CDK's purchase of Auto/Mate may create a major disruption in the dealer management system (DMS) industry. Here is our take. DOWNLOAD
The news broke this week about a Louisiana marketing company that has been permanently banned from automobile advertising and marketing in North Carolina. Since Arizona, Iowa, Kentucky, Maryland, Oregon and Pennsylvania joined North Carolina in bringing the case, there will likely be repercussions for the vendor in other states as well.
On the surface, it looks like a shady operator got his just rewards. I agree and I think that’s good news for the auto industry. But let’s look a little further and see how dealers can be affected by these vendors.
This same marketing company was busted by the state of Washington back in 2007. In that case, the dealer ended up paying almost twice the amount in penalties and legal fees as the marketing company did. In addition, the dealer had to sign a Consent Decree with the Attorney General that stated among other things: “Any violation committed after the date of entry of this Consent Decree of any of the injunctive terms of this Consent Decree shall constitute a violation of an injunction for which civil penalties of up to $25,000 per violation may be sought by the Attorney General”. In other words, any advertising missteps this dealer makes will cost it dearly. This injunction is permanent by the way.
So, the shady operator pays a fine and continues business as usual with other dealers in other states. Meanwhile, the dealer pays through the nose, gets his reputation trashed, and has the AG breathing down his neck forever. Just doesn’t seem right.
In a statement about the case, Assistant Attorney General Mary Lobdell said: “Washington dealers need to be upfront and honest in their advertisements and should carefully select the companies they hire to promote their business. All companies that do business in Washington must know and operate in accordance with Washington laws. Both dealers and ad firms can be found in violation of Washington laws if their promotions fail to include all legally required disclosures. Some marketing firms, especially those located in another state, may not be familiar with Washington’s car dealer and consumer protection laws. If these companies use promotions that mislead or deceive interested buyers, both the marketing firm and the dealer may be found in violation of Washington laws.”
It doesn’t surprise me that so many dealerships sign up for these promotions and blindly believe that the vendor is following the law and covering their back. I must confess I was guilty of the same thing back in my dealership days. Perhaps it’s the excitement of fantasizing about how many cars you’re going to sell? I get it – been there, done that.
This post is not meant to villainize vendors. I can attest to the fact that there are plenty of good marketing companies and ad agencies out there that practice due diligence. I work with a number of vendors in reviewing advertisements for compliance before they reach the public. Quite simply, this should not be an option. Dealers should insist that their vendors prove that they are following state and federal advertising regulations every time. It just makes good business sense.