There’s no doubt that the right advertising program can make you plenty of money. But as they say, it’s not how much money you make but how much you get to keep that counts. Auto dealers are a favorite target of regulators hunting for advertising violations and are often blindsided by expensive fines, lawsuits and bad publicity. While the various laws and regulations covering automotive advertising can be confusing, it can be helpful to understand how lawmakers view advertising in general and what triggers their wrath.
- It’s all about the big picture. An advertisement as a whole may be misleading although every sentence separately considered is literally true. The key is to make sure your message is clear, truthful, easy to understand, and not subject to multiple interpretations.
- Even though the meaning of statements in an ad seems obvious to you, it may still be considered deceptive. Statements susceptible to both a misleading and a truthful interpretation are typically considered to be misleading by regulators. A good example is when the FTC recently cited a number of dealers for ads stating, “We’ll pay off your trade no matter how much you owe.” While this statement may be technically true, lawmakers are of the opinion that these ads imply that the dealer will buy the trade for the amount the customer owes, regardless of its real value. Advertising is considered deceptive if the ad has a “tendency or capacity to mislead the public” or from “reasonable inferences that may be drawn from an ad.” It is vital to clearly and conspicuously disclose any material facts, including limitations, disclaimers, qualifications, conditions, exclusions or restrictions.
- Disclaimers in themselves won’t always protect against advertising violations. A disclaimer must not contradict, confuse, unreasonably limit, materially modify a principle message, or substantially change the meaning of any advertised statements. Your disclosures should be made in a clear and conspicuous manner to minimize the possibility of misunderstanding by the consumer public. Be sure that all disclaimers are clearly and conspicuously displayed and not buried away in difficult-to-read fine print or a difficult-to-find links on websites.
- Despite your best intentions, you may be held accountable for advertising errors. If an ad is deemed deceptive, an advertiser has liability regardless of whether there was intent to deceive.
- Be aware that advertising laws apply to all forms of advertising, including radio, television, print, electronic, direct mail, flyers, billboards, showroom and other dealership displays, and the Internet (including social media).
- There’s no safety net in the “but everybody does it this way” mindset. The fact that others were, are, or will be engaged in like practices will not be considered a defense in a legal action.
- If 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 enters into the contract of purchase or lease. For instance, in the above example with the “we’ll pay off your trade no matter how much you owe” ads, the dealers were found to be in violation even though they disclose that negative equity is added to the amount financed at the time of sale.
- Regulators frequently cite dealers for advertising violations even though there are no customer complaints. 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.
- Bait & Switch advertising is a hot button with lawmakers and must be avoided. It is unlawful to advertise for sale any vehicle that the dealer does not intend to sell because the true intention is to switch the customer to another vehicle. No customer should be encouraged to not purchase the advertised vehicle, nor should there be any acts attempted by the sales staff to prevent the sale.
- Don’t forget your digital marketing. Websites, videos, email, and even social media are considered advertising mediums and may be targeted by regulators. In fact, the “we’ll pay off your trade…” violations were found on the cited dealers’ websites and YouTube videos by the FTC. Don’t assume that your website provider is utilizing language that is acceptable in your particular state or including all of the required disclosures. Check to determine if all necessary disclosures are present and clearly and conspicuously displayed on the site.
Depending on the dealership, advertising and marketing may be handled by any number of people such as sales managers, Internet staff, or a marketing department. Any employee involved in advertising should be properly trained. In addition, you should never assume that advertising agencies or vendors 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. The primary responsibility for compliance lies with the dealership, not the vendor. According to the law, a dealer has the duty to investigate the accuracy of any statements made in advertising.
If you’re not sure, don’t guess! It makes sense to have your advertisements reviewed, and edited if necessary, by someone knowledge before publication. It may cost a few bucks, but it’s a small price to pay.
Author: Jim Radogna
Jim Radogna is a nationally recognized auto industry consultant specializing in dealership sales and finance department legal compliance. His background includes founding and operating a national compliance consulting firm, Dealer Compliance Consultants, Inc., as well as having spent over 15 years in various dealership management positions .