PAA: Dealers Beware of Deceptive Advertising

May 7, 2019 | Member News

By Pennsylvania Automotive Association

 

Promotional activities increase in the spring season, which means heightened advertising oversight from the Attorney General’s office.

 

The Attorney General’s office has reviewed and contacted dealers regarding advertisements that are deceptive and violate state and federal laws and regulations. The following are comments and recommendations regarding types of advertisements dealers should beware.

 

Salesperson Social Media Use

Dealerships must make a business decision whether salespersons are permitted to use social media accounts for advertising purposes. All of the federal and state advertising requirements and recommendations apply to promotions over the internet, and the dealership could be held accountable for any advertising posted to an employee’s social media page. Advertising rules apply to all medium of advertising including internet and social media advertisements; therefore, dealerships and salespersons who are advertising on websites and social media sites must be aware of all advertising rules when designing a promotion or posting on Facebook, Instagram, Twitter and other social media sites.

 

When it comes to online advertising, the basic principles of advertising law apply:

1.       Advertising must be truthful and not misleading;

2.       Advertisers must have evidence to back up their claims; and

3.       Advertisements cannot be unfair.

 

Dealerships are responsible for the clarity and accuracy of the information presented, even if a website is designed and maintained by a third party or in cases where salespeople have posted online without the dealership’s knowledge. All advertisements must have proper disclaimers when appropriate.

 

Craigslist or Ebay Sales

Automotive dealers should avoid advertisements that do not include the dealership’s business name. The Attorney General’s Office has targeted auto dealers and their salespeople who advertised vehicles for sale without disclosing that the sale was being conducted by a dealer, as is required under Pennsylvania law. These advertisements, which were promoted through online sales platforms such as Craigslist, offered vehicles for sale as individual sellers, rather than as dealers. Doing so is considered providing insufficient information to consumers viewing a posted item for sale online.

 

When advertising or making available for sale a new or used vehicle or maintenance service or repair on a new or used vehicle, it is considered an unfair method of competition and an unfair or deceptive act to not disclose the business name and address of the advertiser or the word “dealer.”

 

Advertisements must indicate that the vehicle sale, repair or maintenance is being offered by a dealer. When running display or electronic media advertisements, the business name and address must be included. Classified ads offer much less space, and simply the word “dealer” is permitted.

 

Internet Disclosures

In evaluating whether disclosures and information are misleading or deceptive, online advertisers

should consider:

1.                   the placement of the disclosure in an advertisement and its proximity to the claim it is qualifying;

2.                   the prominence of the disclosure;

3.                   whether items in other parts of the advertisement distract attention from the disclosure;

4.                   whether the advertisement is so lengthy that the disclosure needs to be repeated;

5.                   whether disclosures in audio messages are presented in an adequate volume and cadence and visual disclosures appear for a sufficient duration; and

6.                   whether the language of the disclosure is understandable to the intended audience.

 

To make a disclosure clear and conspicuous, online advertisers should:

1.       Place disclosures near, and when possible, on the same screen as the triggering term.

2.       Use text or visual cues to encourage consumers to scroll down a web page when it is necessary to view a disclosure.

 

 

When using hyperlinks to lead to disclosures:make the link obvious;

    1. label the hyperlink appropriately to convey importance, nature and relevance of the information it leads to;
    2. place the hyperlink near relevant information and make it noticeable; and
    3. take consumers directly to the disclosure on the click-through page.
    4.  

 

1.       Display disclosures prior to purchase, but recognize that placement limited only to the order page may not always work.

2.       Review the entire ad to ensure that other elements, such as text, graphics, hyperlinks or sound do not distract consumers’ attention from the disclosures.

 

Trade-In

As with any price reduction, the price of the vehicle cannot be inflated, then reduced by the amount of an anticipated trade-in. If an anticipated trade-in has been factored into an advertised price, the specific trade-in amount must be clearly disclosed within the ad. The anticipated trade-in amount cannot be placed in “mouse type” or otherwise obscured.

 

Dealerships may advertise a guaranteed minimum trade-in value. However, unless the ad clearly discloses any exceptions or limitations, the minimum trade-in must be applied to all vehicles that arrive at the dealership, regardless of condition.

 

The dealership may require that a vehicle meet certain conditions, such as that it is currently registered and safety-inspected and that it is operating under its own power. Any conditions must be disclosed and cannot be placed in “mouse type” or otherwise obscured. Qualifiers must also be used if the guaranteed trade-in only applies to the purchase of certain vehicles.

 

A range of prices, such as “Up to $500” or “As Much as $500,” are also acceptable. Again, advertisements must disclose any conditions that must be met to receive a trade-in value in the advertised range. If the advertisement does not disclose the criteria for determining the amount to be paid for a particular vehicle, the dealer is required to provide the maximum.

 

Pay-Off Trade/ Credit Cards

Some dealer advertisements reflect that a trade-in vehicle or a credit card amount will be paid off when a vehicle is purchased. A dealer must be careful to properly inform a customer that when the trade-in is to be paid off, that the amount will be added to the cash price or amount financed on the next purchase.

 

A dealer could use a disclosure phrase like, “We’ll structure your trade payoff amount into your new payment plan.” Furthermore, the concept of “eliminating credit card debt” with positive trade equity being cashed out by the vehicle owner is legal, as long as the money is coming from the trade equity and not from vehicle sale loan proceeds.

 

A dealership’s Department of Banking installment seller’s license permits a dealer to finance the installment sale of the vehicle and products related to the vehicle sale.

The license does not authorize a dealer to consolidate debt from other loans with the vehicle sale, or permit the dealer or the customer to pay off other debt obligations with proceeds from the vehicle installment sale loan.

 

PAA and NADA Advertising Guides

NADA has authored a compliance publication entitled “A Dealer Guide to Federal Advertising Requirements.”

 

This guide is available at www.paa.org under Hot Driving Topics, and contains examples of ads, use of discount claims, email advertising rules, internet advertising, satisfaction guarantees, and trigger terms.

 

In addition to recommending the NADA “A Dealer Guide to Federal Advertising Requirements”, PAA in conjunction with the Office of Attorney General prepared a Dealer Advertising Guide, which is available at no cost at www.paa.org under Members Only or by contacting Melanie Stine at [email protected]

 

Source: Pennsylvania Automotive Association