The Key to Steering Clear of the FTC’s Crack Down on Car Dealership Advertisements

By: Ifrah Law

Car dealerships are notorious for running loud, flashy ads with too-good-to-be-true offers for outrageous deals to buy or lease cars.  Some dealerships downplay or even hide the seemingly endless list of qualifications on those offers which render many potential buyers ineligible for the deals, much to the irritation of misled consumers.  The FTC has taken action to stop these misleading practices by continuing its effort to crack down on deceptive advertising among automobile dealerships, which began in 2014 with the FTC’s “Operation Steer Clear,” a nationwide sweep of deceptive car dealership advertising.  The FTC’s efforts in this area have continued, most recently resulting in settlement with two Las Vegas auto dealerships.

Planet Hyundai and Planet Nissan of Las Vegas were the subject of FTC enforcement actions alleging that the dealers’ ads misrepresented the cost to buy or lease a car by omitting critical information or deceptively hiding it in fine print.  For instance, Planet Hyundai advertised a car for sale with “$0 Down Available,” but fine print revealed that a buyer would have to trade in a car worth a minimum of $2,500 or meet other qualifications in order to take advantage of the offer. Planet Nissan’s advertisements ran purportedly reduced prices side by side with former prices which had been struck through (“Was $12,888, Now $9,997”). However, the ads did not adequately disclose the qualifications which buyers had to meet to get those prices. Similarly, the ads touted that the cars were for “Purchase! Not a lease!,” when in fact many of the cars were leases. In both cases the FTC alleged that the prominently advertised prices are not generally available to consumers. The dealerships both entered into consent agreements in which they did not have to admit guilt or pay any fines or penalties, but were obligated to abide by relevant laws and regulations pertaining to deceptive advertising.

Further automobile enforcement efforts may be on the horizon.  In a late July regulatory filing, GM disclosed that it is currently the subject of an ongoing FTC investigation regarding “certified pre-owned vehicle advertising where dealers had certified vehicles allegedly needing recall repairs.”  GM and the FTC declined to comment further, so it is not immediately clear whether the individual dealers were following GM corporate policy when certifying the pre-owned cars in need of recall repairs, or specifically how the ads were allegedly deceptive.

While many of the FTC’s enforcement actions focus on lower-cost products with a large national customer base, such as dietary supplements sold over the internet, these cases serve as a reminder that the FTC’s advertising requirements apply equally to big-ticket items sold locally.  Merchants and service providers of every type, whether operating online or in brick and mortar shops, must ensure that their advertisements adequately disclose all material terms and conditions in a way that is not misleading or deceptive.