I remember the good old days when I was blissfully ignorant about everything except making the next car deal…
Back in the days when I was a dealership general manager, I couldn’t wait for the next Big Sale, Promotion, Mailer, etc., whatever it took to make things happen. I gladly signed up for whatever “Next Big Thing” my boss was willing to pay for. After all, we had to keep the staff pumped up and the customers coming in, right?
Well, since then I’ve learned a thing or two about compliance and now realize that many of the programs we participated in were questionable at best or downright misleading (and thus, illegal) at worst. I never gave those advertisements a second thought because I figured we paid the program vendors a lot of money so they must be legal and proper, right? And even if the ads were improper, the vendor would be responsible, not us, right? Ah, wrong and wrong.
There was one program that we did that still gives me night terrors when I think about it. I was GM at a dealership that was part of a group in California and I got the word from the corporate office that we signed up for a promotion with a company from another state. It went something like this: the company sent out mailers which were simulated newspaper ads with my picture and all kinds of exciting quotes from me about this amazing sale we were putting on. Now the really exciting part was that these ads were mailed to people in hand-addressed envelopes, so they were more likely to open it. When the addressee opened the envelope, he or she found the “newspaper ad” with a Post-it note stuck to it signed by “J”, an apparent friend of theirs who saw the ad and thought they would be interested.
I have to admit - I loved it! I thought this was a great marketing concept. Everyone knows someone with the first initial J, so it had a certain degree of credibility. Of course, a few customers were a bit savvier and called the dealership to express their disgust with our “sleazy tactics”, but I digress.
At any rate, I was excited, the staff was excited, and, not surprisingly, the promotion did quite well. So, what’s the problem?
Well, the ad was “questionable” in all kinds of ways, such as:
• Proclaimed that the dealer “used $20 million from 20 banks to revive the local credit market during this sale” and that we had a “partnership local banks for a special credit and pricing event” – sorry, but we didn’t have any deals with any banks for any amount of money.
• Stated that these “banks” were offering us “preferred terms that our competitors couldn’t match in this market” – yeah, sure…
• 3.9% APR available on certified pre-owned vehicles – too bad we didn’t have any CPO cars…
• Vehicle payments advertised that virtually no one would qualify for: 60 month financing on an 8 year-old car with $29 down and an amount financed of less than $5,000… Good luck with that. (I don’t know, maybe one of those 23 phantom banks that I allegedly hooked up with would have done that kind of a deal?)
As far as I’m concerned, I - and the dealer - dodged a bullet with that ad. The worst part, of course, being the “I” part. My name, my picture and my “quotes” were all over the ad. Was I potentially liable for any violations? Heck yeah!
Advertising is considered deceptive if “members of the public are likely to be deceived” or the advertisement has a “tendency or capacity to mislead the public”. If an ad is deceptive, an advertiser has liability regardless of whether there was intent to deceive. A dealer has the duty to investigate the accuracy of any statements made in advertising. You should never assume that advertising agencies or representatives know all the laws and regulations governing advertising compliance. This is particularly true of companies based in other states, such as internet and direct mail providers. State advertising laws are very stringent and the responsibility for compliance lies with the dealership, not the advertising agency.
Bottom line: Be careful when advertising. If you’re not sure about an advertisement or promotion, it’s a good idea to have an attorney look it over. It’s probably better than trying to dodge those bullets, or worse yet, getting hit by one.
Jim Radogna is the President of Dealer Compliance Consultants, Inc., a San Diego, California training and consulting firm.