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On Sept. 15, the Federal Trade Commission (FTC) issued a Frequently Asked Questions (FAQs) document on dealer advertising. NADA worked with the FTC on the FAQs to supplement guidance the FTC provided during NADA webinars.
The FTC has made price transparency a priority across all industries, including auto sales. In March, the FTC sent letters to 97 dealerships warning them of potentially illegal advertising practices. The FTC has also announced two settlements with auto dealers alleging deceptive advertising practices and requiring the dealerships to advertise the total price of a vehicle clearly and conspicuously as the most prominent price. FTC settlements are only between the party and the FTC and not an admission of guilt.
The FAQs clarify the FTC’s expectations for vehicle advertising that complies with federal law. A summary of the FAQs is below but each of the 14 FAQs should be reviewed in its entirety:
FTC Authority to Regulate Dealer Advertising: The FTC has authority to regulate dealer advertising practices as unfair or deceptive acts or practices (UDAP) under Section 5 of the FTC Act.
Responsibility for Advertising: Dealers are responsible for their own advertising and messages they can control. However, the FAQs state that everyone who has control over the advertising is responsible for making sure an advertisement is compliant, including third parties and OEMs. The FAQs also state that OEM policies cannot conflict with FTC price advertising requirements.
Advertised Price: The most prominent price in any advertisement must be the all-in, out the door price available to all consumers. Prominence is not limited to font size, but the FTC will look at factors such as if a certain price is more likely to draw a consumer’s attention. (Dealers can also consult page 17 of the FTC’s dotcom disclosure guidelines for a discussion on prominence.) This all-in price must reflect everything, including the doc fee. Dealers may also separately disclose the doc fee, provided it remains included in the all-in price and the separate disclosure is less prominent than the all-in price. Only government charges (explained below) can be excluded from the all-in price.
MSRP Advertising: A dealer can list the MSRP of a vehicle if it is less prominent than the actual price that includes all mandatory non-government fees.
Government Charges: Government charges may be excluded from the all-in price if the government agency requires the consumer to pay the charge directly. However, dealer‑required fees that a government authorizes but does not mandate, and fees the government requires the dealer to pay but that the dealer passes onto consumers, must be included in the advertised price. NADA will seek further clarification from the FTC on this requirement.
State Statutes: State-specific document fee rules do not change the fundamental FTC Act requirement that the advertised price must reflect every dealer-required charge and must be the most prominent amount consumers see. Once dealers satisfy that obligation, they can make any additional document fee disclosures required under state law.
Credit and Lease Advertising: Processing fees that are due upfront in a leasing transaction must be included in any advertisement concerning the total amount due upfront. These FTC guidelines do not alter dealers’ compliance obligations under the Consumer Leasing Act and Regulation M, the Truth in Lending Act and Regulation Z, or other federal laws.
Advertising Rebates and Discounts: The most prominent advertised price may not include rebates or discounts that are available only to a subset of consumers. Advertisements may separately include rebates available only to certain customers, such as first responders, provided those rebates are properly disclosed and shown less prominently than the all-in price.
Conditioning Price on Consumers Using Dealer Financing: The most prominently displayed price may not be conditioned on dealer financing because those offers are not available to all consumers. However, dealers may still advertise a discount for using dealer financing if it is displayed less prominently.
Unavailable or Non-Existent Vehicles: Dealers must not advertise cars that have already been paid for and delivered, or that are otherwise unavailable, as a tactic to draw consumers to the dealership and then steer them to higher-priced options. The FTC does not specify when to stop advertising a sold vehicle, but a best practice would be to stop advertising a vehicle that is no longer available as soon as practicable. Dealers may truthfully advertise in-transit vehicles if the dealer clearly discloses that the vehicle is not currently at the dealership and consumers must not be led to believe the car is available on the lot if the car is not.
Representative Photos: Dealers may use a representative photo if it is truly representative of the vehicle being sold and when a reasonable consumer would understand that the picture is illustrative rather than the exact car.
Optional Products and Vehicle Add-Ons: Dealers can offer optional products if they do not mislead consumers. Dealers should not suggest an add-on is required when it is in fact optional, imply that an optional add-on cannot be removed and that the consumer must pay for it, misstate the cost of an option, or include charges for options the consumer did not agree to.
The FTC may update the FAQs with additional guidance. NADA will continue working with the FTC on issues related to dealer advertising and implementing FTC guidance. NADA will schedule a webinar with the FTC to discuss the FAQs further. (login required)
Additional Details:
- Compliance Alert: Federal Trade Commission Warns 97 Dealerships of Potential Violations of Advertising Laws (login required)
- Compliance Alert: FTC Chair and Bureau of Consumer Protection Director Address Dealer Advertising (login required)
- A Dealer Guide to Federal Advertising Requirements (will be updated to reflect the FAQs)
This memorandum is offered for informational purposes only and is not intended as legal advice. Consult an attorney who is familiar with federal, state, and local law addressing these topics and your operations for guidance on the legal sufficiency of your pricing, advertising, and disclosure practices. The presentation of this information is not intended to encourage concerted action among competitors or any other action on the part of dealers that would in any manner fix or stabilize the price or any element of the price of any good or service.
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