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CarMax, Asbury, West-Herr Automotive Settle FTC Recall Advertising Charges

December 19, 2016

WASHINGTON, D.C. — CarMax, Asbury Automotive, and West-Herr Automotive Group agreed to settle Federal Trade Commission (FTC) charges that they touted rigorous pre-owned vehicle inspections but failed to disclose that some vehicles were subject to unrepaired safety recalls, the agency announced on Friday.

The proposed consent orders will prohibit the three major auto retailers from making unqualified inspection or safety-related claims about their used vehicles if any are subject to open or unrepaired safety recalls. The commission also announced it has approved final consent orders in similar cases against General Motors, Jim Koons Management, and Lithia which were settled earlier this year.

“Federal law requires that all new cars sold in the United States be free from recalls, but it does not prohibit auto dealers from selling used cars with open recalls. As a result, neither NHTSA nor any other agency has the authority to ban the sale of used cars that have open recalls across the industry,” the FTC said in a statement. “Section 5 of the [FTC Act], however, enable the commission to stop car sellers from engaging in false or misleading advertising practices that mask the existence of open recalls, and we are committed to doing just that.

“As part of this effort, the commission is issuing final orders against General Motors Co., Jim Koons Management CO., and Lithia Motors Inc. and announcing proposed orders against CarMax Inc., West-Herr Automotive Group Inc., and Asbury Automotive Inc.,” the FTC added, in part. “In these enforcement actions, the commission is challenging what we allege are deceptive advertising claims by these companies that highlight the rigorous inspections they perform on their used cars, but failed to clearly disclose the existence of unrepaired safety recalls.”

The FTC’s complaint against Virginia-based CarMax revolves around the retailer’s advertising claims of a “125+ Point Inspection,” and that its cars undergo, on average, “12 hours of renewing — sandwiched between to meticulous inspections.” The complaint also notes a TV commercial touting a team of inspection and reconditioning, which includes a message that appears for three seconds in tiny type at the bottom of the screen that reads, “Some CarMax vehicles are subject to open safety recalls.”

Those recalls, however, included the GM’s key ignition switch defect, as well as the Takata airbag defect, the agency alleged.

AS for Georgia-based Asbury Automotive Group, which also does business as Coggin Automotive Group, and Crown Automotive Group, the FTC alleged in its complaint that the company made claims such as: “Every Coggin Certified used car or truck has undergone a 150-point bumper-to-bumper inspection by certified mechanics. We find and fix problems — from bulbs to brakes — before offering a vehicle for sale.”

Like it did in its complaint against CarMax, the FTC charged the group with failing to adequately disclose in its advertising that some vehicles were subject to open recalls, including one that could cause fuel to leak and the engine to misfire or stall, as well as one that could cause a car to move in an unexpected or unintended direction.

In its complaint against West-Herr Automotive Group, the largest auto group in New York, the FTC cites claims about vehicles backed by the “West-Herr Guarantee” and touting a “rigorous multipoint inspection with our factory trained technicians.” However, the FTC’s complaint alleges that the company failed to properly disclose that some of the vehicles were subject to recalls for defects that could result in serious injury.

Under the proposed consent orders, CarMax, Asbury, and West-Herr are prohibited from claiming that their used vehicles are safe, have been repaired for safety issues, or have been subject to an inspection for safety-related issues, unless they are free of open recalls or the companies clearly and conspicuously disclose that their vehicles may be subject to unrepaired recalls. They must also explain how consumers can determine whether a vehicle is subject to a recall for a safety issue that has not been repaired.

In a commission statement regarding the six auto recall advertising cases, the commission notes that its orders “will help empower consumers to make more informed and safer purchasing decisions in a market that, absent a change in federal law, continues to include cars subject to open recalls.” The commission vote to issue the statement was 3-0.

The commission vote to issue the administrative complaints against CarMax, Asbury, and West-Herr and to accept the consent agreements was 3-0. The FTC will soon publish a description of each consent agreement package in the Federal Register. The agreement will be subject to public comment for 30 days, beginning today and continuing through Jan. 17, 2017. At that time, the commission will decide whether to make the proposed consent orders final.

 

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