The Federal Trade Commission reached an agreement with two car dealers the agency claimed falsely advertised prices and available discounts for their vehicles. It prohibited the defendants from advertising future prices or discounts unless all qualifications or restrictions are clearly disclosed.
According to the agency’s complaints, Timonium Chrysler of Cockeysville, Maryland, and Ganley Ford West in Cleveland, Ohio, violated Section 5 of the Federal Trade Commission Act with their deceptive Web site and newspaper ads. Ganley’s advertisements touted great deals but failed to mention that the discounts generally applied only to more expensive versions of the vehicles depicted in the ads. For example, one newspaper ad read: “NEW 2013 FORD F-150. $12,000 OFF MSRP!” But the FTC said the deal only applied to a specific version of the truck with an MSRP of $47,000. The terms did not apply to the less expensive models, such as those with an MSRP of $23,670.
On its Web site, Timonium promised “dealer discounts” and “Internet prices” but failed to disclose requirements that purchasers must first qualify for additional rebates. As most failed to qualify, they were left with a higher price than advertised. In one ad, the pricing for a 2013 Chrysler 200 Limited Sedan was promoted as:
Click here to view table.
The math was actually more complicated, according to the agency’s complaint. The discount varied depending on a variety of factors that were not disclosed (being a recent college graduate, a member of the military, or having an account at a particular bank). Even if a consumer managed to meet all of the various requirements, he or she still paid more than the price listed.
Pursuant to the settlement agreements, the defendants are prohibited from advertising discounts or prices unless they clearly disclose any qualifications or restrictions pursuant to the settlement. They include the number of vehicles available at particular prices, the existence, price, value, coverage, or features of any product or service associated with the purchase, and the existence or amount of any discount, rebate, bonus, incentive or price.
The terms of the proposed 20-year deal “are designed to prevent [the defendants] from engaging in similar deceptive advertising practices in the future,” the agency noted. All advertisements and promotional materials must be retained for a five-year period and be made available to the FTC upon request.
To see sample ads challenged by the agency and read the complaints and settlement agreements, click here.
Why it matters: The suits are “part of the FTC’s continuing crackdown on deceptive motor vehicle dealer practices,” according to a press release announcing the cases, which followed a March 2012 action against five national car dealers charged with deceptive advertising about trade-ins. “Buying a car is a huge financial commitment, and people often calculate what they can pay down to the penny,” Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, stated in the release. “They should be able to depend on the dealers to provide truthful information, and they can depend on the FTC to enforce consumer protection laws on the lot.” The case serves as a reminder that all marketers – not just car dealers – clearly disclose all the material terms in an advertisement.