Dealertrack recently held the latest in a series of webinars about dealer advertising. Entitled “Dealer Advertising: New Media, New Rules, New Enforcements,” the presentation shed light on the current regulatory environment and discussed best practices dealerships should adopt in order to avoid fines and other State and Federal actions for alleged unfair and deceptive advertising. The webinar was a hit, given the current regulatory environment, with hundreds of participants tuning in. As a result, we’d like to open up the conversation here on the Dealertrack blog and in social media by offering a brief FAQ summary of the webinar:
Q: What’s the current regulatory environment for auto dealers?
A: It’s complicated. Dealers have to pay attention to activity at the State and Federal level, or risk being fined. For example, the Federal Trade Commission (FTC) has primary regulatory authority over auto dealers on a federal level based on Section 5 of the FTC Act (1912) which prohibits Unfair and Deceptive Acts and Practices (UDAP). This includes advertising and privacy. Violators of the section could face fines of $16,000 per day, per violation. At the State level, DMVs and Attorney Generals have authority over auto dealers; they publish their own advertising guidelines for dealers in their states. Many State Attorney Generals consider dealer advertising to be “low hanging fruit” for fines and penalties under state UDAP laws.
Q: What’s the attitude and approach of the FTC when it comes to dealer advertising?
A: The FTC believes that deceptive dealer advertising is a “significant problem.” In many new cases brought by the FTC, there were no consumer complaints about the deceptive ads. The FTC found deceptive ads simply by trolling the Internet. The agency also gets complaints and referrals from the Consumer Financial Protection Bureau (CFPB) and other regulators.
Q: What does the FTC consider deceptive and unfair?
A: A representation, omission, or practice that is likely to mislead a consumer acting reasonably under the circumstances. It must be “material,” i.e., affecting the consumer’s decision on purchasing or financing, and may be deceptive if the advertiser does not have a reasonable basis to support the claim. The FTC doesn’t just review specific items within the ad, such as price. It also assesses at the overall impression of the ad. Unfair is a broader standard than “deceptive” and can include essentially any advertising that is likely to cause substantial injury to consumers which is not reasonably avoidable. This can cover things like advertising deals that most consumers will not qualify for based on their credit standing, or other requirements when those limitations are not clearly and conspicuously stated in the ad.
What’s your Question?
As you begin to align important goals and objectives for 2016, consider compliance as a crucial area of change and potential risk. If you have a question, don’t wait until the next webinar – ask Randy right here, in the comments section. Or post your question on Twitter and Facebook with the hashtag #AskRandy. He can’t review your individual ads, but he can provide valuable answers to your questions based on best practices and his unique insight into the regulatory environment.