The FTC announced this week that it was bringing claims against two auto dealership chains alleging that they had violated the terms of two 2012 administrative orders prohibiting the dealerships from misrepresenting financing and lease terms in their advertising.
First, the FTC sued the Billion Auto dealerships – a chain of 20 dealerships in Iowa, Montana, and South Dakota – seeking civil penalties against the dealerships for alleged violations of the Truth in Lending Act and Regulation Z, and the Consumer Leasing Act and Regulation M, which had previously been the subject of a 2012 FTC administrative order.
The FTC charged that the Billion Auto dealerships and their advertising company, Nichols Media, Inc., had violated the 2012 FTC administrative order by highlighting only favorable terms, such as low monthly payments and finance rates, while distracting consumers from other less favorable terms. In response to the filing of the complaint this week, Billion Auto has agreed to the entry of a consent judgment, under which the dealerships will pay civil penalties of $360,000.
Second, the FTC sought civil penalties against dealerships in Virginia and West Virginia affiliated with Ramey Motors, Inc., based on alleged violations of a similar 2012 FTC administrative order. As with Billion Auto, the FTC claimed that Ramey Motors’ advertising misrepresented the charges associated with financing or leasing vehicles by concealing important terms. In its complaint, the FTC sought $16,000 in civil penalties for each claimed violation.
Both cases were filed in the U.S. District Court for the Northern District of Iowa.
These cases have wider implications because they demonstrate that the FTC will not hesitate to seek and impose penalties for allegedly deceptive advertising. Moreover, disclaimers will not be sufficient to deter such action if those disclaimers could be deemed inadequate in the context of the overall message being delivered to consumers.