When the Federal Trade Commission sent 97 warning letters in March to dealers about deceptive advertising practices, Peter Smith founder and managing partner of Lion Partnership began analyzing the potential liability dealerships could face for social media posts not only on their own pages but also on their employees’ accounts.
From ensuring consistent price disclosures to making sure hundreds of posts are updated when vehicles are sold, Smith points out, “it’s shocking what dealerships have to do,” and that some groups are tightening their social media use.
Risk with social media: On his Lion Partnership checklist, Smith places social media and making sure every vehicle listed on the platforms and with third-party sites is physically in stock and available for sale as a “high” risk area.
“You have to audit all social media and make sure it’s all correct,” Smith told CDG.
After Smith raised this point, CDG reached out to the FTC for comment, specifically about social media posts and clarification about the regulations following guidance provided during the webinar appearances by FTC Director of Bureau of Consumer Protection Chris Mufarrige.
In his webinars with NADA and NIADA and the sample of the letters sent to dealers, Mufarrige mentioned:
Advertising a price without all the required fees.
Not reflecting that discounts are not available to all consumers.
Advertising unavailable or nonexistent vehicles.
That request received a “no comment.”
Experts weigh in: In addition to Smith, CDG discussed the social media issue with industry compliance experts to gather guidance for the dealers.
Adam Crowell, Chief Legal and Strategy Officer at KPA, points out that there is still some “grey area” with social media on the topic of advertising, especially when vehicles are sold.
“Something that we've suggested for a long time is that with advertisements, there'll always be something built into it that says this is going to expire at midnight or that day,” Crowell said.
“A couple of things that marketers can do there is they can certainly go back, and they can delete something if a vehicle has been sold, right? They could absolutely do that if they wanted to. The other thing that they could do is they could also update it and say this vehicle has been sold. Put that in capital letters so that if anyone's looking at that can see that it's a vehicle that's unavailable.”
Brooke Conkle, partner at Troutman Pepper Locke, made a similar suggestion with social media use and not updating listings could trigger regulators’ attention.
“Advertising a vehicle after it's been sold is the historic bait and switch model,” Conkle told CDG.
“But there’s no intent with social media posts, in most instances, I should say. From a regulator’s perspective, that can still be a problem. If there's a pattern of advertising cars that you can’t actually sell or prices that aren't really available anymore, that's the kind of behavior that gets regulators' attention…If a vehicle has been sold, as a best practice, I would recommend, you know, updating that social media caption to say, ‘Hey, this one went quick, it's already been sold,’ so it turns into sort of, um, positive advertising for you.”
Dealers liable for employees: Some dealerships allow their salespeople to post advertisements of vehicles on their social media. As Smith points out, some dealership groups may have 20 or more salespeople making eight posts per day, leading to 160 posts that would need to be policed for accuracy and that they are current.
That led to the question of whether dealers are liable for their salespeople’s posts on their personal accounts.
“Yes, there can be liability there, especially if there are no good policies built around this,” Crowell said. “The reality is that the salesperson is acting on behalf of the dealership. They are acting as an agent for the dealership, and under the law, there is agent liability that goes along with that.”
Conkle and fellow counsel at Troutman Pepper Locke Christopher Capurso were aligned with Crowell’s mention of needing solid policies in place concerning employees’ use of social media on behalf of the business.
“It’s a difficult balancing act. If you are a dealer, you want your salespeople to be engaged with the inventory,” Conkle said. “They’re out there trying to make a deal and get exposure for the vehicles and the dealership…It probably requires some really strict and sensitive sort of guidelines for your salespeople. So if they are posting about store inventory or deals, then they need to identify their relationship to the dealership and avoid quoting kind of specific prices or payments unless they are using language that has been vetted by the dealer.”
Put it this way: Capruso compared a social media policy for employees to other forms of communication with customers.
“It's just another example of needing employee oversight, like when either through text message or orally they say something about how great the car is, and then it's interpreted as an express warranty, and then you're on the hook for that…Just because an employee does something on their personal device, they’re still an employee, they're still acting in their employment capacity, and the dealerships need to have something in place to be able to kind of police that.”
OUTSMART THE CAR MARKET IN 5 MINUTES A WEEK
Get insights trusted by 55,000+ car dealers. Free, fast, and built for automotive leaders.
Looking for solutions: Since launching its newest guidance in March, the FTC has been consistent with its warnings on pricing discrepancies. But with so many marketing tools being used to reach different customers, dealers find themselves needing to go to dozens of different vendors or sites to make updates on prices and inventory.
“It’s a beast of a problem,” said David Boice, co-founder and CEO of Team Velocity. “We created this platform, and we didn’t do it for compliance. We wanted to create a better customer experience. It fell into a situation where dealers using it were compliant.”
Bottom line: As noted in the warning letters to dealers, the FTC has brought cases against several dealers in recent years, with judgments reaching into the millions, making this an expensive, complex problem. Smith warns it won’t take much to find yourself navigating.
A quick word from our partner
Running a dealership is hard.
Between vendor strategy, process management, market timing, and hiring, one wrong decision can cost hundreds of thousands.
That’s why we created CDG Circles.
It’s not a 20 Group. Circles connects you with top operators across brands through confidential text-based chats — giving you daily intel, real-world feedback, and instant answers from people who actually live it. Ask questions 24/7 and get real-time responses from experienced dealers in curated peer groups built specifically for your level and store type.
No vendors. No sales pitches. No travel. Just real operators helping each other win.
Visit cdgcircles.com to get started today
