Shortly after I began writing this post, an article popped up on my Google Alerts about another dealer group, accused of deceptive marketing by their state attorney general’s office, having to pony up a six-figure settlement. Not surprising at all, I’m used to seeing these types of articles on a regular basis. Another day, another enforcement action against a car dealer.

In this case, the dealerships were accused of “having advertisements online and in print publications that misrepresented the actual prices of automobiles”, “dealership employees asking consumers to sign incomplete documents with the understanding that they would be completed using the negotiated vehicle price, but later entering a higher price”, and “allegedly charging consumers fees for unwanted or undisclosed warranties and services”. According to the article, the auto group denied any wrongdoing but agreed to the settlement.

But I digress. The above story really isn’t the point of this post, nor is it my intention to try to warn you of the legal dangers of non-compliance with the laws of the land. I, and my peers, write enough about that. Sure, I’m now a compliance consultant, but my ramblings here are based on the things I learned during my 20 plus years in automotive retail - and the realization that I probably had it all wrong.

This post is about Transparency. It’s about the Big Picture. It’s about opening your mind and stopping to think about the absurdity of old school tactics. Not from a legal or ethical mindset, but from a common-sense business perspective.

I realize that “Transparency” is the latest, and perhaps most over-used, buzzword in the car business. But please bear with me for a few moments while I pose a few questions. Hopefully, it will stimulate some “outside the box” thinking.

First, what is the upside of hiding information from your customers?

Sure, you have to do whatever it takes to stay ahead of the competition. Sure, that’s what the legendary automotive sales trainers taught us. Sure, the chances of getting into a legal bind are pretty slim. Sure, everybody else is doing it. Sure, if you give customers too much information they’ll just use it to shop you. Sure, there are ways to “manage” your online reputation, even if you have some unhappy customers. I get all that.

But – Big Picture Time – is the “anything it takes to make a deal” mentality really a sensible way to do business in today’s world? Do you really think this will lead to customer satisfaction and retention? Do you really believe that customers will continue to put up with this type of behavior forever?

Here’s how I look at it: Every time you…

Post a misleading ad, or

Charge a customer more than the advertised price, or

Lie to a customer about a vehicle being in stock, or

Present a foursquare with inaccurate numbers in order to confuse a customer, or

Present “packed” payments, or

Fail to truthfully disclose a vehicle’s history, or

You’re not completely honest and upfront with your customers

…there are some things you might want to consider:

1. You may be breaking the law – but it’s only illegal if you get caught, right?
2. What you’re doing may be an unethical business practice – but customers have no loyalty and you’re just trying to make a buck in a fiercely competitive marketplace, right?
3. You may be pissing off customers (or potential customers) – but “ya gotta have haters, right”?
4. You’re gambling with your future - this is an unsustainable way of doing business in the modern world and your continued success is greatly at risk.

Now you may be perfectly comfortable rolling the dice on number 1 and not care a lick about numbers 2 or 3, but what’s your answer for number 4?

I challenge you to think about it. Just think about it. Unfortunately, I didn’t when I worked in dealerships – I was a faithful practitioner of the old school ways.

Now, I realize that you may feel that this post is just more nonsense from an ex-car-guy-turned-consultant who doesn’t get it - and you may be right. Only time, and customer sentiment, will tell. But you may still want to ask yourself just how long are customers going to put up with business as usual?

Let’s face it; consumers have access to much more information, and choices, than they ever did. You can hate the internet and all its information. You can hate the idea of “transparency”. You can hate all the regulations that dealers have to contend with. You can hate the consumer advocates. You can hate the media and all of its anti-dealer sensationalism. But guess what? None of it is going away. The “But We’ve Always Done It This Way” mentality just doesn’t hold water anymore.

Now, I’m not a believer that the internet is going to somehow take over car buying. I totally agree that dealerships are, and will continue to be, the primary way that customers will purchase vehicles for a long time to come. But remember this; while customers may always choose to do business with dealerships, they don’t have to choose to do business with your dealership.

One final question: Are you a true professional who is ready, willing and able to succeed in the new world or are you hoping that things will never change?

In my book, transparency is not a dirty word, but complacency is.

Good luck and good selling.

Shortly after I began writing this post, an article popped up on my Google Alerts about another dealer group, accused of deceptive marketing by their state attorney general’s office, having to pony up a six-figure settlement. Not surprising at all, I’m used to seeing these types of articles on a regular basis. Another day, another enforcement action against a car dealer.

In this case, the dealerships were accused of “having advertisements online and in print publications that misrepresented the actual prices of automobiles”, “dealership employees asking consumers to sign incomplete documents with the understanding that they would be completed using the negotiated vehicle price, but later entering a higher price”, and “allegedly charging consumers fees for unwanted or undisclosed warranties and services”. According to the article, the auto group denied any wrongdoing but agreed to the settlement.

But I digress. The above story really isn’t the point of this post, nor is it my intention to try to warn you of the legal dangers of non-compliance with the laws of the land. I, and my peers, write enough about that. Sure, I’m now a compliance consultant, but my ramblings here are based on the things I learned during my 20 plus years in automotive retail - and the realization that I probably had it all wrong.

This post is about Transparency. It’s about the Big Picture. It’s about opening your mind and stopping to think about the absurdity of old school tactics. Not from a legal or ethical mindset, but from a common-sense business perspective.

I realize that “Transparency” is the latest, and perhaps most over-used, buzzword in the car business. But please bear with me for a few moments while I pose a few questions. Hopefully, it will stimulate some “outside the box” thinking.

First, what is the upside of hiding information from your customers?

Sure, you have to do whatever it takes to stay ahead of the competition. Sure, that’s what the legendary automotive sales trainers taught us. Sure, the chances of getting into a legal bind are pretty slim. Sure, everybody else is doing it. Sure, if you give customers too much information they’ll just use it to shop you. Sure, there are ways to “manage” your online reputation, even if you have some unhappy customers. I get all that.

But – Big Picture Time – is the “anything it takes to make a deal” mentality really a sensible way to do business in today’s world? Do you really think this will lead to customer satisfaction and retention? Do you really believe that customers will continue to put up with this type of behavior forever?

Here’s how I look at it: Every time you…

Post a misleading ad, or

Charge a customer more than the advertised price, or

Lie to a customer about a vehicle being in stock, or

Present a foursquare with inaccurate numbers in order to confuse a customer, or

Present “packed” payments, or

Fail to truthfully disclose a vehicle’s history, or

You’re not completely honest and upfront with your customers

…there are some things you might want to consider:

1. You may be breaking the law – but it’s only illegal if you get caught, right?
2. What you’re doing may be an unethical business practice – but customers have no loyalty and you’re just trying to make a buck in a fiercely competitive marketplace, right?
3. You may be pissing off customers (or potential customers) – but “ya gotta have haters, right”?
4. You’re gambling with your future - this is an unsustainable way of doing business in the modern world and your continued success is greatly at risk.

Now you may be perfectly comfortable rolling the dice on number 1 and not care a lick about numbers 2 or 3, but what’s your answer for number 4?

I challenge you to think about it. Just think about it. Unfortunately, I didn’t when I worked in dealerships – I was a faithful practitioner of the old school ways.

Now, I realize that you may feel that this post is just more nonsense from an ex-car-guy-turned-consultant who doesn’t get it - and you may be right. Only time, and customer sentiment, will tell. But you may still want to ask yourself just how long are customers going to put up with business as usual?

Let’s face it; consumers have access to much more information, and choices, than they ever did. You can hate the internet and all its information. You can hate the idea of “transparency”. You can hate all the regulations that dealers have to contend with. You can hate the consumer advocates. You can hate the media and all of its anti-dealer sensationalism. But guess what? None of it is going away. The “But We’ve Always Done It This Way” mentality just doesn’t hold water anymore.

Now, I’m not a believer that the internet is going to somehow take over car buying. I totally agree that dealerships are, and will continue to be, the primary way that customers will purchase vehicles for a long time to come. But remember this; while customers may always choose to do business with dealerships, they don’t have to choose to do business with your dealership.

One final question: Are you a true professional who is ready, willing and able to succeed in the new world or are you hoping that things will never change?

In my book, transparency is not a dirty word, but complacency is.

Good luck and good selling.

Since the news broke earlier this week about the FTC citing 5 auto dealers for deceptive advertising, I’ve been asked a number of questions by folks in the industry. Here’s my take on the situation:

What’s the big deal about advertising that the dealership will pay off a trade-in no matter what the customer owes? It’s a true statement.

The problem is not so much what the ads say, but what they don’t say. As far as regulators are concerned, if an ad doesn’t explicitly state that any negative equity will be added to the loan balance, it’s deceptive. While it may seem obvious to us that the customer is responsible for negative equity, some consumers (and lawmakers) apparently think that these advertisements imply that the dealer will buy the trade for the amount the customer owes, regardless of its real value.

Some basic principles that regulatory agencies consider are 1) advertising is considered deceptive if the advertisement has a “tendency or capacity to mislead the public”; 2) if an ad is deemed deceptive, an advertiser has liability regardless of whether there was intent to deceive and; 3) statements susceptible to both a misleading and a truthful interpretation will likely be construed to be deceptive.

We always fully disclose negative equity on our contracts and leases, why isn’t that good enough?

If regulators feel that the first contact with a consumer is secured by deception, a violation may occur even though the true facts are made known to the buyer before he or she enters into a purchase or lease. Since statements and representations in advertisements are evaluated based on their tendency to deceive, no actual harm to consumers need occur for there to be a violation.

Dealers have been using this type of advertising for years – did the FTC recently change the rules?

No, these types of incomplete statements about paying off trade-ins have been considered deceptive for a long time by both federal and state regulators, so this is nothing new. Bear in mind that the fact that others were, or are, engaged in like practices is not considered a defense.

As to why the Feds decided to take action against dealers now - your guess is as good as mine. The FTC has been threatening to step up enforcement against dealers for the last year or so, but to be honest; I’ve been a bit skeptical. The Feds have traditionally gone after bigger fish and left car dealers to state regulators. So, while this action may just be a flash in the pan, it can also be a major game changer.

How do we avoid this happening to us? I mean, if the regulators decide to go on a witch hunt, they’re going to get you one way or another.

I disagree. Again, the violations the FTC cited are not new or surprising to anyone who understands advertising regulations. If you have ever read or listened to my ramblings in the past you know that I have a tendency to harp on two issues - Education and Due Diligence.  Please forgive me for once again repeating myself, but this is important:

Protect yourself by doing the following:

• Ensure that any member of your staff involved with advertising is properly trained in all applicable regulations.
• Never assume that your ad agencies or vendors know, or are following, the rules. If you write the check, you’re responsible.
• If you’re not sure, don’t guess! Have your advertisements reviewed, and edited if necessary, by someone knowledge before publication (this should done for all of your advertising including websites, YouTube, social media, etc.). It may cost a few bucks, but it’s a small price to pay.

Since the news broke earlier this week about the FTC citing 5 auto dealers for deceptive advertising, I’ve been asked a number of questions by folks in the industry. Here’s my take on the situation:

What’s the big deal about advertising that the dealership will pay off a trade-in no matter what the customer owes? It’s a true statement.

The problem is not so much what the ads say, but what they don’t say. As far as regulators are concerned, if an ad doesn’t explicitly state that any negative equity will be added to the loan balance, it’s deceptive. While it may seem obvious to us that the customer is responsible for negative equity, some consumers (and lawmakers) apparently think that these advertisements imply that the dealer will buy the trade for the amount the customer owes, regardless of its real value.

Some basic principles that regulatory agencies consider are 1) advertising is considered deceptive if the advertisement has a “tendency or capacity to mislead the public”; 2) if an ad is deemed deceptive, an advertiser has liability regardless of whether there was intent to deceive and; 3) statements susceptible to both a misleading and a truthful interpretation will likely be construed to be deceptive.

We always fully disclose negative equity on our contracts and leases, why isn’t that good enough?

If regulators feel that the first contact with a consumer is secured by deception, a violation may occur even though the true facts are made known to the buyer before he or she enters into a purchase or lease. Since statements and representations in advertisements are evaluated based on their tendency to deceive, no actual harm to consumers need occur for there to be a violation.

Dealers have been using this type of advertising for years – did the FTC recently change the rules?

No, these types of incomplete statements about paying off trade-ins have been considered deceptive for a long time by both federal and state regulators, so this is nothing new. Bear in mind that the fact that others were, or are, engaged in like practices is not considered a defense.

As to why the Feds decided to take action against dealers now - your guess is as good as mine. The FTC has been threatening to step up enforcement against dealers for the last year or so, but to be honest; I’ve been a bit skeptical. The Feds have traditionally gone after bigger fish and left car dealers to state regulators. So, while this action may just be a flash in the pan, it can also be a major game changer.

How do we avoid this happening to us? I mean, if the regulators decide to go on a witch hunt, they’re going to get you one way or another.

I disagree. Again, the violations the FTC cited are not new or surprising to anyone who understands advertising regulations. If you have ever read or listened to my ramblings in the past you know that I have a tendency to harp on two issues - Education and Due Diligence.  Please forgive me for once again repeating myself, but this is important:

Protect yourself by doing the following:

• Ensure that any member of your staff involved with advertising is properly trained in all applicable regulations.
• Never assume that your ad agencies or vendors know, or are following, the rules. If you write the check, you’re responsible.
• If you’re not sure, don’t guess! Have your advertisements reviewed, and edited if necessary, by someone knowledge before publication (this should done for all of your advertising including websites, YouTube, social media, etc.). It may cost a few bucks, but it’s a small price to pay.

Keeping the lawyers at bay used to be a whole lot easier for dealerships. Unfortunately, new technology brings new challenges. A recent high-profile lawsuit involves a large dealer group named in a class-action lawsuit for allegedly failing to honor a text message opt-out request.  The suit, launched by a former employee, is seeking damages of at least $500 for each violation. While this may seem like yet another frivolous lawsuit by a disgruntled former employee, the potential for liability to this dealer group is substantial. Several recent text message cases have resulted in multi-million dollar settlements. For instance:

Twentieth Century Fox - $16 million class-action settlement ($200/ phone number)

Simon & Schuster - $10 million class-action settlement ($175/ phone number)

Timberland Company - $7 million class-action settlement ($150/ phone number)

Text (SMS) marketing is subject to a number of federal and state restrictions and the rules are extremely confusing. These regulations can be much more difficult to deal with than telemarketing or email regulations - primarily because many consumers are charged for text messages and the government feels that they should be afforded additional protection against unwanted solicitations. In many cases, the consumer must opt-in (give express permission) before you can legally send them a text message, even if you have an existing relationship with them.

Here are some things you should know before launching a text marketing campaign:

1. You can’t send a commercial text message (solicitation) to a phone number that’s on the national “Do Not Call” (DNC) list (subject to the “established business relationship” and other provisions of the national DNC rules).
2. You can’t send a commercial text message to a phone number that is on your company-specific DNC list.
3. You can’t send any text message whatsoever to a cell phone number – including sales pitches, service reminders, and communications with current customers - using an “automated dialer system” unless you have the consumer’s prior express consent.  This may include computers used to send automated text messages (yours or your vendors).
4. In some instances, a text message may also be considered an email and must comply with all of the standard CAN-SPAM requirements (contains your physical mailing address, cost-free opt-out mechanism, etc.). A text message will be considered an email if is sent to an email address – that is, if it has an internet domain name after the "@" symbol (for example: sending a message from your computer to a mobile carrier, such as 10digitmobilenumber@txt.att.net).
5. The CAN-SPAM Act also prohibits sending commercial e-mail messages to wireless devices without prior permission. So, no commercial text message that is deemed to be an email may be sent to a wireless device without express prior authorization. Merely having an "established business relationship" with the recipient is not enough.

Confused yet? Here are some suggestions to help protect yourself against legal challenges:

Consult your company-specific DNC list before sending a text message.

Consult the national DNC list and consider whether your messages are based on an "established business relationship," which may provide an exception from the national DNC compliance.

Determine whether your delivery meets the CAN-SPAM Act’s "email" definition, and if so, whether you have complied with the CAN-SPAM disclosure and opt-out requirements.

Put a process in place to ensure that all opt-out requests are honored quickly and permanently.

Develop an employee policy regarding text messaging and educate your staff on proper procedures.

Appoint an in-house compliance coordinator to monitor text messaging by both employees and vendors.

Consider instituting a policy of ALWAYS obtaining recipients’ express prior authorization before sending text messages, regardless of the circumstances or method of delivery.

Always consult knowledgeable legal counsel before launching a text marketing campaign.

 If you use an outside vendor to administer your text marketing campaigns, NEVER assume that they know all the rules and regulations - run it by your legal team first. If you’re writing the check, you’re responsible.

I know - it’s mind-boggling how difficult it can be to deal with these regulations. But just remember - it only takes one consumer (or one employee) to get the legal ball rolling, and it’s certainly not difficult to find a lawyer who’s ready, willing, and able to sue a car dealer.

Keeping the lawyers at bay used to be a whole lot easier for dealerships. Unfortunately, new technology brings new challenges. A recent high-profile lawsuit involves a large dealer group named in a class-action lawsuit for allegedly failing to honor a text message opt-out request.  The suit, launched by a former employee, is seeking damages of at least $500 for each violation. While this may seem like yet another frivolous lawsuit by a disgruntled former employee, the potential for liability to this dealer group is substantial. Several recent text message cases have resulted in multi-million dollar settlements. For instance:

Twentieth Century Fox - $16 million class-action settlement ($200/ phone number)

Simon & Schuster - $10 million class-action settlement ($175/ phone number)

Timberland Company - $7 million class-action settlement ($150/ phone number)

Text (SMS) marketing is subject to a number of federal and state restrictions and the rules are extremely confusing. These regulations can be much more difficult to deal with than telemarketing or email regulations - primarily because many consumers are charged for text messages and the government feels that they should be afforded additional protection against unwanted solicitations. In many cases, the consumer must opt-in (give express permission) before you can legally send them a text message, even if you have an existing relationship with them.

Here are some things you should know before launching a text marketing campaign:

1. You can’t send a commercial text message (solicitation) to a phone number that’s on the national “Do Not Call” (DNC) list (subject to the “established business relationship” and other provisions of the national DNC rules).
2. You can’t send a commercial text message to a phone number that is on your company-specific DNC list.
3. You can’t send any text message whatsoever to a cell phone number – including sales pitches, service reminders, and communications with current customers - using an “automated dialer system” unless you have the consumer’s prior express consent.  This may include computers used to send automated text messages (yours or your vendors).
4. In some instances, a text message may also be considered an email and must comply with all of the standard CAN-SPAM requirements (contains your physical mailing address, cost-free opt-out mechanism, etc.). A text message will be considered an email if is sent to an email address – that is, if it has an internet domain name after the "@" symbol (for example: sending a message from your computer to a mobile carrier, such as 10digitmobilenumber@txt.att.net).
5. The CAN-SPAM Act also prohibits sending commercial e-mail messages to wireless devices without prior permission. So, no commercial text message that is deemed to be an email may be sent to a wireless device without express prior authorization. Merely having an "established business relationship" with the recipient is not enough.

Confused yet? Here are some suggestions to help protect yourself against legal challenges:

Consult your company-specific DNC list before sending a text message.

Consult the national DNC list and consider whether your messages are based on an "established business relationship," which may provide an exception from the national DNC compliance.

Determine whether your delivery meets the CAN-SPAM Act’s "email" definition, and if so, whether you have complied with the CAN-SPAM disclosure and opt-out requirements.

Put a process in place to ensure that all opt-out requests are honored quickly and permanently.

Develop an employee policy regarding text messaging and educate your staff on proper procedures.

Appoint an in-house compliance coordinator to monitor text messaging by both employees and vendors.

Consider instituting a policy of ALWAYS obtaining recipients’ express prior authorization before sending text messages, regardless of the circumstances or method of delivery.

Always consult knowledgeable legal counsel before launching a text marketing campaign.

 If you use an outside vendor to administer your text marketing campaigns, NEVER assume that they know all the rules and regulations - run it by your legal team first. If you’re writing the check, you’re responsible.

I know - it’s mind-boggling how difficult it can be to deal with these regulations. But just remember - it only takes one consumer (or one employee) to get the legal ball rolling, and it’s certainly not difficult to find a lawyer who’s ready, willing, and able to sue a car dealer.

Chances are, since you’re reading this post, your dealership or company is involved in social media. That’s good - it’s hard to imagine how difficult it will be moving forward for organizations that have not embraced social networking. Although Social Media is relatively new (and certainly exciting), its meteoric growth has unfortunately caught the early attention of the legal powers-that-be.

Despite the widespread use and misuse of social networking at work, 45 percent of all businesses still do not have a social media policy. Many of the policies that companies are using do not adequately address potential legal issues. Regulators have been bringing complaints against companies arising from their social media activity, thus, highlighting the need for companies to demonstrate that they are exercising due diligence to promote legal and ethical conduct in the context of social media activity.

Not surprisingly, plaintiff’s attorneys have also jumped on the bandwagon. Companies are being sued regularly by employees and others based on social media use. Beyond legal risks, employees can harm a company’s reputation by disseminating controversial or inappropriate comments regarding the employer or its business activities.

There are a number of legal considerations that every company should be aware of when establishing their social media policies and procedures, such as social media use in employment decisions; posting of online reviews, testimonials and endorsements; ‘fake’ and paid-for reviews; advertising on social media; potential overtime claims; harassment, discrimination and defamation claims; copyright and privacy issues.

It's more important than ever to craft a policy that's both practical and legally defensible. You can protect yourself by insisting that participants in your social media programs comply with the law and training them how to do it. The Federal Trade Commission specifically says these steps may limit potential liability and will be considered in any prosecution. According to FTC guidelines, “The Commission agrees that the establishment of appropriate procedures would warrant consideration in its decision as to whether law enforcement action would be an appropriate use of agency resources. The Commission is not aware of any instance in which an enforcement action was brought against a company for the actions of a single ‘rogue’ employee who violated established company policy that adequately covered the conduct in question.”

So, if you have a social media policy in place, it may be time to dust it off and re-evaluate it. If you don’t have a policy, it’s time to get started.

Chances are, since you’re reading this post, your dealership or company is involved in social media. That’s good - it’s hard to imagine how difficult it will be moving forward for organizations that have not embraced social networking. Although Social Media is relatively new (and certainly exciting), its meteoric growth has unfortunately caught the early attention of the legal powers-that-be.

Despite the widespread use and misuse of social networking at work, 45 percent of all businesses still do not have a social media policy. Many of the policies that companies are using do not adequately address potential legal issues. Regulators have been bringing complaints against companies arising from their social media activity, thus, highlighting the need for companies to demonstrate that they are exercising due diligence to promote legal and ethical conduct in the context of social media activity.

Not surprisingly, plaintiff’s attorneys have also jumped on the bandwagon. Companies are being sued regularly by employees and others based on social media use. Beyond legal risks, employees can harm a company’s reputation by disseminating controversial or inappropriate comments regarding the employer or its business activities.

There are a number of legal considerations that every company should be aware of when establishing their social media policies and procedures, such as social media use in employment decisions; posting of online reviews, testimonials and endorsements; ‘fake’ and paid-for reviews; advertising on social media; potential overtime claims; harassment, discrimination and defamation claims; copyright and privacy issues.

It's more important than ever to craft a policy that's both practical and legally defensible. You can protect yourself by insisting that participants in your social media programs comply with the law and training them how to do it. The Federal Trade Commission specifically says these steps may limit potential liability and will be considered in any prosecution. According to FTC guidelines, “The Commission agrees that the establishment of appropriate procedures would warrant consideration in its decision as to whether law enforcement action would be an appropriate use of agency resources. The Commission is not aware of any instance in which an enforcement action was brought against a company for the actions of a single ‘rogue’ employee who violated established company policy that adequately covered the conduct in question.”

So, if you have a social media policy in place, it may be time to dust it off and re-evaluate it. If you don’t have a policy, it’s time to get started.

It was bound to happen. The tremendous growth of digital marketing and social media was an invitation for government regulation. For instance, the Federal Trade Commission recently updated its truth-in-advertising guidelines, which were last revised in 1980, to address the commercialism of the Web. Federal and state regulators are taking the position that social media is not a loophole for deceptive marketing practices and are actively enforcing and cracking down on social media deception. Proper social media ethics are now a matter of law, not just personal preference.

Faking Reviews

The FTC’s updated Endorsement and Advertising Guidelines require companies to ensure that their posts are completely accurate and not misleading, and planting or allowing fake reviews is a violation. The Guidelines are extremely broad and can apply to anyone writing reviews on rating sites, web sites or promoting products through social media sites, including blogs.

There are several companies out there that offer seemingly quick and easy ways to improve your ratings on review sites. Be careful! A Dealership in Texas suffered devastating reputation damage because of the review-posting practices of a company they hired. A customer discovered that suspicious “reviewers” were writing 5-star reviews about all kinds of businesses and dealerships across the nation on the same day. This debacle was uncovered in October of 2010, yet news stories continue to show up on the dealer’s page one search results.

While the above case may be an example of a dealer who unfortunately hired the wrong vendor, an area of real concern is the activity of a company’s own employees. The FTC recently charged a California marketing company with deceptive advertising after it found that the company’s employees were posing as ordinary consumers posting positive reviews online.

Dealers may face liability if employees use social media to comment on their employer’s services or products without disclosing the employment relationship. The FTC requires the disclosure of all “material connections” between a reviewer and the company that is being reviewed. These connections can be any relationship between a reviewer and the company that could affect the credibility a consumer gives to that reviewer’s statements, such as an employment or business relationship. So if employees, friends, family or vendors post reviews to prop up a dealership’s online reputation, they must clearly disclose any relationship they have with the company. In addition, all reviews must be an honest opinion based on a real experience. Reviewers must never endorse a product or service that they have not used personally or create any other form of false endorsement. It’s all about transparency and full disclosure.

Besides the obvious potential damage to a dealer’s reputation, failure to follow these regulations can result in substantial penalties. In recent actions, the New York Attorney General fined a cosmetic surgery company $300,000 for ordering its employees to write fake reviews of its face-lift procedure and the FTC ordered a company marketing instructional DVDs to pay $250,000 for fake reviews posted by the company's affiliate marketers. The FTC has indicated that companies are fully responsible and liable for all inappropriate actions of their employees, their vendors, and any advocates they recruit. Reviewers may also be held personally liable for statements made in the course of their endorsements.

Paying For Reviews

The practice of offering a free oil change or gas card to a customer in exchange for a good survey has long been frowned upon by manufacturers. Because there are no factory gatekeepers when it comes to online ratings, it may seem tempting to offer customers an incentive to post a positive review.  The good news is that you can if you want to; the not-so-good news is that the regulations require that any reviewer provided with any form of compensation such as free services, rewards, incentives, promotional items, gifts, samples, or review items, must fully disclose the source and nature of any compensation received.

So, if you pay for reviews and the reviewers fail to disclose their compensation, you may face liability. This is an area where it’s easy to get caught and besides the legal danger, your reputation will likely take a big hit.

Advertising on Social Media Sites

The wisdom of trying to “sell” on social media sites by posting inventory, prices, or payments is an ongoing debate, but the fact remains that many dealers are engaged in this activity in some form. While I have no opinion on the relative merits of whether to “sell or not to sell” on social media, it’s important to note the potential implications of these types of activities.

Despite the fact that social media tends to be a low-keyed, casual type of communication, advertising regulations don’t go away. In fact, The Federal Trade Commission recently announced that it was updating its document Dot Com Disclosures: Information About Online Advertising. The primary focus of the document, which was first issued in 2000, is to inform advertisers that consumer protection laws and the requirement to provide clear and conspicuous disclosures applies to the online world in addition to the offline world.

So, in a nutshell, if inventory is posted or prices/payments are quoted on social media it’s likely that the posts will be deemed to be advertisements and will be subject to state and federal disclosure and truth in advertising regulations. Lack of space is no excuse either. Even if you’re advertising on Twitter and limited to 140 characters, you must include a clear link to any necessary disclosures. A good rule of thumb is to have any information that could possibly be construed as advertising reviewed by upper management or a qualified professional before it is posted.

Social Media Policy

Social media applications such as blogs, social networking, and video sharing have soared in popularity so it’s important that dealers control the information that’s coming out of their business. Policies and procedures should be put in place to spell out how employees are expected to conduct themselves within social media.  A social media policy can help take the guesswork out of what is appropriate for employees to post about a company to their social networks.

There are a number of potential legal issues with employees’ use of social media that should be addressed such as the danger of possible privacy, harassment, discrimination or defamation claims. Beyond legal risks, employees can harm a company’s reputation by disseminating controversial or inappropriate comments regarding the employer. However, employer restrictions on the use of social media can be tricky. The National Labor Relations Board (NLRB) recently issued a complaint against an Illinois dealership, alleging that the dealership unlawfully terminated an employee for making critical comments about the dealership on Facebook. While some unprofessional and inappropriate conduct may not be protected, the intersection of social media and the NLRA is an evolving area of the law.

The best way to protect your dealership from legal trouble is by establishing formal social media policies for your staff. Companies often get in the most trouble when they fail to train their employees about appropriate social media use and disclosure. To prevent this from happening, it’s a good idea to create a written social media policy and training program for your company and carefully monitor social media use.

It was bound to happen. The tremendous growth of digital marketing and social media was an invitation for government regulation. For instance, the Federal Trade Commission recently updated its truth-in-advertising guidelines, which were last revised in 1980, to address the commercialism of the Web. Federal and state regulators are taking the position that social media is not a loophole for deceptive marketing practices and are actively enforcing and cracking down on social media deception. Proper social media ethics are now a matter of law, not just personal preference.

Faking Reviews

The FTC’s updated Endorsement and Advertising Guidelines require companies to ensure that their posts are completely accurate and not misleading, and planting or allowing fake reviews is a violation. The Guidelines are extremely broad and can apply to anyone writing reviews on rating sites, web sites or promoting products through social media sites, including blogs.

There are several companies out there that offer seemingly quick and easy ways to improve your ratings on review sites. Be careful! A Dealership in Texas suffered devastating reputation damage because of the review-posting practices of a company they hired. A customer discovered that suspicious “reviewers” were writing 5-star reviews about all kinds of businesses and dealerships across the nation on the same day. This debacle was uncovered in October of 2010, yet news stories continue to show up on the dealer’s page one search results.

While the above case may be an example of a dealer who unfortunately hired the wrong vendor, an area of real concern is the activity of a company’s own employees. The FTC recently charged a California marketing company with deceptive advertising after it found that the company’s employees were posing as ordinary consumers posting positive reviews online.

Dealers may face liability if employees use social media to comment on their employer’s services or products without disclosing the employment relationship. The FTC requires the disclosure of all “material connections” between a reviewer and the company that is being reviewed. These connections can be any relationship between a reviewer and the company that could affect the credibility a consumer gives to that reviewer’s statements, such as an employment or business relationship. So if employees, friends, family or vendors post reviews to prop up a dealership’s online reputation, they must clearly disclose any relationship they have with the company. In addition, all reviews must be an honest opinion based on a real experience. Reviewers must never endorse a product or service that they have not used personally or create any other form of false endorsement. It’s all about transparency and full disclosure.

Besides the obvious potential damage to a dealer’s reputation, failure to follow these regulations can result in substantial penalties. In recent actions, the New York Attorney General fined a cosmetic surgery company $300,000 for ordering its employees to write fake reviews of its face-lift procedure and the FTC ordered a company marketing instructional DVDs to pay $250,000 for fake reviews posted by the company's affiliate marketers. The FTC has indicated that companies are fully responsible and liable for all inappropriate actions of their employees, their vendors, and any advocates they recruit. Reviewers may also be held personally liable for statements made in the course of their endorsements.

Paying For Reviews

The practice of offering a free oil change or gas card to a customer in exchange for a good survey has long been frowned upon by manufacturers. Because there are no factory gatekeepers when it comes to online ratings, it may seem tempting to offer customers an incentive to post a positive review.  The good news is that you can if you want to; the not-so-good news is that the regulations require that any reviewer provided with any form of compensation such as free services, rewards, incentives, promotional items, gifts, samples, or review items, must fully disclose the source and nature of any compensation received.

So, if you pay for reviews and the reviewers fail to disclose their compensation, you may face liability. This is an area where it’s easy to get caught and besides the legal danger, your reputation will likely take a big hit.

Advertising on Social Media Sites

The wisdom of trying to “sell” on social media sites by posting inventory, prices, or payments is an ongoing debate, but the fact remains that many dealers are engaged in this activity in some form. While I have no opinion on the relative merits of whether to “sell or not to sell” on social media, it’s important to note the potential implications of these types of activities.

Despite the fact that social media tends to be a low-keyed, casual type of communication, advertising regulations don’t go away. In fact, The Federal Trade Commission recently announced that it was updating its document Dot Com Disclosures: Information About Online Advertising. The primary focus of the document, which was first issued in 2000, is to inform advertisers that consumer protection laws and the requirement to provide clear and conspicuous disclosures applies to the online world in addition to the offline world.

So, in a nutshell, if inventory is posted or prices/payments are quoted on social media it’s likely that the posts will be deemed to be advertisements and will be subject to state and federal disclosure and truth in advertising regulations. Lack of space is no excuse either. Even if you’re advertising on Twitter and limited to 140 characters, you must include a clear link to any necessary disclosures. A good rule of thumb is to have any information that could possibly be construed as advertising reviewed by upper management or a qualified professional before it is posted.

Social Media Policy

Social media applications such as blogs, social networking, and video sharing have soared in popularity so it’s important that dealers control the information that’s coming out of their business. Policies and procedures should be put in place to spell out how employees are expected to conduct themselves within social media.  A social media policy can help take the guesswork out of what is appropriate for employees to post about a company to their social networks.

There are a number of potential legal issues with employees’ use of social media that should be addressed such as the danger of possible privacy, harassment, discrimination or defamation claims. Beyond legal risks, employees can harm a company’s reputation by disseminating controversial or inappropriate comments regarding the employer. However, employer restrictions on the use of social media can be tricky. The National Labor Relations Board (NLRB) recently issued a complaint against an Illinois dealership, alleging that the dealership unlawfully terminated an employee for making critical comments about the dealership on Facebook. While some unprofessional and inappropriate conduct may not be protected, the intersection of social media and the NLRA is an evolving area of the law.

The best way to protect your dealership from legal trouble is by establishing formal social media policies for your staff. Companies often get in the most trouble when they fail to train their employees about appropriate social media use and disclosure. To prevent this from happening, it’s a good idea to create a written social media policy and training program for your company and carefully monitor social media use.