Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC targets auto dealer groups for violating deceptive price advertising order, (Dec 12, 2014)

By Linda O’Brien, J.D., LL.M.

The FTC has filed actions against two auto dealer groups, operating in five states with more than two dozen retail stores, seeking civil penalties for violations of FTC administrative orders that prohibit them from deceptively advertising the cost of buying or leasing a car, the FTC announced today.

Billion Auto, a chain of 20 family-owned automobile dealerships in Iowa, Montana, and South Dakota, and a family-controlled advertising company, Nichols Media, Inc., have agreed to settle charges that they violated a 2012 FTC administrative order. The administrative order prohibits Billion Auto from misrepresenting material costs and terms of vehicle finance and lease offers and requires specific disclosures, mandated by the Truth in Lending Act (TILA) and Regulation Z, and the Consumer Leasing Act (CLA) and Regulation M.

According to the complaint against Billion Auto and Nichols (US v. Billion Auto, Inc., Case No. 5:14-cv-04118), the dealerships and advertising company violated the 2012 FTC administrative order by frequently focusing on only a few attractive terms in their ads, while hiding others in fine print, through distracting visuals, or with rapid-fire audio delivery. For example, some dealership ads promoted low monthly payments or attractive annual percentage rates and finance periods, while concealing other material items, such as that low payments were for leases, not sales; major limits existed on who could qualify for discounts; and offers often included significant added costs.

In a proposed stipulated order, Billion Auto and Nichols agreed to pay $360,000 in civil penalties to settle the FTC charges.

The Commission vote to refer the complaint against Billion Auto and proposed stipulated order to the U.S. Department of Justice for filing was 5-0. The Justice Department filed the complaint and proposed stipulated order on behalf of the FTC in the U.S. District Court for the Northern District of Iowa on December 11, 2014.

In a separate action, the FTC has charged Ramey Motors, Inc. and three affiliated dealerships, in several locations in Virginia and West Virginia, with violating a 2012 FTC administrative order (FTC v. Ramey Motors, Inc., Case No. 1:14-cv-42-3082). In its advertising, Ramey Motors allegedly misrepresented the costs of financing or leasing a vehicle by concealing important terms of the offer, such as a requirement to make a substantial down payment. The complaint also charges Ramey Motors with failing to make credit disclosures clearly and conspicuously, as required by the TILA. The FTC further alleged that the auto dealer group failed to retain and produce appropriate records to the Commission to substantiate its offers. Ramey Motors and its affiliates are subject to $16,000 in civil penalties for each alleged violation of the FTC administrative order.

The Commission vote to authorize filing the complaint against Ramey Motors was 5-0. It was filed in the U.S. District Court for the Southern District of West Virginia on December 11, 2014.

“If auto dealers make advertising claims in headlines, they can’t take them away in fine print,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “These actions show there is a financial cost for violating FTC orders.”

Companies: Billion Auto, Inc.; Nichols Media, Inc.; Ramey Motors, Inc.

News: ConsumerProtection FederalTradeCommissionNews