The Federal Trade Commission said nine dealerships had agreed to 20-year settlements after being charged with deceptive advertising, adding that more dealerships will face similar charges.
“We have many other investigations in the pipeline,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection, at a press conference in Los Angeles. “This is a priority for the FTC and you will see many other cases in the auto-related area going forward.
“There are many dealers who are honorable and want to treat their customers well,” she said, “but we believe there are many more dealers out there who are involved in these deceptive practices.”
The FTC’s investigation, announced in a statement, focused on the sale, financing and leasing of vehicles. The sweep was dubbed Operation Steer Clear.
The dealerships that settled charges were:
• Norm Reeves Honda Superstore in Cerritos, Calif.
• Honda of Hollywood in Los Angeles
• Nissan of South Atlanta in Morrow, Ga.
• Infiniti of Clarendon Hills in Clarendon Hills, Ill.
• Paramount Kia in Hickory, N.C.
• Fowlerville Ford in Fowlerville, Mich.
• Southwest Kia, which owns New World Auto Imports in Dallas, New World Auto Imports of Rockwall in Rockwall, Texas; and Hampton Two Auto Corp. in Mesquite, Texas
• Two used-only dealerships — Casino Auto Sales of La Puente, Calif., and Rainbow Auto Sales of South Gate, Calif.
The FTC is also taking action against a 10th dealership, Courtesy Auto Group of Attleboro, Mass.
The FTC said the dealerships in this case made several “misrepresentations” in print, Internet and video advertisements that violated the FTC Act, falsely leading consumers to believe they could buy cars for low prices, get low monthly payments through financing and/or make no upfront payment to lease vehicles.
The FTC said one dealership sent out 30,000 mailers to consumers, saying they had won prizes they could collect at the dealership, but “not a single consumer, not one,” won any prize, Rich said.
Fowlerville Ford was the only dealership cited for advertising prizes.
The dealership said it agreed to a settlement with the FTC over allegedly deceptive ads because “the cost of appealing” the FTC’s conclusions “would have been prohibitive.”
“Fowlerville Ford has prided itself on maintaining the highest possible standards in treating its customers and in complying with all laws and regulations in conducting its business,” the dealership said in a statement e-mailed to Automotive News.
Under the settlements, the dealerships concerned will be barred from deceptive advertising practices for 20 years. Any violation of that agreement could bring a fine of up to $16,000 per day. So if a dealership runs a deceptive ad for 10 days anytime until 2034, the potential fine is $160,000.
“We hope that these actions,” Rich said, “really put all dealers on notice” that violating the law will have “significant consequences for them.”
Rich said third-party vendors who help create these kinds of deceptive ads could also be subject to liability depending on how involved they were in creating the content.
Rich declined to say how long the FTC had been investigating the dealerships, but noted that typical FTC investigations run “several months to over a year.”