A friend of mine runs a rural, franchise car dealership and he recently shared with me some of the trials and tribulations he encounters when competing with nearby urban dealers. Here’s an example that involves advertising—not his you understand, but the advertising he has to compete with.
“We compete heavily with dealers in a nearby urban market. The prices we’re seeing quoted by some of the larger, urban-area, dealer groups are really, really low. When customers drive to those dealerships, however, they learn that the prices advertised or quoted include all sorts of manufacturer rebates that there is no way all customers would ever qualify for. Examples of such discounts are special deals for recent grads, members of the military, returning lessee, and retirees from various corporations. Some of these programs would be mutually exclusive most of the time (not too many retirees are recent grads, for example).
When we look into the situation, we often find that pricing is handled by a third party vendor. Often, the dealership employees say they hate this sort of tactic, but feel like they have no choice. It seems that the decision to approach pricing like this is often made on a "group-wide" level by the dealer group’s management/corporate leaders. Of course, the corporate folks were not the ones interacting with customers and having to ‘bump’ them when, inevitably, the customer didn’t qualify for the rebate, but I digress.”
His email note arrived at a time when I was trying to help my son with a car purchase. My internet-savvy son was turning up price quotes several hundred dollars less than what I was confident was a pretty bare-bones offer from a dealer friend. I couldn’t figure out what was going. When my dealer friend’s email arrived, though, I had an “ah ha!” moment. This, I said to myself, is what people in the detective business refer to as a clue.
Dealers who engage in such practices need to know that they run the real risk of violating laws and regulations dealing with advertising. Knowingly using two or more rebates to compute a quoted price, without indicating the limitations on the rebates or that some of them can’t be used together could, I believe, be argued to be a “bait and switch” scheme, or an unfair or deceptive trade practice, and would be something that I suspect would set your state’s attorney general drooling with the anticipation of a very large fine.
The dealership shouldn’t expect any protection from the fact that the pricing is being “handled by a third-party vendor,” whatever that may entail. At the end of the day, I guarantee you that the regulators will hold the dealership responsible for all of its pricing decisions.
Just a guess, but I’m pretty confident that this pricing strategy hasn’t been reviewed by counsel. And this is one of those instances in which I’m betting that the dealership won’t have to wait for a consumer complaint to end up in the regulatory crosshairs. Other dealers harmed by this sort of predatory pricing will be perfectly happy to file complaints.
Tom Hudson is the author of CARLAW® II, Street Legal, andCARLAW®, and is the editor/author of the CARLAW® F&I Legal Desk Book, the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers, and the editor in chief of CARLAW®, a monthly report of legal developments in all states for the auto finance and leasing industry. In addition, he is a partner in the law firm of Hudson Cook, LLP. For information, call 410-865-5411, email [email protected], or visit www.counselorlibrary.com.
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