AutoNation CEO says misleading promotions hurt reputable dealers

Jackson cheers FTC crackdown on bad ads

AutoNation CEO says misleading promotions hurt reputable dealers

Jackson: "The consumer deserves more."
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AutoNation Inc. CEO Mike Jackson is delighted that the Federal Trade Commission is cracking down on deceptive advertising by dealerships.

"Automotive advertising needs to be regulated in fairness to consumers and to level playing field competition," Jackson, head of the nation's largest dealership group, told Automotive News. "The consumer deserves more."

Many dealers share Jackson's sentiment, saying it is hard to compete against dealers who run deceptive ads. They want their state associations to take a stand against the practice and push for legislation that provides clarity and uniformity in the rules and better enforcement, industry sources say.

"Here in New Jersey, and I think around the country at other associations, we support advertising regulations," said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers in Trenton, N.J. "Our problem is that there aren't clear rules of the road."

'Flat-out lying'


This month nine U.S. dealerships settled with the FTC over charges of deceptive ad practices. The agency warned the industry to expect more scrutiny.

Jackson said, "Most automotive advertising is aggressive, but fair, correct and factual." There's also some that lies in a gray zone and some "that are flat-out lying," he said. "I think the FTC is starting at the lying end" with its enforcement actions.

Deceptive advertising has been a longtime topic of conversation among many dealers in various 20 Groups, said Kevin Cunningham, director of 20 Group Operations for dealership consulting firm NCM Associates in Overland Park, Kan.

"It's a key frustration for them," said Cunningham. "The dealers would like to see the state associations take a formal stance showing they are intolerant of it." They also believe some states need more legislation to clarify laws and enforce them better, he said.

Michigan is one of them, said one dealer in that state who spoke on condition of anonymity. He said authorities do not adequately police deceptive advertising, and it creates a problem for him when a customer shows him a competitor's ad promising a vehicle for a price that he knows he cannot match because it is not a real price.

Jail


Sonic Automotive Inc. President Scott Smith said it is "fantastic" that the FTC cracked down on dealers who run deceptive ads.

"They should stick them in jail for a day, and maybe they'll stop giving the rest of the good dealers who do the right thing a bad name," said Smith. "Frankly, those are dealers who probably don't have a whole lot of staying stamina." Sonic, of Charlotte, N.C., is the nation's third-largest dealership group.

Smith has seen what he called "outlandish" ads.

"'Buy a car, get a car free.' '$89 a month car payments' -- without disclosing you've got to put down $5,000, or it's in small print or at the end of the commercial you hear someone racing through the disclosure," Smith said. "'We can get you in a car for $89 a month.' I can get you in for $49 a month with enough money down. It's just not realistic."

Sonic, AutoNation and Penske Automotive Group Inc. have in-house compliance departments and rely on advertising agencies and, in some cases, third-party venders to monitor advertising compliance.

"We don't leave it up to chance and allow our dealers to randomly place ads," Smith said. "We handle all that stuff semicentrally. We're moving toward central."

Penske's Tony Pordon, executive vice president of investor relations and corporate development, said, "We're constantly looking at our Web site disclosures, our newspaper disclosures and making sure that everything is above board."

Murky rules


But the rules are sometimes murky to dealers. Appleton, who this week became the head of the Automotive Trade Association Executives, which represents executives of state and local dealer associations, said federal and state regulators do not spend enough time working with the industry to articulate the rules and help dealers achieve compliance.

"In New Jersey, we've seen enforcement actions or threatened enforcement actions before there was any real effort by regulators to educate dealers on how to comply," he said.

But AutoNation COO Mike Maroone said following the rules is "not that complex, I promise."

Sonic's Smith errs on the side of caution when in doubt. "My whole thought process: Disclose what you can actually do," he said.

Jackson said it was "appropriate" that the FTC "clearly laid out what they will not accept." Now, he said, "Everybody needs to re-examine their own practices and try to get to a better place."

Amy Wilson contributed to this report.

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

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