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That’s perhaps exactly what the FTC tried to avoid by bringing two new auto disclosure enforcement actions late last week. Both actions seek to enforce existing orders, though in the one instance the parties agreed to settle while in the other the parties will have their day in court. The FTC has been coming down hard on auto dealers of late and these two cases are no exception.
Both cases focused on the need for and adequacy of disclosures regarding automobile sale, leasing, and rebate offers. According to the FTC’s complaints, the defendants failed to adequately disclose certain terms and conditions including the following:
- A lease offer was limited to only a very narrow class of customers
- That an offer was a lease, not a sale and required a $5000 down payment
- That an advertised sale price was after a $2000 down payment
- That an advertised monthly payment was only available if you traded in a particular type of vehicle.
How bad were the disclosures? Click here and see if you can read this one.
It’s worth noting, however, that the FTC did not just challenge the prominence of disclosures that made the advertised deal seem much less appealing. The FTC also challenged ads which made required disclosures but allegedly did so inadequately. For example, an ad was challenged that promised a monthly payment of $459 but failed to adequately disclose that the payment was at 1.99% APR for 75 months. Another challenged ad promised a 0% APR but allegedly failed to adequately disclose that the monthly payments would amount to $16.67 per month per $1000 financed.
Finally, there are two other cautionary tales worth telling here. First, all FTC orders contain a provision requiring the retention of certain records which some companies may be less diligent toward than the more substantive provisions. However, in both cases, the FTC included a count alleging that the companies had failed to maintain adequate records as required under their orders. Second, in the one matter the FTC named in its complaint multiple entities that were not parties to the initial order, including the media company that produced the ads. The FTC alleged, however, that they had received notice of the prior order and had been in active concert or participation in the alleged violations of the order. In this case the nonparty defendants shared common officers with the original party defendant, but the case serves as a reminder that the FTC does not feel bound to only seek civil penalties against named parties in orders.
So to paraphrase the words of Simon and Garfunkel, “slow down, you move too fast, you got to make the disclosure last.”
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