FTC Investigates 10 Dealers For Deceptive Ads, With More Probes Planned

January 13, 2014

If you're a car dealer and you're unfamiliar with the term "best practices", listen up, because the Federal Trade Commission may soon be knocking on your door.

The FTC has investigated consumer complaints at ten U.S. auto dealerships, all of whom were accused of deceptive advertising. The agency has reached agreements with nine of those companies, and according to AutoNews, more investigations are in the works.

According to the FTC, the nine dealerships in question are:

  • Casino Auto Sales of La Puente, California
  • Fowlerville Ford of Fowlerville, Michigan
  • Hampton Two Auto Corporations of Mesquite, Texas
  • Infiniti of Clarendon Hills of Clarendon Hills, Illinois
  • New World Auto Imports of Dallas, Texas
  • New World Auto Imports of Rockwall in Rockwall, Texas
  • Nissan of South Atlanta in Morrow, Georgia
  • Paramount Kia of Hickory, North Carolina
  • Rainbow Auto Sales of South Gate, California

Most were accused of advertising vehicles at low prices or for no/low money down, without mentioning many add-on fees. Paramount Kia, for example, told customers that they "could finance a purchase with low monthly payments when, in fact, the payments were temporary 'teasers' after which the consumer would owe a much higher amount, by several hundred dollars."

Fowlerville Ford's violation was a bit more egregious: it sent out mailers telling recipients that they'd won a sweepstakes contest, when in reality, they hadn't. The dealership claims that the language on the flyer made it clear that recipients were really just eligible for prizes, provided that their sweepstakes number matched one at the dealership. However, the FTC pointed out that of all 30,000 recipients, not one won any sort of prize.

The agreements these nine dealerships signed with the FTC...

"are designed to prevent the dealerships from engaging in similar deceptive advertising practices in the future. The orders prohibit the dealerships from misrepresenting in any advertisement for the purchase, financing, or leasing of motor vehicles the cost of leasing a vehicle, the cost of purchasing a vehicle with financing, or any other material fact about the price, sale, financing, or leasing of a vehicle. When relevant, the proposed consent orders also [require] the dealerships to clearly and conspicuously disclose terms required by these credit and lease laws. In the case where the dealerships misrepresented that consumers had won a prize, the proposed order also prohibits misrepresenting material terms of any prize, sweepstakes, giveaway, or other incentive."

The tenth dealership under investigation is Courtesy Auto Group of Attleboro, Massachusetts, which is accused of similarly misleading business practices. No agreement has been reached in that case.

In the meantime, the National Automobile Dealers Association has sent out a notice, urging dealers to review their advertising practices and ensure that they fall within the appropriate guidelines.

If you're shopping for a new vehicle, know how to spot trouble signs. Check out this great overview from the FTC called "Are Car Ads Taking You For A Ride?", which offers a list of things to watch out for in showrooms. 


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