Earlier this year the Federal Trade Commission (“FTC”) began to crack down on several dealerships in South Dakota, North Carolina, Connecticut and West Virginia who were running advertisements which may have violated the Truth in Lending Act. Additionally, there have been numerous civil lawsuits brought by consumers against dealerships throughout the country complaining about dealer ads. Such lawsuits and investigations can be extremely costly. That is why it is important to be sure that your advertisements comply with all state and federal requirements.
A common advertising issue which has led to litigation as well as government investigations involves the promise to “pay-off your trade no matter what you owe.” Numerous courts and the FTC have ruled that this promise can be misleading because many customers believe that the dealership will pay off the difference and that the customer will not have to pay it. In reality, typically the dealerships simply rolls any negative equity the customer has in the trade into the financing for the new vehicle. Therefore, it is not advisable to use this phrase in your advertisements at all, but, if you choose to do so, you should at least confirm that any disclaimers or explanation offered on the offer provide you with sufficient protection from both the FTC and potential civil suits.
Another issue which can lead to litigation is failure to disclose required fees. It is important that any advertisements you run complies with all state and federal law regarding disclosures of fees. Additionally, running advertisements for prices which are only available for certain customers (or for products which are unavailable, or available in limited quantities), can lead to legal concerns in some states if the ads exclude proper disclosures or disclaimers.
Advertising using electronic media has caused some dealerships legal headaches. Dealerships have been sued for sending unsolicited advertisements to customers via text message. In at least one case, a court found in favor of the consumer because the unsolicited text messages caused consumers who did not have texting plans to be charged for each text that the dealer sent. Some dealerships have been forced to litigate regarding e-mail advertisements, which consumers claimed violated anti-spam laws. Still other dealerships have faced lawsuits regarding their advertising practices on social media sites such as Twitter or Facebook.
It never hurts to run new or unique advertising campaigns by your dealership’s attorney, regardless of the medium on which you intend to run it. Even advertisements run on non-traditional media or using social media are generally subject to the same regulations as your television and radio advertisements. Thus, the same concerns you consider for your newspaper or radio spots should be taken into account when sending out a tweet or posting to your Facebook page. Finally, if you find the advertisement confusing or misleading, you should strongly consider modifying the advertisement or at minimum seeking a legal opinion.
The car business is extremely competitive and advertising can be a key to a dealership’s success or failure. While it is important to be aggressive in advertising you must still comply with all state and federal law. It is true that the law on what is acceptable advertising practice will vary from state to state, but the above basic recommendations might help to at least give you some protection from a lawsuit or an investigation from the FTC.