Since the FTC has been the regulator at the top of our Naughty List this year, it's only fitting that we call attention to the latest action they've taken against yet another Car Dealer. This one involves a $20 Million settlement of a lawsuit that it and the Illinois Attorney General filed against a ten dealership auto group in Illinois. As they've been prone to do lately, the FTC also pursued one of the business leaders in their individual capacity.
What's This Case About?
There's a lot to unpack in the allegations, which all generally fall under Unfair and Deceptive Acts and Practices. The list of allegations includes:
Deceptive Price Advertising and advertising low prices that failed to disclose pre-installed add-ons that the buyer had no choice but to purchase.
Unauthorized charges for "add-ons" for products such as protective coatings, theft protection and GAP coverage without consent, and sometimes failing to provide the products.
Junk Fees such as "certification" and "reconditioning fees/
Fake reviews, and providing incentives for employees and customers to post them.
Destruction of evidence, including pricing documents, in an effort to conceal inflated charges and deceptive acts and practices.
Misleading prize promotions that falsely suggested that recipients had won prizes in an effort to get them to visit the dealership.
Advertising violations, some under Reg Z and others under state law.
Used Car Rule Violations due to failure to provide copies of the Buyers Guides to purchasers of used vehicles.
What's It All Mean?
The settlement amount of $ 20 Million is attention grabbing, but the underlying allegations are pretty consistent with where the FTC has been focused for quite some time. Fake reviews, advertising violations, junk fees, and add-on violations have all been under the FTC's microscope for quite some time. The fact that a senior executive for the company was also brought into the suit is further warning to senior leadership throughout the industry.
It's significant that the Order imposes specific requirements on the companies going forward that are consistent with the FTC's CARS Rule or Vehicle Shopping Rule. Concepts like obtaining express informed consent for all charges and stating the "Offering Price" in any advertisements are already being enforced, which is consistent with the FTC's statements that rather than being new law, the CARS Rule simply codifies existing law. We can anticipate that no matter what ultimately happens with the CARS Rule litigation, these concepts are here to stay.
It's also important to note that the Commissioners voted 5-0 in favor of this action, and industry participants need to understand that no matter the current divided political climate, the FTC Commissioners will take a bipartisan approach when it believes it encounters egregious behavior.
Tip Of the Week
What's this all mean for our readers? It's always a good idea to examine your current compliance program and practices in view of recent regulatory action. Advertising laws, pricing, add-on products and the rest will continue to be aggressively examined at both the state and federal level. Dealers must prioritize their efforts to advertise, disclose and conduct business in a clear and transparent manner. We believe there will be continued focus at both the federal state level on the concepts of express informed consent and offering price, so your programs need to be examined through those lenses.
When was the last time you had a document, advertising and process review performed? If it's been more than a year, it's time to contact Ignite at info@ignitecp.com and get this scheduled for early in 2025.
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