The Federal Trade Commission delivered its FAQs on automobile industry pricing transparency Tuesday, approximately six months after sending 97 warning letters to auto groups nationwide about advertising and pricing transparency violations.
Driving the news: Following the warning letters sent in March, the FTC held webinars with the NADA and NIADA and promised to send out FAQs on its price transparency requirements.
The FAQs cover 14 different topics around price transparency.
The agency states its focus on price transparency is driven by “evidence and complaints we see every day in the marketplace.”
Zooming in: The FAQs start by describing that the price in an advertisement must reflect the number a consumer can “reasonably expect” to pay when walking on the lot.
The FTC requires that any fees or charges be included in the advertised price.
Additionally, the FTC states dealers may exclude government fees paid directly by the consumer.
All advertisements and communications must be in compliance, including website inventory listings, social media, print advertisements, phones, and texts.
“It’s about not wasting the consumer’s time. When a consumer sees a price online, whether it’s on their website or a digital retailing platform, if they walk in, they can purchase the vehicle for that price,” Adam Crowell, Chief Legal and Strategy Officer at KPA, told CDG News.
Price must be most prominent: The FTC states that the actual price must be the most prominently displayed amount in an ad.
But that prominence is not just about font size, with the agency stating that if another price is listed in a spot to draw more attention, then the actual price is not the most prominent amount.
Discounts are allowed to be added to the ad as long as the price that “any consumer could walk in and pay is the most prominent and the terms of the discount are clear.”
Lease process fees due upfront must be included in the advertisement concerning what is due upfront.
Negotiating prices and ancillary products: The FTC points reinforced the dealers’ obligation that the advertised price must be what any consumer can pay for a vehicle.
Consumers can negotiate and pay less.
Additionally, dealers cannot suggest that add-on products or services are required.
Vehicles in transit or recently sold: For vehicles in transit, the FTC states advertisements must make it clear that the vehicle is not on the lot.
Those vehicles in transit must be available for sale and not allocated to fulfilling another customer’s order.
Representative photos of vehicles must be of the same make, model, condition, and all other material characteristics.
The FTC stated that used cars are rarely identical and differ in condition, and “it is reasonable for consumers to expect the photo to show the exact car offered for sale.”
Also, the FTC warned that advertising a sold vehicle that is no longer available to draw customers to the dealership is a “deceptive tactic.”
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Who is responsible for ads: The FTC stated that everyone who has control over advertising is responsible for making sure the actual price is the most prominent amount, including dealers, third-party advertisers, and OEMs.
What they are saying: “The FTC Act requires truthful and accurate pricing, which brings significant benefits for consumers and competition,” said Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection. “Price transparency is a priority for the Trump-Vance FTC, and today’s guidance is intended to help dealers and others in the auto industry better understand how the law applies to their advertising.”
Bottom line: Dealers should make sure they are in compliance before enforcers start knocking at the door, as the agency explicitly states “price transparency is not a new requirement” and “the FTC Act and Section 5’s requirements have been in effect for decades.”
The FTC specifically addressed in the FAQs that they “will protect both consumers and competition” and give out information on reporting violations.
“They made it clear that this is, in their opinion, not a new obligation under Section 5 of the FTC Act,” Crowell said. “I think with them coming out with these FAQs, I would expect that we are going to see some enforcement actions, and we are going to see those enforcement actions drop very soon. And that could be cases that have been pending with the FTC, and it could also be new cases.”
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