Thursday, March 20, 2014

Key Takeaways from the FTC’s Dealer Advertising Webinar

On March 19th, 2014 two FTC attorneys, Mark Lassman and Carole Reynolds, participated in an NADA-sponsored webinar titled Comply with Federal Advertising Regulations. While much of the information is unchanged from what we’ve seen in the past few months, Mr. Lassman and Ms. Reynolds revealed some additional, and sometimes troubling, revelations that dealers everywhere need to be aware of:
  • Even if a dealership follows their state advertising regulations to the letter, the FTC may bring an action based upon their interpretation of federal advertising guidelines and the net impression your ad gives to consumers. According to the FTC, a customer is not required to “figure out” what the ad terms mean. If the agency feels the ad is confusing in any way, the ad is likely to be considered misleading in their opinion. They cautioned against using industry terms of art in disclaimers that customers may not understand. 
  • Disclosures must be clear and conspicuous to convey the information that qualifies the claim; and must be easily noticed and understood by customers.
  • When you use disclaiming statements remember the “4 Ps":
    Prominence - Can consumers see and read it, or hear it? Small print and rapid fire delivery in TV, radio and website banners should be avoided.
    Placement - Is it where the customer would look? Caution: turned sideways on the ad is to be avoided. 
    Proximity - Is it near the claim it qualifies? Caution: back of direct mail; multiple clicks away is not close. 
    Presentation - Is the wording and format easy for consumers to understand? Caution: avoid industry Jargon, or technical terms; buried in fine print; multiple asterisks; gray or light print; loud music.

  • In Radio and TV Ads, you can limit the required information, but you must include a reference to a toll free number or print ad published at least three (3) days before the radio or TV spot. References to a website for further information do not meet the FTC ACT requirements.
  • When a dealer advertises $0 Down, that means no money out of pocket to take advantage of financing terms as far as the FTC is concerned. Disclaimers to the contrary are not acceptable. 
  • The notion that the term “down payment” and “payments due at signing” are mutually exclusive and somehow OK to say $0 down payment when other upfront payments  fees are due in lease ads is false from the FTC’s standpoint. They made no bones about it; they have and will prosecute dealers who engage in this practice as false advertising since the net impression of the ad is false.
  • The overriding basis for the FTC choosing to bring disciplinary actions is when the net impression an ad has is false even if small print disclaimers are present.
  • They also warned dealers that they, and not their ad agency or media company, will be held liable for advertising violations. 
  • Numerous questions erupted about the “Factory Review and Pre-Approval” being relied upon and the feeling that that absolves the dealer.  The FTC simply stated “Absolutely Not” - the dealer is responsible.
  • They made a point that EVERY AD, EVERY MEDIUM, EVERY DAY can be considered by them to be a separate violation. They stated as an example that if a print ad was copied and published to the dealer’s website and then also put on social media sites, that is three ad violations in their opinion. 
  • FTC remedies can include: cease and desist orders of 20 years duration; equitable relief including rescission, redress, injunctions; frozen assets and sale of assets; bans from business; and civil penalties up to $16,000 per violation. These remedies can be brought against companies and individuals.
  • The FTC may also bring criminal charges for intentional violations.
  • Deceptive appearing claims in ads lead to discovery of other Truth in Lending Act (TILA) claims.
  • In addition to standard advertising mediums, additional areas that are covered include billboards, emails, mobile messages, windows and in-store displays, electronic displays, service area waiting rooms, handouts in parking lots, and auto displays at shopping malls, athletic events, or near colleges. Any media, any place. 
  • Actionable Misrepresentations can occur at any point in the sales process including ads and marketing, training materials, greeting as the customer walks into the dealership, test drives, point-of-sale, finance or lease discussion, add-ons presentation, and can occur in any language.

The FTC attorneys strongly recommended that dealers have their ads reviewed for compliance with both federal and state guidelines by qualified professionals prior to publication. In addition, employees should be trained early and often.

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