Article

Dealer Advertising - An Easy Target

August 2006, Auto Dealer Today - WebXclusive

by Thomas B. Hudson, Esq. - Also by this author

My handy writer’s style manual says that the plural of Attorney General is “Attorneys General,” not “Attorney Generals.” “Attorneys General” always sounds awkward to me, though, so I’ll just call them “AGs” (although some people say – with good reason – that “AG” stands for “Aspiring Governor”).

Regardless of what you call them, AGs across the country have been hammering car dealers. The most recent target of AGs is dealer advertising. It isn’t a coincidence that AGs from several states have zeroed in on dealer advertising.

Have you been to an industry conference of car dealers lately? NADA, NABD or your state association convention?

Well, guess what? AGs get together too. And when they get together, they do exactly what you do. They talk about what works and what doesn’t work in the enforcement area. And the word is out in the AG community – dealers are violating the law with many, many of their advertisements.

AGs read too, and part of what they read consists of press releases from AGs in other states. So when last year, the Illinois AG announced a $250,000 fine against a dealership in connection with alleged violations in the dealer’s direct mail campaign, you can bet that word of that staggering fine spread to the other AGs like wildfire. If you want proof, consider that the “opening bid” by one state’s AG to settle a dealer advertising claim is $200,000.

What’s a dealer to do? My first answer, as always, is to have your advertisements reviewed by a lawyer familiar with the advertising laws and regulations that apply to whatever kind of advertising you are doing.

Some of those laws and regulations are federal – the Truth in Lending Act and Regulation Z, the Consumer Leasing Act and Regulation M, the Fair Credit Reporting Act, the Magnuson-Moss Warranty Act and the FTC prohibition against unfair or deceptive trade practices all come to mind.

Other laws and regulations apply at the state level. We always check a state’s retail installment sales law, state motor vehicle laws and regulations pertaining to dealers, state laws that prohibit unfair and deceptive trade practices, and laws that regulate advertising generally for sellers of all types of goods and services, and not just motor vehicles. Sometimes advertisements have features that bring into play laws that regulate lotteries and games. When this is the case, we review these laws, which are sometimes hidden in the state’s criminal law or in other strange places, as well.

It isn’t cheap to work through an advertisement, think through all these laws and regulations and correct problems. Many dealers either don’t want to pay for this sort of legal review or can’t afford it. If that describes you, what can you do?

First – leverage everything you can that’s free. Go to the Federal Trade Commission’s Web site and pull down all of their industry advertising guides. Read them carefully, and put them in a binder for later consultation.

Then hit your state dealer association’s Web site. Many state associations do a bang-up job of assembling and presenting resources that are offered by motor vehicle administrations and other state agencies. Read these, and add them to your binder, as well.

Next, get tough with those companies that you buy advertising materials from. Remember, it is your checkbook that the AG asks for when you get hit with that $250,000 fine. Ask the advertising agency for a copy of the legal opinion letter stating that the ad campaign complies with state and federal law (the standard response is, “Say what?”). Don’t sign a contract to buy advertising without reading it carefully and, if you can, get your lawyer to review it. Ask the advertising company if they are willing to indemnify you if their advertisements get you into hot water (again, the standard response is, “Say what?”). Ask for a copy of the advertising company’s financials – if you need to sue them to recover the $250,000 you had to pay the AG, you want to make sure that they are solvent enough to take the hit. And ask if they carry insurance that will cover an AG’s enforcement campaign against you.

Finally, read your own ads. Carefully. When you read each statement in the ad text, ask yourself, “Is that statement literally true?”

If your ad says that you are having a sale of repossessed and off-lease cars, is that statement accurate? Are all the cars repos and off-lease cars, or do only a few meet that description?

If your ad says that “bank representatives will be on site,” is that statement literally true? When the AG’s letter arrives asking you to identify these folks by name, will you be able to do so?

If your ad says that “special buyers” will be at the sale to “give you top dollar for your trade,” ask yourself what is “special” about those evaluating trade-ins and be prepared to prove that the amounts given for trade-ins during the sale was in fact higher than the amounts credited for trade ins before the sale or when the sale is over. You can bet that the AG will ask these questions.

If your ad says that your sale is “factory authorized” (one of my favorites), be prepared to produce the written “factory authorization” that backs up that statement. Don’t have one? Don’t say it in the ad.

Check print ads for “mouse type,” text in a color of print on a background that makes it difficult to read, abbreviations that customers will not understand (tell me how many consumers are likely to know that “WAC” means “with approved credit”). Check radio and TV ads for any attempt to “speed through” or otherwise hide or diminish required disclosures.

In short, make sure your ads tell the absolute, literal truth, because that is the test that the AG will employ in reviewing your ads.

Keep copies of your ads in the same notebook that you keep your other advertising materials in, along with a checklist you used to review the ad. You want to be able to show an inquiring AG that you have a process for making sure that your ads comply with law, and, almost as importantly, that you follow that process.

Vol 2, Issue 6

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