a priority area for the FTC and you will see other cases in the auto area as we move forward.” Earlier in the conference, Ms. Rich also stated that the FTC is “always on the lookout for deception in the auto marketplace.”

To sum it up, there are both positives and negatives in this announcement. On the positive side is that none of the settlements involved admissions of liability or monetary fines. Also positive is the fact that the FTC appears to focus on an overall lack of transparency that it views as deception rather than trying to trap dealers who inadvertently miss a mandatory disclosure. This is not to say that they are ignoring those things, quite the contrary. What appears to have triggered the complaints in this round of investigation are small print disclosures that seem to directly contradict large print offers. Once the contradiction is discovered, then the FTC adds allegations related to mandatory federal disclosures. This is in the positive column because ensuring that your ads do not contain contradictory language requires nothing more than a careful review.

In the negative column, there is the fact that this operation is ongoing and we can expect more FTC complaints brought against dealers in the near future. The FTC has made it very clear that these kinds of cases are now a priority.