LOS ANGELES -- Dealers tired of competing with unscrupulous retailers pitching too-good-to-be-true bargains are cheering the Federal Trade Commission's recent crackdown on deceptive dealer ads.
But compliance experts warn that all dealers should take a hard look at their own marketing efforts and their vendors' actions because the FTC remains on the prowl. Agency investigators can bring enforcement actions quickly, even without a formal complaint from consumers.
"The FTC has people trolling the Internet, looking at newspapers, going into social media sites," Randy Henrick, associate general counsel for Dealertrack Inc., said in a February Webinar with dealers about the FTC's crackdown. "They're affirmatively looking for stuff that they think is bad so they can regulate by enforcement."
Among the practices in the FTC's cross hairs: ads that misrepresent vehicle prices, monthly payments and lease drive-off costs; improperly advertised lease details and financing terms; and bogus sweepstakes designed to get customers into the showroom.
Paul Metrey, chief regulatory counsel for the National Automobile Dealers Association, issued a statement urging dealers to be cautious when hiring advertising vendors and to make sure an attorney reviews ads before publication.
Rob Cohen, president of Auto Advisory Services, an advertising compliance consultancy in Tustin, Calif., says the volume of weekly compliance requests from his clients has doubled since the FTC began its crackdown in January under the banner Operation Steer Clear.
While used-car dealers more frequently veer into questionable advertising territory, Cohen says, new-car dealers aren't always Boy Scouts.
"Even in the new-vehicle world, there's an occasional bad player that tries to gain a competitive advantage," Cohen said. "That puts pressure on other dealers who say, 'Well, look. They're doing it and they're killing us. Why can't we do it?' My standard response is you never know when lightning is going to strike."
The FTC's nationwide enforcement sweep targeted 10 dealerships in six states over alleged deceptive advertising practices. Nine of those dealerships agreed to 20-year settlements barring them from deceptive advertising. The settlements allow the FTC to monitor all the dealerships' ads for deceptive or misleading messages and impose penalties of $16,000 for each violation.
Two more dealerships reached settlement agreements with the FTC in early February.
But dealers say not everyone has gotten the message. "Even in my little area here, the compliance is so underenforced," says David Basha, a Gainesville, Ga., dealer with Kia, Nissan and Mitsubishi franchises. "There's so little oversight in what dealers can say and print, and now, put on the Internet."