- The FTC is encouraging car dealers to tattle on competitors who break the rules on deceptive advertising.
- The director of the FTC Bureau of Consumer Protection wants dealers to “compete on an even playing field.”
- At some dealers, the prices shown in ads differ significantly from the prices on the dealer lot.
Anyone who has bought a new or used car at a dealership has had to deal with fees that don’t show up on an online listing. There are doc fees, destination charges, tax and title, and sometimes much more. Some of these additional charges are par for the course, but in some cases, dealers engage in deceptive advertising practices that show very different prices in ads than in the showroom.
The U.S. Federal Trade Commission (FTC) is the governing body on advertising rules for car dealerships, specifically, the Bureau of Consumer Protection. Long-standing “truth in advertising” principles require that dealerships advertise the “all-in” price of a car, including mandatory fees required to buy the car. However, the all-in price excludes government fees like tax, title, and registration. Where things get shady is when dealers advertise “discounts” that either require special eligibility that isn’t clearly disclosed or simply aren’t available to most buyers.
“There remains consumer frustration with prices revealed in advertisements, and then the prices actually offered on the dealer floor,” FTC Chairman Andrew Ferguson said, per Automotive News.
There were so many complaints to the FTC from consumers and dealers who were playing by the rules that the Bureau of Consumer Protection sent a formal warning letter to 97 dealer groups in the U.S., reminding them of the rules and the consequences of breaking them. FTC requirements create a bit of a subjective gray area in its mandate to make price disclosures easy to notice and understand, and to ensure the “out-the-door” price is close to the advertised price. This is where deceptive dealers take advantage of the vaguer side of the rules.
One way the FTC is cracking down on these shady practices is by encouraging the good dealers to snitch on the bad dealers. If a car shopper has a bad experience at one dealer, it could foreseeably have a negative impact on the perception of a competing dealer down the road. The dealers who play by the rules are thus losing business because their competitors are giving shoppers bad experiences. To combat this, Bureau of Consumer Protection director Christopher Mufarrige, in a recent webinar, encouraged dealers to file a report on the FTC’s website about their competitors’ bad behavior.
The goal is to create more transparent pricing to give the consumer a realistic idea of what they’ll pay for their next car. In an economy where cars keep getting more expensive, more truth-in-advertising can take some of the headaches out of the car shopping process.
