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Are Your Pants on Fire?

August 2008, F&I and Showroom - Feature

by Thomas B. Hudson, Esq.

If you’ve ever read any of my articles on advertising, you know that a couple of common dealership solicitation techniques drive me nuts (actually, they are probably advertising company techniques, but more on that in a moment). The ones I really hate are solicitations that are designed to look like correspondence from, or approved by, the government, and ads that offer “special” sales and trade in terms when the actual deals completed during such sales aren’t “special” at all.

In article after article, I’ve warned that those practices are an engraved invitation for an attorney general to bring a charge against the dealer for engaging in unfair or deceptive acts and practices. If any dealers are reading these warnings, they’d better read especially carefully if they are from Arizona.

Arizona Attorney General Terry Goddard announced a $225,000 settlement with a large Scottsdale dealership. The AG’s press release says that the settlement resolves claims of deceptive advertising and sales practices, and requires future advertisements to be clear and not deceptive.

According to court documents, the dealership failed to disclose important terms and conditions of offers advertised in newspapers, through direct mail or on the Internet. In some instances, the dealership included a “[Dealership’s name] discount” as part of the vehicle’s advertised price but did not always give the discount to the consumer. In other cases, the dealership refused to sell advertised vehicles to consumers consistent with the terms of the ads.

The AG groused that “New and used car sales complaints ranked high once again this year in the top 10 complaints filed with my office. This is unacceptable. Arizona consumers should expect truthful advertising from all businesses, including car dealerships, and my office will continue to pursue these complaints until all car dealers understand they must advertise truthfully.”

As is customary in such proceedings, the settlement, in the form of a consent judgment, does not constitute an admission of wrongdoing by the dealership. The settlement requires the dealership to:

n Not engage in false and deceptive advertising and prohibits the dealership from selling vehicles for more than their advertised price.

• Ensure that its ads accurately identify vehicles available for sale, the price of the advertised vehicles and which options are included in the advertised price.

• Ensure it has advertised vehicles in inventory and available for sale, or that a fair substitute is available.

• Stop using ads that appear to include a check or come from a governmental entity.

• Stop using newspaper ads that exaggerate the number of vehicles available for sale.

• Stop using direct mail letters that claim to offer a variety of “special” discounts or programs, but in fact deliver no real benefits to consumers who received them.

• Adopt policies and procedures to implement the specific terms of the consent judgment.

• Provide training to its employees and enact procedures to discipline employees who fail to comply.

• Ensure that all parties involved in its advertising, including independent marketing companies, are aware of the settlement.

Additionally, the settlement provides a mechanism for consumers to file complaints with the Attorney General’s Office for their interactions with the dealership occurring on or after March 1, 2007. The settlement requires the dealership to review the complaints and resolve them according to the terms of the settlement, but the dealership is not necessarily required to pay refunds.

The dealership will pay $225,000 to the Attorney General’s Office for civil penalties, attorney’s fees and costs of investigation. When you consider that the dealership had to pay its own lawyer (we bloodsucking lawyers ain’t cheap), and when you consider the cost to the dealership to create and enforce the advertising procedures that it has agreed to adopt and in management time to deal with this mess, you can bet that the cost to the dealership for this one is pushing half a million.

I said at the beginning of this article that I would get back to the subject of advertising companies. From the car dealer ads and solicitations I see day-in and day-out, most advertising companies don’t seem to know squat when it comes to the laws and regulations that govern dealer ads and solicitations. They offer these programs to dealers, and dealers seem to buy them without any sort of critical review.

That doesn’t excuse the dealers who hire these advertising companies, though. The first rule of dealer ad and solicitation compliance is “IS IT TRUE?” If you’re trying to make your solicitation look like it’s coming from the government, or if you are claiming that just another weekend sale will offer special deals to consumers when you know that it will just be business as usual, then IT AIN’T TRUE.

If your solicitations aren’t true, you can bet that you are a fat target for your Attorney General. You probably don’t need that half million anyway, though.

Thomas B. Hudson, Esq. (thudson@special-finance.com) is the author of several books, available at CounselorLibrary.com. He is also the publisher of Spot Delivery, a monthly legal newsletter for auto dealers, and CARLAW, a monthly report of legal developments in all states for the auto finance and leasing industry. He is also a partner in the Maryland office of Hudson Cook, LLP.

Copyright CounselorLibrary.com 2008, all rights reserved. Based on an article from Spot Delivery. Single-print publication

rights only, to Special Finance Magazine.

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