FTC Settles Deceptive Advertising Claims against Two Auto Dealers

by Ballard Spahr LLP
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The Federal Trade Commission recently accepted agreements containing proposed consent orders from two car dealers who were charged with deceptive advertising in violation of Section 5 of the FTC Act. The orders are instructive to all advertisers about the FTC’s expectations regarding the disclosure of qualifications to or restrictions on advertised terms.

One of the dealers advertised sizable discounts off the manufacturer’s suggested retail price (MSRP) for certain car models. In its complaint, the FTC alleged that when consumers tried to obtain the advertised discounts, they learned that the discounts were available only on particular versions of the vehicle, often a more expensive version. According to the FTC, the dealer’s failure to disclose that the discounts were not available for all versions of the advertised car models was a deceptive act or practice that violated Section 5.

The other dealer, in addition to advertising sizable discounts off the MSRP for certain car models, advertised an “Internet Price” for those models. The dealer’s advertisements contained an asterisk next to the MSRP intended to direct consumers to information qualifying the offer that appeared elsewhere in the advertisements. This information included statements that all prices needed to be confirmed by the dealer’s Internet department and were only valid through that department, and that not all customers would qualify for all incentives.

The FTC’s complaint alleged that the advertised discounts and prices were generally not available to consumers and were subject to various qualifications or restrictions not specifically mentioned in the qualifying information, such as the consumer having to be in the military or a recent college graduate. The FTC further alleged that in numerous instances, even consumers meeting such qualifications and restrictions could not obtain the advertised discounts and prices. According to the FTC, because the discounts and prices were generally unavailable, the dealer violated Section 5 by advertising such discounts and prices.

The proposed consent orders each have a 20-year term. They require the dealers, in advertisements representing that a discount, rebate, bonus, incentive, or price is available, to disclose clearly and conspicuously all material qualifications or restrictions on a consumer’s ability to obtain those terms and the vehicles available at those terms. The orders prohibit the dealers from making various misrepresentations, including with regard to add-on products and services. The dealers must keep copies of advertisements and related materials for five years.

While the use of footnotes for qualifying information is not directly addressed in the consent orders, a post about the settlements on the FTC's Business Center Blog highlights the risks of such use and stresses the need for advertisers to put qualifiers as close as possible to the information being qualified. This tracks more detailed guidance on qualifications found in the FTC's Advertising FAQ's: A Guide for Small Business and its .com Disclosures document.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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