Tuesday, September 21, 2010

Digital Due Diligence

Before the internet, when there were only phone pops, we learned valuable lessons on how to handle calls, such as selling the appointment, creating urgency, not giving shopping numbers and keeping information close to the vest until the customer showed up. It was good advice then and it may be good advice now. But keep in mind that many customer inquiries tend to come online rather then by phone. While the ultimate goal remains the same – to get the customer into the dealership – the rules for execution have become trickier because online communication creates a permanent written record of all interactions with customers.

In addition, many dealers are now utilizing social media as an easy and affordable way to promote their products and services. It’s important to understand that even though it may not require writing a big check, certain social media postings may be considered advertising and proper care should be taken to avoid legal exposure. As we are painfully aware, there are plenty of federal and state regulations that govern automotive advertising. For instance, social media postings that list vehicle prices, payments, downpayments or drive-off amounts may trigger advertising disclosure requirements.

Here’s an illustration of how an online interaction could potentially come back to haunt you. A few days before this past Labor Day, I saw a posting from a dealer on their Facebook page about a Labor Day weekend special that offered zero drive-off leases. During this time period, several competing dealers ran newspaper advertising on similar lease programs with “no money down, zero driveoff, leave your checkbook at home” and so forth. On closer inspection, many of these ads indicated in the fine print that certain fees were due at signing, such as tax, license, doc fees and acquisition fees.

I logged on to the Facebook dealer’s website to check out the actual ad (there were no disclosures on the Facebook posting other than zero drive off). The ad indicated that the customer was responsible for tax and license. I then contacted the dealer online to inquire whether I had to pay for the tax & license or if it was indeed “zero out of pocket”. The dealer representative responded that yes it was zero down, but since it was the last day of the month, I needed to come in before close of business to take advantage of the special lease.

Now, let’s look at some possible outcomes if a customer decided to go to the dealership that night.

If the customer went to the dealer to lease the car and there was indeed no money down required and they gave her the advertised payment, she would probably leave happy and nothing else would matter.

But, if she showed up at the dealership and they informed her that she had to pay other fees to get the advertised payment, a few other things might happen:

1. She might reluctantly pay the fees or roll them into a higher payment. The salesperson’s closing ratio would go up and his CSI would go down.

2. She might leave and go lease a car from another dealer.

3. She might decide to take the written evidence of the transaction to her friendly neighborhood attorney. This could happen the next day or sometime in the future if she decides that she no longer wants the car.

Here are some potential claims that an attorney might make. First, I wouldn’t be surprised if an aggressive attorney would try to make a case for Unfair and Deceptive Acts and Practices (UDAP) for the dealer rep’s little miscommunication about zero down (remember, the customer has an email from the rep that said there was no money required).

Next, the dealer’s Facebook posting stated that they were having a “Labor Day Weekend” sale, yet the dealer rep claimed (in writing) that the sale was over the Tuesday BEFORE the Labor Day weekend. Another deceptive act?

The attorney might also throw in a few advertising violation claims for good measure, such as that the Facebook posting may have lacked some required advertising disclosures and the disclaimer in the dealer’s website may not have been clear and conspicuous enough to be in compliance.

There’s a good chance that an aggressive lawyer would throw all of those nitpicky claims against the courthouse wall to see what sticks. Plaintiff’s attorneys love UDAPs, they can often get multiple damages and attorney fees if successful.

So, here’s my two cents: Be careful what you say; even more careful what you write and if you communicate with customers, it’s not a bad idea to get some training in legal compliance.


  1. Well said Jim!
    I have to tell you that the car business in Central Illinois is at least 20 years behind when it comes to EVERYTHING: sales process, technology applied to sales, dealer compliance... not even funny the things dealers still get away with over here! LOL

  2. test post. this system for follow up posts is flawed.

  3. PAGE 2 of 3:

    Those with no remedy at hand will FIRST go to mandatory arbitration within the legal system, of which 90 percent will find a resolution.

    The point is, that very very few of these fact scenarios end up in actual punitive damages awarded by a court. And, there are no friendly neighborhood attorneys around that are willing to take this type of case. UDAP and MMWA actions are a very specialized area of law, and, there are NO attorneys that represent clients in this area of law on a contingency basis, but rather, require some form of cash retainer in advance to even review the case. Most consumers who have suffered damages don’t have funds for cash retainer, which is why they fell for this stupid purchasing and financing opportunity advertised by the unscrupulous car dealer to begin with. This fact alone makes my first assessment using the 90/10 rule (concerning those that are willing to avail themselves to the legal system for a remedy) quite conservative.

    In summary, yes, your article is well written. But is uses the same old scare tactics that governmental regulators attempt to use as an effort to gain compliance. We all know this tactic does not produce compliance at the level we hope to achieve, but rather, just continues to support the status quo.

    Take a look at the FTC, which, has not had enforcement of the FTC Buyers Guide rule in over 15 years, and then, it was the first of it’s kind since the inception of the rule. Today, compliance training educators all over the country teach there is a $10,000 violation for every window sticker missing on your lot. Does anyone really think the FTC police are driving down North Main Street this afternoon ?

  4. PAGE 3 of 3:

    Yes, there are a handful of big case out there. But comparatively, they are far an few in between. Further, if you read the actual complaints, those within the automotive industry who can wear an honest and objective hat for must a minute, will admit those dealers deserve the judgments the courts have awarded. Those dealers who have suffered against large awards deserve it. Take a look at Bill Heard in Georgia for a moment. His net-to-gross is so large, are you telling me he couldn’t afford to hire someone with a triple digit salary to focus on ONLY compliance issues and nothing else ? This is just one example, we could go on all day. Take Toyota, 50,000 deceived consumers times $28.00 per consumer, and, well, you do the math. Are you telling me because it was only $28.00 per person that Toyota should get to keep the money ?

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