| Compliance Alert

What's new: On October 8, the Federal Trade Commission (FTC) announced a settlement to resolve allegations that a dealership group in Florida misled consumers through illegal advertising and "add-on" practices. The settlement imposes compliance reporting, monitoring, and recordkeeping requirements. Because the FTC did not bring the case jointly with the Florida State Attorney General, the agency was unable to obtain a monetary penalty. However, the FTC may impose civil penalties of $53,088 per violation if the dealership group fails to comply with terms of the settlement.

Why it matters: This settlement follows the FTC's March 13 announcement that it sent 97 letters to dealerships warning of potentially illegal advertising practices. The FTC stated that "the agency is dedicated to ensuring that consumers only pay the advertised price for products and services, and are not subject to undisclosed fees, hidden charges or other illegal conduct." The recently released Automobile Industry Pricing Transparency: FAQs also said, "the FTC is committed to ensuring that the price consumers see in advertising is the actual price they will pay."

Tell me more: The FTC alleged that, after the dealership group received a warning letter in March, the dealership group continued to exclude mandatory non-government fees from its advertised price, such as a reconditioning fee for vehicle preparation and a "loyalty fee" for customers who had not purchased from the dealership before. The FTC also alleged that the dealership group sent mailers to consumers that they had won prizes, such as vehicle discounts, that the dealership did not honor.

The FTC also alleged that the dealership group advertised prices reflecting additional rebates and discounts not available to all consumers, inflated government charges, and otherwise increased the price without explanation. It was also alleged that the dealership group did not let the consumer review the paperwork to purchase the vehicle until the purchase was completed.

The settlement requires the dealership group to advertise the total price of a vehicle clearly and conspicuously as the most prominently displayed price in any disclosure. The total price of a vehicle is the maximum total price, including all mandatory fees or charges a consumer must pay for the vehicle, excluding charges a federal, state, or local government requires the consumer to pay.

The settlement also addresses third-party advertising. The dealership group will not violate the order so long as it provides a third party with the total price, requests that the third party prominently display it, and takes all reasonable steps within its control to ensure the third party does so.

FTC settlements are only between the party and the FTC and are not an admission of guilt.

What's next: Dealers should carefully review the recent enforcement actions with an attorney familiar with federal, state, and local laws governing vehicle advertising, sales and financing, as well as with their dealership operations personnel to determine appropriate compliance measures.

Go deeper:

• Compliance Alert: Federal Trade Commission Warns 97 Dealerships of Potential Violations of Advertising Laws
• Compliance Alert: FTC Chair and Bureau of Consumer Protection Director Address Dealer Advertising
• Compliance Alert: FTC Announces Settlement and $3 Million Civil Penalty Against Dealership
• Compliance Alert: FTC Announces Settlement Against Dealership for Charging Undisclosed Fees
• A Dealer Guide to Federal Advertising Requirements (will be updated to reflect FAQs)