The Federal Trade Commission (the “FTC” or “Commission”) and various law enforcement agencies are racing forward with their latest campaign against deceptive advertising, code-named “Operation Ruse Control.” The initiative is a coast-to-coast and cross-border effort by the FTC and state, federal and international law enforcers aimed at deceptive automobile advertisements, adds-ons, financing and auto loan modification services. How far-reaching is Operation Ruse Control, and what sort of advertising practices are grinding the Commission’s gears?
FTC Deceptive Advertising Complaints
Last Thursday, as part of Operation Ruse Control, the Commission proposed to settle disputes with three auto dealers in California, Florida and Alabama, respectively. According to the FTC’s investigation, conducted in coordination with the Los Angeles County Department of Consumer and Business Affairs and the Consumer Protection Division of the Florida Office of the Attorney General, the subject auto dealers allegedly violated certain deceptive advertising provisions of the FTC Act. The Commission’s complaints cite a number of purportedly deceptive advertising practices, including the ad featured above, which advertised used cars for as low as $99, when in fact: (1) this amount was the minimum bid price at a liquidation sale; and (2) an additional $299 in dealer fees was often required.
The California and Florida dealerships in question also allegedly violated the Consumer Leasing Act (“CLA”) by failing to include certain disclosures in connection with their advertisements promoting consumer leases. According to the FTC, these two dealers did not divulge: (1) that the transactions advertised were leases; (2) the total amount due at signing; (3) whether or not a security deposit was required; (4) the number, amount and timing of scheduled payments; and (5) how extra charges might be imposed at the end of lease terms.
Finally, the Commission asserted that the subject dealers in California and Alabama did not include certain disclosures required for advertisements promoting closed-end credit in consumer credit transactions, in violation of the Truth in Lending Act (“TILA”). Specifically, the FTC’s complaint alleges that both dealerships failed to conspicuously disclose: (1) the percentage amount of required down payments; (2) the terms of repayment; and (3) the annual percentage rate, including whether the rate could be increased after lease signing.
As part of the proposed settlements, the auto dealers would be prohibited from misrepresenting the purchase cost or any other material fact relating to the price, sale, financing or leasing of a vehicle. Likewise, the settlement agreements would ban the Florida and Alabama dealerships from offering any deal that is not available to all consumers or with terms that are not clearly and conspicuously disclosed. The proposed orders would also require the dealers to include requisite CLA and TILA disclosures in all future advertisements. These agreements will be subject to public comment through April 27, 2015.
Are Your Ads Deceiving?
As Operation Ruse Control and the above-mentioned FTC enforcement actions confirm, marketers face a wide range of legal risks in connection with their advertising practices. As a top priority, before launching a new advertising campaign, marketers should speak to experienced marketing counsel.