Dealer Advertisements – Low-Hanging Fruit for Enforcers?

I admit that I’m a bit quirky. Quirky Exhibit One is what I do when I travel. Whenever possible, at breakfast, I try to find a local paper. When I do, I sip my coffee and go immediately to the car dealership ads to see how many disclosure and “unfair and deceptive acts and practices” violations I can find and if dealers have found new ways to violate the advertising laws. Dealership ads are a source of entertainment that beats the comics, hands down.

Federal and state enforcers, however, are threatening to end my fun. The Federal Trade Commission’s Operation Steer Clear has announced a number of advertising enforcement actions against dealers, and now state attorneys general are joining the posse. The latest AG to get a dealership in the crosshairs is New Jersey’s.

On August 5, Acting Attorney General John J. Hoffman and the New Jersey Division of Consumer Affairs announced the filing of a complaint against Bergen Auto Enterprises, LLC, d/b/a Wayne Mazda and Wayne Auto Mall Hyundai, for repeated deceptive advertising practices. The complaint alleges that the dealerships advertised vehicles for sale without disclosing to consumers that used vehicles had previously been used as rental vehicles and/or had sustained significant prior damage and without publishing statements to consumers about applicable purchase costs, as required by New Jersey law.

The five-count complaint alleges that the dealerships committed multiple violations of both the New Jersey Consumer Fraud Act and the state’s motor vehicle advertising regulations. The state of New Jersey wants restitution for consumers and the imposition of civil penalties, among other remedies.

Additionally, the complaint alleges that certain new vehicles offered for sale or lease had been sold months before but remained featured in the dealerships’ advertisements. The AG claims that a 2013 Mazda advertised for lease had actually been sold almost 11 months before the advertisement was published. In another instance, the Hyundai dealership allegedly advertised for at least 175 days a 2013 Hyundai Genesis for lease that it did not possess and that was, in fact, located and titled in Pennsylvania.

” ‘The alleged actions of Bergen Auto Enterprises demonstrate contempt for consumers and their rights under the law. The Wayne Mazda and Wayne Auto Mall Hyundai dealerships allegedly offered vehicles and terms that were not attainable, and concealed important details about other vehicles for sale and lease, all in a calculated effort to profit at consumers’ expense,’ ” said Division of Consumer Affairs Acting Director Steve Lee.

Newspaper advertisements for Wayne Mazda and Wayne Auto Mall Hyundai also allegedly failed to include legally required statements that explain to consumers what costs the advertised price included and what additional costs consumers would need to pay. The complaint also alleges that the dealerships advertised prices of new vehicles that reflected dealership discounts but failed to properly explain the qualifications necessary to obtain those discounts. For instance, Wayne Mazda advertised prices and included a footnote – “Available to qualified buyers on select vehicles” – but did not specify the vehicles to which the discount applied or the conditions necessary for the consumer to qualify for the discount.

Keep in mind that, so far, all we have here are allegations – the AG still has to convince a court that the dealerships did what they are charged with doing. If the AG’s allegations are true, though, I really have to wonder who at the dealerships is responsible for the legal compliance of these ads and what the advertising compliance review process looks like.

My bet is on “nobody” and “nothing.” If that describes your dealership, you need to know that the federal and state enforcers are in an absolute lather about dealers’ ads. If your ad process isn’t up to snuff, it’s time to get to work.

Catherine M. Brennan is a partner in the Maryland office of Hudson Cook, LLP. Cathy can be reached at 410.865.5405 or by email at cbrennan@hudco.com.

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