Advertising “Rulebook” Is a Result of Deceptive Advertising Practices

 

At some point, we’ve all been guilty of it…embellishing upon the truth, that is. We tend to believe that our little exaggerations or minor untruths won’t catch up with us. We do it in our personal lives when we hype up a good story shared with friends and colleagues, or when we “oversell” a particular item we’re hawking on Craigslist or eBay. When it crosses over into the business realm, however, as many car dealers do in their advertising and marketing campaigns, this practice can come back to haunt you. A recent Attorney General settlement in Arizona reminds us that folks are watching and it’s only a matter of time.
 
Over the course of a two-year period, consumers filed complaints with the Arizona Attorney General alleging that three Steve Coury dealerships engaged in deceptive and misleading advertising. After a two year AG consumer fraud investigation, the Steve Coury dealerships had to write several checks: $86,000 to the AG in civil penalties, $19,800 to the AG for attorneys’ fees, and a total of $9,200 to three victims of the deceptive advertising. It all started in 2006 and ended on March 3, 2010, when the Steve Coury dealerships signed a Consent Order with the AG.
 
The AG claimed that three Steve Coury dealerships violated the Arizona Consumer Fraud Act with deceptive advertising, including:
 
·         Falsely advertising large discounts off the Manufacturer’s Suggested Retail Price (MSRP) on used vehicles when the MSRP was based on new vehicle prices;
 
·         Using contradictory and confusing disclaimers in footnotes buried at the bottom of the page or on separate pages;
 
·         Using “grabbing” headlines that applied only to one vehicle in a sale;
 
·         Falsely advertising that credit approval was guaranteed to all; and
 
·         Using game and contest promotions that required consumers to purchase a car to participate or claim the prize.
 
In addition to writing those checks, the Steve Coury dealerships now have to abide by very rigid advertising and marketing rules. Talk about getting into the weeds…some of the rules are incredibly specific. Here are a few:
 
·         Disclosures, disclaimers and footnotes must be on the same page as the offer they qualify for and in not less than a 10pt font.
 
·         The reference to the disclosure, disclaimer or footnote (“reference”) cannot contain non-sequential reference symbols (e.g. # † ^ * ¥ +).
 
·         The reference located next to the advertised claim must be at least in 12pt font.
 
·         In allused vehicle advertisements, if an offer doesn’t apply to a majority of vehicles, the advertisement must identify the number of vehicles to which the offer applies, and if it’s fewer than four vehicles, the stock number for each vehicle must be included (providing an example is not sufficient).
 
·         MSRP cannot be used as a price comparative or reference price for used cars.
 
·         The terms “emergency,” “public sale,” “official,” “liquidation,” or other terms describing an event of urgent or special status cannot be used, unless true.
 
·         Advertisements cannot claim that inventory was obtained for the special sale unless true.
 
·         No promises of credit approval can be made unless the advertisement includes the material offers for the credit approval and they are placed next to the offer in keeping with the previously stated disclosure placement and font requirements.
 
·         There can be no statement or claim that implies that credit is available to all applicants, including “You are Definitely Approved!”
 
Wow, that’s quite a sampling of the Steve Coury mandated advertising rules, but that’s not it. Yep, there’s more. They also have to comply with some general rules (which, by the way, all dealers should be complying with):
 
·         Do not engage in untruthful or misleading advertising.
 
·         Comply with the state’s advertising guidelines.
 
·         Comply with the state’s Consumer Fraud Act.
 
But wait, there’s more …
 
·         The Steve Coury dealerships must comply with the Better Business Bureau Auto Advertising Guidelines.
 
·         Copies of all direct mail advertisements and Better Business Bureau correspondence must be maintained for a period of two years.
 
·         The Steve Coury dealerships must adopt policies and procedures to implement all of the provisions of the Consent Order and employees must be trained on them on a regular basis (at least annually).
 
·         A summary of the provisions of the Consent Order must be prepared and shared with all employees and vendors that play a part in the advertising and marketing campaigns so that the provisions of the Consent Order are complied with. A copy of the summary must also be provided to the AG.
 
All this sounds like fun, huh? So, what does this mean for other dealers in Arizona, as well as other states? Well, first there are state credit and consumer protection cops (and not just in Arizona) taking note of dealer advertising practices. This isn’t anything new, but these days it’s even more true. Consumers are becoming savvier and with the focus on consumer protection (remember that recent economic crisis we’re still trying to crawl our way out of), consumers are tuned in. Second, sometimes it’s only a matter of time, as the saying goes “before the chickens come home to roost.” This is especially true for violations with respect to advertisements. An advertisement, by definition, is public; and while it seems obvious, public displays of noncompliance are very risky.
 
Patty Covington, is a partner in the Maryland office of Hudson Cook, LLP. She has significant experience in the areas of dealer, credit and privacy law. Patty can be reached at 410-865-5409 or pcovington@hudco.com.
 
 

 

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