How 2 stores settled FTC bad-ad cases
They're spending now to avoid penalties later
Hire lawyers. Change Web site providers. Put every ad under the microscope. Those are some of the steps two dealerships have taken since settling charges with the Federal Trade Commission alleging deceptive advertising.
This month, Don White's Timonium Chrysler-Dodge- Jeep-Ram near Baltimore and Ganley Ford West in Cleveland concluded settlements they reached last year with the FTC stemming from allegations that they falsely advertised prices or discounts.
Measures they have implemented in the past year have cost time and money, but the cost of slipping up would be higher: Under the settlement, if they fail to comply at any point over the next 20 years, they could face a fine of up to $16,000 each day a deceptive ad runs.
"It's for 20 years that the FTC monitors my compliance," says Andrew White, vice president of Timonium, in Cockeysville, Md. "You have to be more careful that you're adhering to all the rules they set forth, which is why I'm not going to push the edge of the envelope."
The settlements are part of an FTC crackdown on dealer advertising that began nearly two years ago and has broadened in recent months. In March 2012, the agency settled with five dealers that it had accused of running deceptive ads. Late last year the FTC settled with Timonium and Ganley Ford West. Last month nine more stores agreed to settle charges, and the agency warned that it wouldn't let up.
"We have many other investigations in the pipeline," Jessica Rich, director of the FTC's Bureau of Consumer Protection, said last month. "This is a priority for the FTC."
The FTC says Timonium's Web site advertised specific dealer discounts and Internet prices but failed to disclose that consumers would have to qualify for rebates to get the promoted savings, the FTC said.
White says his store has been compliant since the settlement. But he says the FTC should do a better job of educating dealers on the specific rules.
"We don't agree with their position that the advertising was deceptive," White says. "We were following all state rules. The state of Maryland says you just have to say, 'All rebates included.' The FTC position is the customer should be able to clearly look at it, somewhere in the proximity of the price, and see which specific rebates are within the pricing."
To do that, White had to hire a Web site provider and pay about $2,000 to program a Web page to include the variable disclosure next to the price and add a link to take customers to a page of rebate rules. He cited legal fees as well among the costs of the compliance effort; he wouldn't give the total amount, but says it was not "exorbitant" because he chose to settle with the FTC instead of challenging the allegations.
White says he has stopped mentioning prices in TV and radio commercials: "I stay away from advertising $1,000 off this car because I don't want to fight the disclosure laws. I just didn't want to get into it."
The FTC accused Ganley Ford West Inc. of advertising that vehicles were available at specific discounts. But those discounts were available only on more expensive models of the advertised vehicles. The dealership's lawyer, Steve Dever, said in a statement it was "an oversight and a regrettable incident."
Ganley Ford West, part of Ganley Auto Group, has put in place a compliance services group to advise vendors and employees. A full-time compliance officer reviews all ads and coordinates publishing requirements and standards with all ad agencies for print, Internet, radio and TV.
"We had to educate the outside advertising agency that handles this store and make them aware of all guidelines, then designate a specific individual to review all advertising prior to publishing," Dever says.
Dever says this review process applies to every dealership within Ganley Auto Group, which has 23 stores and ranks No. 35 on the Automotive News list of the top 125 U.S. dealership groups with retail sales of 17,516 new vehicles in 2012.
"The essence of our objective is to provide advertisements that fairly and accurate depict the terms and conditions of the sale," Dever says. "We hope that this isolated incident, involving a single store, will never occur again."
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