After the Federal Trade Commission’s 97 warning letters sent to auto dealers, announcement of a settlement with a large dealership group, testimony on Capitol Hill, and then webinar appearances with two auto dealer groups, questions loom among dealers about what is next.
Driving the news: The recent action and messaging from the FTC leads Chris Capurso, counsel at Troutman Pepper Locke, to believe enforcement actions in the automotive space could soon be on the way.
“Especially in this administration, I don't think they're going to just take a regulatory action, like sending all those letters, and going through all this with the webinars and everything, if they were just trying to scare a little [dealers] a bit. I think there is probably going to be some enforcement on the way.”
Chris Capurso
Troutman Pepper Locke
What we know: The best evidence to support the indication that enforcement could be on the way came from what FTC leadership repeated in recent appearances.
FTC Chairman Andrew Ferguson, speaking before the Senate Oversight Committee on Commerce, Science, and Transportation, said the role of the agency is to “enforce the law against the bad actors, and we will enforce vigorously and without fear.”
FTC Bureau of Consumer Protection Director Christopher Mufarrige reinforced that message with the NADA and NIADA.
From those presentations to dealers, a major takeaway was that the FTC is pushing full force to ensure pricing is transparent and accurate.
The agency expects:
The price advertised is what every consumer could walk into the dealership and be expected to pay, minus government-imposed fees.
It expects doc fees to be disclosed in the price or prominently displayed in the disclaimer.
And it expects add-ons to be communicated as optional.
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Capruso noted the FTC’s point of view that the price is a ceiling that could be negotiated down.
“You could always change the fees downward, but they don't want people coming in and getting the shock of having something much higher,” Capruso said. “And that was really echoed in that Lindsay consent order that finally came out in the last month. It seems like this was all a concerted effort to have all this timed together - this order talking about price transparency, and then these letters and all these webinars.”
Zooming in: The FTC’s messaging on third-party advertising is that whoever controls the material presented to consumers is responsible for its accuracy. The agency also wants websites updated quickly to reflect the inventory available.
Other factors to consider: Questions were posed during the webinars about enforcement resources. Mufarrige indicated that the agency would accept tips from other dealers concerned about pricing transparency.
Capruso also said enforcement actions could come from consumer complaints made not only to the FTC but to the state attorneys general.
“The AGs have been involved before, and you've had the cross federal and state investigations and consent orders,” Capruso said. “Without any insider knowledge or anything, it just seems like if this version of the FTC is endorsing this theory as an unfair, deceptive act or practice, you have to think that it emboldens state AGs. State AGs are very political, and if they get enough complaints about a certain type of practice, the AG's are going to look into it.”
Put together: Now is the time for dealers to make sure they are accurately advertising the prices of vehicles with the proper disclosures, putting in processes to timely remove sold vehicles from listings, and reviewing compliance with their team.
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