The FTC has been cracking down on dealership advertising violations lately—and it can cost your business upwards of 5 or 6 figures if you are found liable. Beyond being against FTC regulations, untruthful or deceitful advertising will hurt your reputation with existing and future customers.
So, how can you make sure your dealership’s advertising captures the attention of prospective customers, but not the attention of the Federal Trade Commission’s (FTC)?
The FTC Follows These Three Rules When Determining Truth In Advertising Violations
What makes advertisements unfair in the FTC’s eyes?
According to the FTC’s Unfairness Policy Statement, an ad or business practice is unfair if:
- It causes or is likely to cause substantial consumer injury which a consumer could not reasonably avoid
- It is not outweighed by the benefit to consumers
How about deceptive?
According to the FTC’s Deception Policy Statement, an ad is deceptive if it contains a statement – or omits information – that:
- Is likely to mislead consumers acting reasonably under the circumstances
- Is “material” – that is important to a consumer’s decision to buy or use the product
What are the penalties for dealerships found running false or deceptive ads?
According to the FTC, the penalties depend on the nature of the violation, but can include:
Civil penalties, consumer redress, and other monetary remedies.
These can range from thousands to millions of dollars. Sometimes dealers have been ordered to give full or partial refunds to ALL consumers.
Cease and desist orders.
These orders can require dealerships to
- stop running the deceptive ad or engaging in the deceptive practice
- have substantiation for claims in future ads
- report periodically to FTC staff about the substantiation they have for claims in new ads
- and pay a fine of $43,792 per day per ad if they violate the law in the future
Corrective advertising, disclosures, and other informational remedies.
Sometimes, advertisers have been required to take out new ads to correct the misinformation conveyed in the original ad, notify purchasers about deceptive claims in ads, include specific disclosures in future ads, or provide other information to consumers.
Dealerships find themselves in the FTC’s and state attorney generals’ crosshairs more often these days.
Why? Because both have stepped up their scrutiny of consumer protection practices.
Protect your dealership from regulatory fines and legal actions with KPA’s F&I compliance solutions. The pressure to stay on top of all these regulations is enormous. We know because we’ve been providing protection for auto dealers for fifteen years.
Online, onsite, and on-call resources deliver a detailed compliance program assessing risk and helping to design and implement policies, programs, and training. These work together to ensure all customer-facing personnel and programs are both accountable and effective.
Limit liabilities and protect your dealership with KPA’s front-end compliance solutions.