January 15, 2014

FTC Revs Its Engine: Announces Industry Sweep of Deceptive Automobile Ads

Seller Beware: Consumer Protection Insights for Industry

On January 9th, the Federal Trade Commission (FTC) announced "Operation Steer Clear," billed as a "nationwide sweep against deceptive auto dealer ads." In the past week, nine automobile dealers have entered into consent agreements with the FTC and the FTC has issued an administrative complaint against a tenth dealer. The companies involved include dealerships in California, Michigan, Georgia, Illinois, North Carolina, Texas, and Massachusetts.

The FTC charged that the dealerships violated the FTC Act by making false or misleading claims in newspapers, television commercials, and Internet advertisements. Some of the ads promised low prices without disclosing significant fees or deal limitations. Others touted low initial "teaser" payments, without disclosing that the payments would significantly increase after the first two months. Many of the dealers were also charged with violating consumer finance laws, such as the Truth in Lending Act and Consumer Leasing Act, by failing to disclose details about lease and credit related terms in their advertisements.

Agency scrutiny of automobile advertisements is not new. Last September, car dealerships in Maryland and Ohio settled with the FTC, which had charged them with advertising auto deals that were not available for most consumers or even applicable to the models advertised. In March 2012, five dealerships reached settlement agreements with the FTC for deceptive advertising of their loan and financing plans.

These actions underscore the need for automobile dealers to ensure that their advertisements present all material terms "clearly and conspicuously" -- especially those related to price or costs to the consumer. Many of the ads caught in the sweep did include the material terms, but only in very small print, a practice that is likely to draw agency scrutiny.

Given the FTC's recent focus on automobile dealers, ongoing scrutiny seems likely. Automobile dealers -- and other sellers of big ticket items -- should take special care to ensure their advertisements are not deceptive or misleading.

© Arnold & Porter Kaye Scholer LLP 2014 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.


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