How to Defend Against the Advertising Compliance War

How to Defend Against
the Advertising Compliance War
June 19, 2014
Copyright 2014 DealerOn, Inc.

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Jim Radogna
Director of Compliance
College of Automotive Management
jradogna@lagc.com
858-722-2726
www.collegeofautomotive.com
www.facebook.com/JimRadogna
www.twitter.com/JimRadogna
TODAY’S PRESENTER

• If you have questions during the
presentation, please submit them
using the “Questions” feature
• Questions will be answered at the
end of the webinar
•A link to the recorded webinar will
be emailed to you within 24 hours
and will also be posted on
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as an On-Demand Webinar
SEND IN YOUR QUESTIONS

After the presentation, be the first to answer
the giveaway question correctly to win this awesome prize!
PRIZE ALERT
Professional Website Advertising Compliance Review by the
College of Automotive Management Compliance Team
$1295 value!

AFTER THE SHOW
After the webinar, please fill out our survey for a chance to win a Google prize!

 Understanding the risks – how the game has
changed…
 Learning the rules – Don’t get blindsided!
 Determining best practices
 Question & Answer Session
TODAY’S OBJECTIVES

POLL QUESTION

What’s Changed?
Advertising Compliance Overview
• The Feds have traditionally gone after
bigger fish and left car dealers to state
regulators.
• Even though advertising “legal” by
state guidelines, FTC has claimed
non-compliance.
• State AGs can now enforce FTC Act.
• FTC partnering with local agencies in
their investigations. Regulators
compare notes!
• Focus on Online Advertising.
• Agencies switched to a proactive
stance re: dealer advertising – actively
seeking out deceptive ads – Easy to
do on websites, YouTube, social
media, etc.
FTC STATEMENT ON ONLINE ADVERTISING
“Although the number of companies advertising online and
the number of consumers shopping online are soaring, fraud
and deception may dampen consumer confidence in the e-
marketplace. But cyberspace is not without boundaries, and
fraud and deception are unlawful no matter what the
medium. The FTC has enforced and will continue enforcing
its consumer protection laws online to ensure that products
and services are
described truthfully in online ads and that consumers get
what they pay for. These activities benefit consumers as well
as sellers, who expect and deserve a fair marketplace.
The same consumer protection laws that apply to
commercial activities in other media
apply online. The FTC Act’s
prohibition on unfair or deceptive
acts or practices encompasses
Internet advertising, marketing
and sales.”

The Downside
• Fines up to $16,000 per violation per day
• 20 year consent decrees – Do you want the FTC
or others looking over your shoulder?
• Local authorities can take action against
dealer’s license
• Devastating reputation damage

10 Advertising Guidelines Every Dealer Should Know
1. Be aware that advertising laws apply to all forms of advertising, including radio,
television, print, electronic, direct mail, flyers, billboards, showroom and other
dealership displays, and the Internet (including social media).
2. It’s all about the big picture. An advertisement as a whole may be misleading
although every sentence separately considered is literally true. The key is to make
sure your message is clear, truthful, easy to understand, and not subject to
multiple interpretations.
3. Even though the meaning of statements in an ad seems obvious to you, it may still
be considered deceptive. Statements susceptible to both a misleading and a
truthful interpretation are typically considered to be misleading by regulators.
4. Disclaimers in themselves won’t always protect against advertising violations. A
disclaimer must not contradict, confuse, unreasonably limit, materially modify a
principle message, or substantially change the meaning of any advertised
statements. Your disclosures should be made in a clear and conspicuous manner
to minimize the possibility of misunderstanding by the consumer public. Be sure that
all disclaimers are clearly and conspicuously displayed and not buried away in
difficult-to-read fine print or a difficult-to-find links on websites.

5. Despite your best intentions, you may be held accountable for advertising errors. If
an ad is deemed deceptive, an advertiser has liability regardless of whether there
was intent to deceive.
6. There’s no safety net in the “but everybody does it this way” mindset. The fact
that others were, are, or will be engaged in like practices will not be considered a
defense in a legal action.
7. 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 enters into the
contract of purchase or lease. For instance, in the FTC action with the “we’ll pay off
your trade no matter how much you owe” ads, the dealers were found to be in
violation even though they disclose that negative equity is added to the amount
financed at the time of sale. “See Dealer For Details” is not enough in many cases!
8. Regulators frequently cite dealers for advertising violations even though there are no
customer complaints. Since statements and representations in advertisements are
evaluated based on their tendency to deceive, no actual harm to consumers need
occur for there to be a violation.

9. Bait & Switch advertising is a hot button with lawmakers and must be avoided. It is
unlawful to advertise for sale any vehicle that the dealer does not intend to sell
because the true intention is to switch the customer to another vehicle. No
customer should be encouraged to not purchase the advertised vehicle, nor
should there be any acts attempted by the sales staff to prevent the sale. Ensure
that vehicles are promptly removed from the website and third party sites after
they have been sold.
10. Don’t assume that your vendors are 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 and clearly and conspicuously displayed on the
site. The primary responsibility for compliance lies with the dealership, not the
vendor. According to the law, a dealer has the duty to investigate the accuracy
of any statements made in advertising.
BOTTOM LINE: Advertising violations are easy to find and difficult to defend
against. Often, all the proof a regulator or attorney needs is the ad itself.

Something to Think About…
 Getting “caught” is no longer a just a
fine and slap on the wrist. Regulators
have begun using the media to
penalize those dealers caught in order
to intimidate others. Regulators want
press, and the tougher the press is on
the offending dealers the better it is for
the regulators in charge.
 The severity of the offenses is often
exaggerated.
 •The social media age brings more
long-term consequences and public
humiliation than businesses have ever
seen before.
 Do you want your customers seeing
YOUR dealership on the 6 o’clock
news?

Real World Website Examples
Is YOUR Website Bulletproof???

Online Credit Applications
Website Advertising Compliance
• Dealers are required to provide
consumers with a Privacy Notice if
they plan on disclosing financial
information about the Consumer to a
nonaffiliated third party.
• Since it’s possible that the consumer
information collected on these
applications is available to the
nonaffiliated third party that created
the online application for the website
(and possibly other parties), it is
recommended that the dealership’s
Privacy Notice be delivered to the
consumer before submission of the
application. This will give the
consumer the opportunity to “opt-out”
by not submitting.

Website Privacy Policy
Common Website Privacy Policy
Issues:
• No Privacy Policy
• OEM’s Privacy Policy, not dealer’s
• Website provider’s PP, bot dealer’s
• Wrong Privacy Policy (GLBA privacy
notice is NOT the same as website
policy)
• Using boilerplate policy that doesn’t
reflect dealer’s actual practices
Federal and state regulators can take action
against companies that fail to comply with their
own privacy policies or otherwise misrepresent
their information management practices. And of
course, there is the real possibility of substantial
private lawsuits.

Price Disclosures
• Disclosures and what must be
included in the advertised purchase
price are specific to each state
• Boilerplate disclosures can create
problems
• Disclosures must be clear &
conspicuous
• Failure to follow guidelines
pertaining to price disclosure can be
an Unfair & Deceptive Practice
“The price for this vehicle as equipped
does not include charges such as: License,
Title, Registration Fees, State or Local
Taxes, Finance Charges, Credit
Investigation, Optional Credit Insurance,
Physical Damage or Liability Insurance,
Delivery Fees, or a negotiable
Documentary Fee”
“Price does not include applicable tax, title,
license, processing, documentation and/or
electronic filing fees, and destination
charges.”

Vehicle History Disclosures
• Some states require that prior
rentals, etc. be disclosed in
vehicle advertising
• Disclosures should be made on
third party sites as well
(Cars.com, AutoTrader.com, etc.)
• Particularly important when
vehicle is listed as “one-owner”
• Be careful with descriptions on
“one-owner” prior rentals:
“This 2010 Elantra is for Hyundai fans that
are searching for that babied, one-owner
creampuff.”
“From the looks of it, I'd say this car has
been garage kept and babied regularly. If
only my wife treated me as nice!!!”

Advertising Vehicles Not in Specific Dealer’s Inventory
• In most states it is illegal for a dealer to
advertise any vehicle not actually for sale
at the premises of the dealer or available
to the dealer directly from the
manufacturer at the time of the
advertisement.
• If advertised vehicles are located on
different lots, a best practice is to place a
clear and conspicuous disclosure on the
top of each Search Results Page stating
that the vehicles listed are located at
different dealerships throughout the area
and that the actual location of the vehicles
are listed on each Vehicle Detail Page.
Then, on each Vehicle Detail Page, state
the actual location with the dealership
name and address.

Free Gifts With Purchase
Many states, as well as the FTC, prohibit
dealers from advertising free goods or
services conditioned on the purchase or
lease of a vehicle.*
However, free merchandise or services can
generally be offered for taking a test drive or
visiting the dealership.
* Free gifts offered by the OEM to the
customer tied to a purchase or lease are
generally exempt from this prohibition.

Clear and Conspicuous Disclosures
• Type size is too small to read.
• Often happens when newspaper ads are
shrunk to fit webpage or TV commercials
are put on YouTube.
• The type size should be big enough to
read easily.
• The FTC has developed what it refers to
as “THE FOUR Ps” to describe what the
clear and conspicuous standard requires:
Prominence – Size matters
Presentation – Easy to understand
Placement – Placed where it will be read
Proximity – Close to the main message

Inventory Claims and Links
• A banner ad on the website states that
Kia Certified Pre-Owned vehicles are
available. However, when the used
inventory is filtered by “certified”, the
results show “0 vehicles currently match
your selection”
• Next, when you click the “Click Here For
details” link on banner, 225 vehicles
show up, many of which are not Kias
and therefore could not be certified. This
could give the misleading impression
that all of these vehicles are “certified”.
• Links from banner ads should always
be relevant. E.g., if a specific vehicle
price or payment is advertised, the link
should go to the VDP, NOT the SRP.

Improper Advertising of “New” Vehicles
• A number of vehicles that are advertised
on this site as “New” are actually not
considered to be “New” based on state
and federal laws.
• In addition to state regulations, the federal
Used Car Rule states:
“Previously titled or not, any vehicle driven for
purposes other than moving or test driving,
is considered a used vehicle”
• These vehicles should be listed on Used
Vehicle inventory pages.

“Too Good To Be True” Ad?
What a Deal!
• Payment misstated
• Amount due at signing misstated
• Disclosure hard to read
• Disclosure contradicts the main message
and does NOT protect the dealer.

“Too Good To Be True” Part 2
$13K discount? Where do I sign???
• Actually a pre-paid lease
• Price misstated
• Savings misstated
• Disclosure hard to read
• Disclosure contradicts the main
message and does NOT protect the
dealer.

Truth in Lending Disclosures
Hot Button Issue With Regulators
Required disclosures when a payment is
advertised:
• The amount or percentage of the down
payment
• The terms of repayment
• The “annual percentage rate” using that
term or the abbreviation “APR”, and if
the rate may be increased after
consummation, that fact.

Use of the Word “Wholesale”
It is improper to use the word “wholesale”
when advertising retail transactions to the
public.
Be careful when using advertising created
by outside vendors! The dealer is
responsible.

“Internet Pricing”
The statement “Complete the form below to
lock in internet pricing” may be a
misleading call to action as the law in many
states requires all advertised pricing to be
honored with or without actual knowledge.
Thus, the consumer may be mislead to
believe they have to provide their contact
information in order to get the advertised
prices on the web.
In many states, there is no such thing as
“Internet Pricing”!

“Disclosure Issues”
These Banner Ads contain
disclosures that are only partially
readable due to directional arrows
obscuring parts of the disclosures.

Unsubstantiated Claims
Are these claims true? Can they
be proven?

TAKE AWAYS
 Advertising compliance isn’t rocket science. The rules for good advertising are
mostly common sense. It’s all about being truthful and easy to understand. A
good practice is to have a friend or family member not involved in the car
business look at your ads. If they don’t get it, your customers probably won’t
either!
 Depending on the dealership, advertising may be handled by any number of
people such as sales managers, internet staff, or a marketing department. Any
employee or vendor involved in advertising should be properly trained on federal
and state advertising regulations.
 If you’re not sure about an advertisement, don’t guess! It’s a good idea to have
your advertising reviewed by a qualified professional – it may end up costing quite
a bit less than a legal action!
 Work with your website provider to help ensure compliance. The DealerOn team
is always available to help you keep your website bulletproof!

Be the first to answer the giveaway question correctly
to win this awesome prize!
PRIZE ALERT
Professional Website Advertising Compliance
Review by the College of Automotive
Management Compliance Team
$1295 value!

A link to the recorded webinar will be emailed to you within 24 hours and will
also be posted on www.DealerOn.com/webinar
CONTACT INFORMATION
Jim Radogna
Director of Compliance
College of Automotive Management
jradogna@lagc.com
858-722-2726
www.collegeofautomotive.com
www.facebook.com/JimRadogna
www.twitter.com/JimRadogna

Jeremy Anspach
CEO
Pure Cars
How to Take Consumers
from Search to Showroom
June 26, 2014
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