Mazda North American Operations has agreed to pay state and federal penalties of $5.25 million to settle allegations of deceptive advertising.
The Federal Trade Commission and 24 states had accused Mazda of violating a February 1997 federal order to change its lease advertising.
Mazda said it was surprised by the latest sanctions. The company said it had changed its lease commercials in response to the 1997 order, and thought it was meeting FTC requirements. The case shows how important it is for companies to keep in close touch with regulators to make sure they comply with the law.
'There certainly was no intention on our part to violate the order, and we have complied fully with the investigation,' said Jay Amestoy, a Mazda spokesman.
The focus of the probe was the company's TV campaign. Mazda had dropped claims the FTC considered flagrantly misleading, such as 'zero down payment' or 'penny down payment.' And the company's commercials made all the required disclosures, such as the total up-front cost of leasing, the security deposit and the number, amount and timing of scheduled payments.
But, according to the FTC:
1. The disclosures were not prominent enough.
2. The type vanished too quickly from the screen.
3. The disclosures were presented against a cluttered background that made them difficult to see.
In the 1997 order, the agency said disclosures must be presented 'clearly and conspicuously.' But the FTC did not provide specific guidelines, such as how big the type should be or how long it should remain on the TV screen.
'We don't have guidelines because we don't want to impair the creativity and flexibility of advertisers with a performance standard,' said David Medine, the chief attorney for the FTC's Bureau of Consumer Protection.
Mazda's ad agency was FCB Worldwide, which lost the account soon after doing these ads.
In 1997, the FTC ordered Mazda and seven other automakers to spell out up-front charges and key payment terms in lease ads. The FTC would not disclose whether it is investigating any of the other seven companies for violating orders.