1. Dealer Compliance In a
Digital Age
Best Practices For Avoiding Fines,
Lawsuits, and Reputation Damage

2. What’s Changed?
• New Technology
• Regulators with More Teeth
• Consumerism
Six Areas Where Dealers Are
Getting Blindsided:
• Online Advertising
• Online Reviews
• Social Media
• Contests and Sweepstakes
• Text Message Marketing
• Online Privacy

3. Advertising Online
In March 2012, the Federal Trade Commission cited 5 dealers around the country
with advertising violations
Was this a flash in the pan or a game-changer for dealers?

4. What was wrong with the ads?
• The problem may not be what the ads say, but what they don’t say. Lawmakers
feel that these ads imply that the dealer will buy the trade for the amount the
customer owes, regardless of its real value.
So a few dealers got unlucky - What makes this a potential game-changer?
• The ads were found on dealer websites and YouTube. The FTC staff was actively
looking online for dealer violations.
How were advertising violations uncovered in the past?
• Consumer complaints
• An unlucky mailbox
Is it easier to get caught with digital?
• Where does your traditional advertising show up? TV ads? Print ads? Mailers?
Were there consumer complaints on these ads?
• Apparently not, but…
• No actual harm to consumers need occur for there to be a violation.
Were these dealers trying to pull a fast one on their customers?
Probably not. But, according to the government, if an ad is deemed deceptive, an
advertiser has liability regardless of whether there was intent to deceive.

5. These types of ads have been around forever, haven’t they?
Why did the FTC making such a big deal of it?
• The Feds have traditionally gone after bigger fish and left car dealers to state regulators.
These cases are the first of their kind brought by the FTC.
• The Dodd-Frank Consumer Protection Act enhanced the FTC’s existing authority over
motor vehicle advertising, sales and lease practices .
• State AGs can now enforce FTC Act.
• Said David Vladeck, Director of the FTC's Bureau of Consumer Protection. "The Federal
Trade Commission is constantly on the lookout for potentially deceptive ads, and brings
actions to stop them when appropriate."
• Federal enforcement leads to more local enforcement…Politics…
• Iowa Attorney General's Office assisted in the investigation of this matter.
• AG comments to FTC, “Complaints to the States about motor vehicle dealer practices
traditionally rank among the top complaint categories by quantity among all consumer
complaints received annually. Given what is at stake, and given the prevalence of some
harmful retail auto sales and lease practices, the Attorneys General joining in this
comment welcome the FTC’s enhanced authority and look forward to continuing our
long-time working relationship with the FTC in this important area. Together, we can do
even more to ensure a fair and competitive retail automobile marketplace.”

6. Didn’t some of the ads have a disclaimer?
• Yes, apparently some of the advertising included the disclosure: “Negative equity
applied to new loan amount.”
• The disclosures were not enough to save these dealers. The FTC hasn’t offered
any guidance on what type of disclosures might make this type of advertising
compliant.
• Don’t rely on general disclosures to keep your advertisements compliant.
• Disclaimers must not contradict, confuse, unreasonably limit or materially
modify a principle message of the advertisement.
What if there’s not enough room for a disclaimer (banner ad, tweet, etc.)?
• You have to MAKE room – FTC’s Dot Com Disclosures addresses these issues.

7. What specific laws did the ads violate?
• It’s not really clear. Many state regulations are very specific, but not this one.
• In order to be in violation, the ad doesn’t have to run afoul of any specific
regulation. Just because your state doesn’t list extensive ad regulations, doesn’t
mean you’re less likely to be cited.
Some advertising regulatory standards:
• Deception may also result from the failure to clearly and conspicuously disclose
any material facts, including limitations, disclaimers, qualifications, conditions,
exclusions or restrictions.
• Statements susceptible to both a misleading and a truthful interpretation will
likely be construed to be deceptive.
• The fact that others were, or are, engaged in like practices is not considered a
defense.

8. Isn’t it pretty obvious that the negative equity is going to be added to the price? How
stupid are these consumers?
• Advertising is considered deceptive if “members of the public are likely to be deceived” or
the advertisement has a “tendency or capacity to mislead the public”. A VERY LOW BAR.
But we always disclose the negative equity on the contract or lease, so why is it deceptive?
• According to regulators, if the first contact with a consumer is secured by deception, a
violation may occur even though the true facts are made known to the buyer before he or
she enters into a purchase or lease.
Isn’t it up to our vendors to get this stuff right?
• The responsibility for compliance lies with the dealership, not the advertising agency. A
dealer has the duty to investigate the accuracy of any statements made in advertising.
Never assume that your ad agencies or vendors know, or are following, the rules. If you
write the check, you’re responsible.
Who handles advertising in your dealership?
• Are they trained?
• Consider having your advertisements reviewed, and edited if necessary, by someone
knowledge before publication.

9. DOT COM DISCLOSURES
The FTC is in the process of revising its online advertising disclosure guidelines known as
“Dot Com Disclosures” to address technological advancements and marketing developments
that have emerged since the FTC first issued the guidelines in 2000.
The new guidance will re-emphasize that the same consumer protection laws apply to
marketers whether they operate online or not. Here’s what they’re looking at:
• Disclosures on social media platforms and mobile devices – including when they are used
in commercial texting.
• What terms must be disclosed in mobile location-based ads?
• Effective and accessible privacy disclosures on mobile devices.
• Disclosure requirements for hyperlinks, jump links, hashtags, click-throughs, layered
disclosures, icons, and other similar options.
• FTC recently published a guide for truth in advertising and privacy for mobile apps.
“Whether it’s what you say on a website, in an app store, or within the app itself, you
have to tell the truth,” the publication advises.
BOTTOM LINE – They don’t care where you advertise, you’d better do it right!

10. Advertising Compliance - Websites
• Don’t assume that your website provider is utilizing language that is acceptable in your
particular state or including all of the required disclosures.
• Check to determine if all necessary disclosures are present on your site. For example,
“advertised prices exclude tax, government fees, etc.
• Be sure that all disclaimers are clearly and conspicuously displayed and not buried away
in a difficult-to-find link elsewhere on the site.
• If payments, downpayments or interest rates are advertised, make sure that all of the
proper Truth in Lending and state disclosures are included.
• Ensure that lease programs are properly disclosed. Many factory national lease programs
contain generic information that may not be sufficient or appropriate in your state.
• Some states require that vehicle history, such as prior rental or demonstrator, is disclosed
on vehicle advertisements. Does your website provide a way to include these disclosures?
• Ensure that vehicles are promptly removed from the website after they have been sold.
Some sites are linked to the dealer’s DMS and will remove sold units automatically, while
others require vehicles to be removed manually. Sold units should always be removed
promptly to avoid potential bait and switch advertising claims.

11. Online Reviews
Florida AG’s office sued a Jacksonville car dealership for alleged violations of Florida’s consumer
protection law, including the posting of the allegedly false reviews on the Internet. The lawsuit seeks
restitution for harmed consumers, civil penalties of up to $15,000 per violation, attorneys’ fees and
costs, and injunctive relief.
• The FTC requires companies to ensure that their posts are completely accurate and not
misleading, and planting or allowing fake reviews is a violation. Several companies fined.
• Reviewers must never endorse a product or service that they have not used personally or
create any other form of false endorsement.
• Dealers may also face liability if employees or vendors use social media to comment on
the company’s services or products without disclosing the employment or business
relationship. The FTC has indicated that companies are fully responsible and liable for all
inappropriate actions of their employees and their vendors.
• Regulations also require that any reviewer provided with any form of compensation for
posting a review must fully disclose the source and nature of any compensation received.
So, if a dealer gives away free oil changes or gas cards for reviews and the reviewers fail to
disclose their compensation, the dealership may face liability.
• Fake reviews violate the Terms of Service for Google and others and could result in being
banned or having reviews removed. Sound familiar?

12. Social Media Legal Considerations
Regulators have been bringing complaints against companies arising from their
social media activity and companies are being sued regularly by employees and
others based on social media use.
Social Media use in employment decisions
• When a job candidate is the subject of a social media search there’s a possibility
that the search will reveal information that would be off limits on a job
application or interview such as age, race, religion, disability, or other protected
characteristics. Access to this type of information may open the door to a
discrimination claim.
• “Lifestyle Discrimination Laws” that prohibit discrimination based on such factors
as tobacco or alcohol use, sexual orientation, or political affiliation.

13. Potential wrongful termination claims by employees
• The NLRB went after a Chicago dealership for firing a salesman over a derogatory
Facebook posting.
Potential overtime claims
• Allowing or encouraging employees to contribute to dealer-hosted social media
outside of regular work schedules may lead to overtime claims for non-exempt
employees.
Harassment, discrimination and defamation claims
• Employers may face liability when employees use social media to make
discriminatory statements, racial slurs, or sexual innuendos directed at co-
workers. For example, a worker could file a sexual-harassment suit after a
manager repeatedly tries to "friend“ her on Facebook.
• Could also face liability for defamation when employees use social media to
disseminate rumors, gossip, or offensive false statements about others.
Invasion of privacy claims
• How does the hiring manager obtain access to the candidate's page?

14. Improper disclosure of protected information
• Employees may reveal, either inadvertently or intentionally, proprietary or
confidential information on a blog or social networking site.
CAN-SPAM compliance on social networks
• A U.S. District Court ruled in March 2011 that the federal CAN-SPAM Act applies
beyond traditional e-mail messages, including messages sent by commercial
social networking sites.
• Advertising messages to individuals (such as direct messages, messages to an
individual’s social media “inbox”, or massages posted directly on a person’s wall,
home pages or news feed) may apply.
Consumer privacy issues
• Employees must be conscientious regarding any Personally Identifiable
Information (PII) that is collected.
• Permission to post customer photos.
Copyright infringement
• Employees should not claim authorship of something that is not theirs. Any
copyrighted information requires written reprint authorization before it can be
posted.

15. • You may be liable even if you don’t allow social media use. Just because
employees may not be engaged in company-related social media as part of
their job, they can easily discuss company business on personal sites or
engage in inappropriate activities that put the company at risk.
• A comprehensive social media policy is vital. According to FTC guidelines,
“The Commission agrees that the establishment of appropriate procedures
would warrant consideration in its decision as to whether law enforcement
action would be an appropriate use of agency resources. The Commission is
not aware of any instance in which an enforcement action was brought
against a company for the actions of a single ‘rogue’ employee who violated
established company policy that adequately covered the conduct in
question.”

16. Contests and Sweepstakes
• Sweepstakes, contests, and giveaways have become increasingly
popular among dealerships, especially on sites such as Facebook.
• These promotions are governed by a variety of federal and state laws as well as social
networking sites’ terms of service. Failure to follow pertinent statutes and regulations
regarding promotions can lead to government inquiries, civil enforcement actions,
adverse publicity, and even criminal penalties.
• Each state has a different set of laws governing promotions, and some states require that
sweepstakes offering prizes over a certain value to be registered. This amount can be as
low as $500 (Rhode Island). Attention to the rules in all jurisdictions where the promotion
will be available is essential.
• It’s dangerous to assume that outsourcing responsibility for the promotion to a marketing
firm or other service provider will result in a legal compliance. Understanding the rules
and running your promotions by your legal team can guard against potential problems
and may help shield the dealership from liability.

17. Text Message Marketing

18. Text Message Marketing
• In April 2011, a large dealer group was sued in a class-action for failing to honor consumer
opt-out requests.
• Defendants claimed that it was a “technical error” by an outside marketing agency they
hired.
• Ultimately agreed to a $2.5 million settlement.
• In August 2012, Jiffy-Lube agreed to a $47 million settlement for sending unsolicited text
messages. Also, used an outside vendor.
• Text messaging is subject to a number of federal and state restrictions such as the
Telephone Consumer Protection Act (TCPA) and CAN-SPAM and the rules are extremely
confusing.
• Regulations are much more difficult to deal with than telemarketing or email regulations -
primarily because many consumers are charged for text messages and the government
feels that they should be afforded additional protection against unwanted solicitations.
• Until recently, businesses were allowed to send text messages to consumers on the DNC
list — so long as they could prove there was an established business relationship. That
changed when the (FCC) amended the TCPA and removed that exception.

19. Text Message Marketing Best Practices
• Consult the national and your company-specific Do Not Call lists before sending a text
message.
• Determine whether your delivery meets the CAN-SPAM Act’s "email" definition, and if so,
whether you have complied with the CAN-SPAM disclosure and opt-out requirements.
• Put a process in place to ensure that all opt-out requests are honored quickly and
permanently.
• Develop an employee policy regarding text messaging and educate your staff on proper
procedures.
• Appoint an in-house compliance coordinator to monitor text messaging by both
employees and vendors.
• Consider instituting a policy of ALWAYS obtaining recipients’ express prior written
authorization before sending text messages, regardless of the circumstances or method of
delivery.
• Always consult knowledgeable legal counsel before launching a text marketing campaign.
• If you use an outside vendor to administer your text marketing campaigns, NEVER assume
that they know all the rules and regulations - run it by your legal team first. If you’re
writing the check, you’re responsible.

20. Online Privacy
• The FTC charged a Georgia dealer with illegally exposing the sensitive personal
information of thousands of consumers by allowing peer-to-peer, file-sharing software to
be installed on their corporate computer systems.
• Dealerships typically collect a great deal of personal information from their website
visitors through contact forms, online credit applications, etc.
• The FTC has penalized a number of companies for failing to follow their own published
privacy statements. For instance, the policies state: “Subscribers to our e-mail services (or
any other feature/service found on our Web site) will not receive unsolicited e-mail
messages from us”. If the dealers decide to launch an email marketing campaign to these
website visitors (which is legal as long as they adhere to CAN-SPAM regulations), they
could be in danger of violating their own policies.
• The FTC has been known to review on-line privacy policies and then cold-call the relevant
companies to see if reality matches up with the promises. Auto dealers are definitely on
the FTC’s radar screen.
• Many dealers have boilerplate privacy policies that may state that they do not share PII
with non-affiliated parties. If vendors are accessing DMS data from the dealership, that
statement may not be true.

21. • Since most dealerships are far more technologically advanced than they were when the
Safeguards Rule first came into play, protecting consumer information has become quite a
bit more challenging. It’s no longer just a matter of making sure that credit apps aren’t
laying on top of desks in the showroom or that deal jackets are stored in locking cabinets.
• The potential consequences for non-compliance with the Safeguards Rule are substantial.
Besides private lawsuits and reputation damage, civil penalties of up to $10,000 per
violation can be assessed, along with criminal penalties which could include
imprisonment and fines.
• It’s important for dealers to examine their policies for handling consumer privacy online
and to review the policies with their employees and vendors to ascertain their
understanding.
• The FTC Safeguards Rule requires that a business conduct regular audits to determine the
effectiveness of its policy and procedures.

23. Thanks For Attending!
Please feel free to call or drop an me a line if you ever have
any questions…
Jim Radogna
(858) 722-2726
Email: jim@dealercomplianceconsultants.com
Facebook: http://www.facebook.com/jimradogna
Twitter: @jradogna
Compliance Blog: http://dealercomplianceconsultants.blogspot.com
www.DealerComply.com