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Dealer Group to Pay $1.4M in Misleading Advertising Case

November 10, 2017 0 Comments

A Southern California-based dealer group has agreed to a $1.4 million settlement with the Federal Trade Commission.

The FTC filed a complaint against the Conant Auto Retail (CAR) Group, alleging its advertisements were misleading to consumers. The dealer claimed the allegations were without merit; however, while admitting to no wrongdoing, it has agreed to settle the case for $1.4 million.
According to the FTC, several of CAR’s dozen Norm Reeves dealerships in California and Florida “violated several consumer-protection laws by leading car shoppers to believe they could finance vehicles for low monthly payments, or lease vehicles with no money down, while failing to adequately disclose associated costs.” The FTC alleged the dealer ran ads despite a 2014 consent agreement prohibiting its dealerships (plus nine other groups) from “misrepresenting the costs of vehicles.” According to the FTC, CAR’s dealers continued running the misleading ads even after signing the agreement.

The FTC’s complaint included over a dozen examples of ads on various media platforms and in email promotions. One such ad was run by an Irvine Norm Reeves dealership in 2015, offering zero percent APR for 60 months; in that case, the FTC said the dealership failed to disclose both the amount or percentage of the down payment, and the full repayment terms.

Another ad from a CAR Group store ran on multiple platforms in 2015 and 2016, boasting “$0 due at lease signing” and “Lease for $159/mo + tax.” Additional required language, while present, was “small, grey, and illegible,” according to the FTC. The ad also failed to disclose whether a security deposit was required and what the number of scheduled payments would be.

In 2015, a Norm Reeves dealership in Huntington Beach, California, sent a marketing email which featured an ad for a new Honda Civic; the ad offered 1.9% APR for 72 months. According to the FTC, however, the email neglected to clarify that the promotion was available only to Tier 1+ credit customers (FICO score over 700), and that the down payment varied, as well as certain other required terms.

“Most consumers do not have a credit score high enough to be considered Tier 1+ and therefore do not qualify for many of Defendants’ advertised offers,” the FTC stated in its complaint.

In addition to the $1.4 million payout, the settlement required the CAR Group to check in with the FTC regularly over the next 20 years to ensure compliance with the FTC’s directives.

Despite agreeing to pay the settlement sum, the group has not admitted fault or liability in the matter, saying in a statement, “The settlement payment was for an amount that was equivalent to the company’s expected defense costs and within range of lower-level FTC/dealer settlements on a per-dealership basis.”

“The FTC made allegations about CAR Group advertising that CAR considered to be without merit,” the statement continued. “The Complaint set forth allegations about minor technical issues in a handful of ads. The CAR Group publishes many thousands of advertisements annually.”

This is not the first time in recent years the FTC has taken issue with what it deemed misleading advertising. In 2014, Billion Auto was required to pay $360,000 in civil penalty fines for advertising violations, and in 2016, the FTC filed a complaint against Southwest Kia of Dallas, alleging the dealership was advertising cars for $179/month but with required terms that were “in print too small to read without magnification.” That case was eventually settled for $85,000.

Do you think the FTC’s regulations for dealership advertising are reasonable or unreasonable? How do you ensure your marketing team knows the rules and remains in compliance, so as to avoid a hefty fine or settlement?

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