Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: GM, used car dealers settle FTC charges that ads failed to disclose unrepaired safety recalls, (Jan 29, 2016)

By Michael Menzhuber, J.D., LL.M.

General Motors Company, Jim Koons Management Company, and Lithia Motors, Inc. have agreed to settle separate FTC charges that they touted how rigorously they inspected their cars but failed to disclose that some of their used cars were subject to unrepaired safety recalls, the FTC announced yesterday. Jim Koons, which has 15 dealerships in the Mid-Atlantic region, and Lithia Motors, which has more than 100 stores in the West and Midwest, are two of the nation’s largest used car dealers.

In its complaint against GM, the FTC alleged that the company advertised numerous certified pre-owned vehicles at its local dealerships using its “certified pre-owned vehicles” representations without disclosing that certain of the vehicles were subject to previously announced open recalls for safety issues. These safety issues included: (1) key ignition switch defects; (2) problems in the body control module; and (3) chassis electronic module defects.

In its complaint against Jim Koons, which also does business as “Jim Koons Automotive Companies,” the FTC claimed that, despite the company’s purported “inspection guarantee,” some cars were subject to unrepaired recalls. These recalls involved: (1) key ignition switch defects; (2) alternator-related defects; and (3) a rear suspension defect.

In its complaint against Lithia Motors, the FTC alleged that, despite the company’s inspection claims in its dealer-backed “60-Day/3000 Mile” warranty, some of the cars it advertised were subject to repair recalls involving defects in the key ignition switch and other safety issues.

Under the proposed consent orders, which would remain in effect for 20 years, the companies are prohibited from claiming that their used vehicles are safe or have been subject to a rigorous inspection unless the vehicles are free of unrepaired safety recalls or the companies clearly disclose the existence of the recalls in close proximity to the inspection claims.

The proposed order also:

• Prohibits the companies from misrepresenting material facts about the safety of used cars that they advertise; and

• Requires the companies to inform recent customers, by mail, that their vehicles may have an open recall. This requirement applies to: (1) GM for certified pre-owned vehicles purchased between July 1, 2013 and the final order date; (2) Lithia Motors for Lithia Warranty used vehicles purchased between July 1, 2013 and the final order date; and (3) Jim Koons for certified used vehicles purchased between July 1, 2013 and June 15, 2015.

The FTC will publish the consent agreement packages in the Federal Register shortly. The agreements will be subject to public comment through February 29. Comments can be filed electronically by following the instructions for the notices for GM, Jim Koons, and Litha Motors.

Companies: General Motors Company; Jim Koons Management; Lithia Motors, Inc.

News: ConsumerProtection FederalTradeCommissionNews