Notice follows FTC settlement with 9 dealers

NADA alerts members to review their advertising

Notice follows FTC settlement with 9 dealers

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In the wake of a crackdown by the Federal Trade Commission on deceptive dealership advertising, the National Automobile Dealers Association sent an e-mail to its board late Thursday, urging dealers to review their advertising closely and warning them not to deflect responsibility onto third-party vendors.

The e-mail went to NADA’s 64-member board of directors and to 108 state association heads. The state association heads are expected to deliver the information to their dealer members, an NADA spokesman said.

In the e-mail, NADA’s Bill Fox, chairman of NADA’s regulatory affairs committee, urged dealers to review their advertising, “whether online, in print, or over the air to ensure that it is not misleading, that it includes the required disclosures if applicable, and that those disclosures are clear and conspicuous.”

On probation

The warning follows news that nine dealerships had agreed to settlements with the FTC after being charged with deceptive advertising. The settlements don’t include any monetary damages now, but essentially put the dealerships on probation so that any deceptive ads by the dealerships over the next 20 years will bring potentially hefty fines.

The FTC said it is investigating other cases and that more dealerships will face similar charges.

The FTC’s investigation focused on the sale, financing and leasing of vehicles. It said that third-party vendors who help create deceptive ads could also be subject to liability depending on how involved they were in creating the content.

Where the buck stops

But experts say dealers are ultimately legally responsible for the content of their ads.

NADA’s Fox said in the e-mail: “Dealers should not rely on advertising agencies or similar third parties to ensure compliance, but should consult with legal counsel to ensure compliance with local, state, and federal law.”

The NADA spokesman added that NADA has reminded dealers of their obligations in the advertising area many times, and resources from NADA are available to dealers seeking further guidance.

The dealerships that settled the FTC charges were:

• Norm Reeves Honda Superstore in Cerritos, Calif.

• Honda of Hollywood in Los Angeles

• Nissan of South Atlanta in Morrow, Ga.

• Infiniti of Clarendon Hills in Clarendon Hills, Ill.

• Paramount Kia in Hickory, N.C.

• Fowlerville Ford in Fowlerville, Mich.

• Southwest Kia, which owns New World Auto Imports in Dallas, New World Auto Imports of Rockwall in Rockwall, Texas; and Hampton Two Auto Corp. in Mesquite, Texas

• Two used-only dealerships -- Casino Auto Sales of La Puente, Calif., and Rainbow Auto Sales of South Gate, Calif.

The FTC is also taking action against a 10th dealership, Courtesy Auto Group of Attleboro, Mass.

‘Misrepresentations’

The FTC said the dealerships in this case made several “misrepresentations” in print, Internet and video advertisements that violated the FTC Act, falsely leading consumers to believe they could buy cars for low prices, get low monthly payments through financing and/or make no upfront payment to lease vehicles.

The FTC said one dealership sent out 30,000 mailers to consumers, saying they had won prizes they could collect at the dealership.

But no one won any prize.

You can reach Jamie LaReau at jlareau@crain.com. -- Follow Jamie on Twitter


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