CDK's purchase of Auto/Mate may create a major disruption in the dealer management system (DMS) industry. Here is our take. DOWNLOAD
Many complaints and legal actions against auto dealers are the result of the way vehicles are advertised. According to a joint survey by the Consumer Federation of America (CFA), National Association of Consumer Agency Administrators (NACAA), and North American Consumer Protection Investigators (NACPI), the number one consumer complaint has been misrepresentations in advertising or sales of new and used cars.
Advertising violations are also a ripe target for regulators and consumer attorneys. To give you an idea of how dealer advertising is on the radar, consider the opinion published by the New York State Attorney General’s office: “This office's review of current car ads has revealed a widespread pattern of deception and the use of materially false or misleading representations by some dealers. Rather than truthfully informing consumers, all too many ads appear designed primarily to confuse and mislead them. Such unscrupulous dealer ads are costly traps for unwary car buyers and are unfair to those dealers who compete on the basis of forthright and truthful advertising”. You may also recall that in 2007, Bill Heard Chevrolet was faced with a $50 million deceptive advertising lawsuit by the Georgia Governor's Office of Consumer Affairs.
Many dealers run into trouble with their advertising when staff members or outside vendors are not aware of the countless federal and state laws that regulate advertising. Here are some practical tips on how to avoid advertising violations:
• Never assume that advertising agencies or representatives know all the laws and regulations governing advertising compliance. This is particularly true of companies based in other states, such as internet and direct mail providers. State advertising laws vary and the responsibility for compliance lies with the dealership, not the advertising agency.
• Be aware of all advertising that your staff participates in. If your internet manager is advertising online (including social media!) or your used car manager is placing Auto Trader ads, it is important that they are properly trained and that all advertising is inspected before it is run.
• All advertising, whether printed, broadcast, internet or otherwise, should be in plain language, clear and conspicuous and non-deceptive. Deception can result from direct statements in the advertisement or from reasonable inferences that may be drawn from an ad, or from disclaimers that contradict, confuse, unreasonably limit or materially modify a principle message of the advertisement. Deception may also result from the failure to clearly and conspicuously disclose any material facts, including limitations, disclaimers, qualifications, conditions, exclusions or restrictions. Advertising is considered deceptive if “members of the public are likely to be deceived” or the advertisement has a “tendency or capacity to mislead the public”.
• Be sure that everyone understands that Bait & Switch is a commonly-cited advertising offense and must be avoided. The FTC defines Bait & Switch advertising as “an alluring but insincere effort to sell a product or service which the advertiser in truth does not intend or want to sell. Its purpose is to switch consumers from buying the advertised merchandise in order to sell something else, usually at a higher price or on a basis more advantageous to the advertiser.”
• If you are not sure about an advertisement, you should have it reviewed by a qualified professional – it may end up costing quite a bit less than a legal action.
• Be conservative in your advertising and understand that your intent is not relevant as far as the law is concerned. If an ad is deemed deceptive, an advertiser has liability regardless of whether there was an intent to deceive. A dealer has the duty to investigate the accuracy of any statements made in advertising.