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Monday, February 08, 2016

Open Letter to Auto Manufacturers: Require Your Dealers to Obey the Law


Dear USA auto manufacturer,

My last blog was about the fact that most car dealers’ advertisements violate the Federal Trade Commission’s rule that “advertisers cannot use fine print to contradict other statements in an ad or to clear up misrepresentations the ad would otherwise leave.” The FTC states that any disclaimer regarding a price or a payment must be “CLEARLY AND CONSPICUOUSLY DISPLAYED”. You can read my last blog at http://oncars.blogspot.com/2016/02/the-federal-trade-commission-most-car.html.

I’m not telling you anything that you don’t already know. You see the TV, print and Internet advertisements of your franchised dealers and those of the other US auto manufacturers. In fact, I suspect that the reason you haven’t done anything about this before is because “everybody else does it!”, including YOU. Every auto manufacturer uses fine print in most of their advertising that “contradicts other statements” especially lease and purchase payments and selling prices. Your dealers are simply following your example. Some of your dealers might not even know that they are breaking the law because you are advertising just like them. I’m not a lawyer, but I’m confident that “everybody else does it” is not a very good defense when you break the law.

My opinion as to how we reached this sad state where almost every manufacturer and car dealer is violating the FTC regulations is that everyone felt they had to do so to remain competitive. Each manufacturer and dealer believes that if his competitors advertise prices and payments that are perceived to be lower than his, he will lose sales to his competitors. Each feels like he has no choice even if he feels bad about misleading his customers.

All of this begs the questions “Why doesn’t the Federal Trade Commission” enforce their laws better? I’m not positive about why that is but I’m guessing that it has to do with lots of things like insufficient budget, low priority, heavy lobbying by large corporations like GM, Ford, Chrysler, and Toyota and not enough consumer complaints. By the way, I believe that the reason more consumers don’t complain is that most don’t know that concealing important information in the fine print is illegal. Educating the public and the car dealers might be the first step toward resolving this serious issue. In fact, this blog is my small contribution to that education.

But, the most effective thing that you, the auto manufacturer, can do is set the example for your dealers. After you have begun to follow the law, require the same of your franchised dealers. I would begin by including a clause in your dealers’ franchise agreements that they must “obey all federal, state, and local laws”. If they do not, there should be penalties up to and including the cancelation of their franchise agreement. Furthermore you could include the same language in your advertising covenants, contractual agreements that you dealers must sign regarding ethical and honest advertising. I’ve heard it said that it’s difficult for you to know when you or one of your dealers advertises in a manner that is unfair, deceptive, illegal, and/or unethical. This brings to mind the famous quotation by the former Associate Justice of the US Supreme Court, Potter Stewart, (no relation)…” I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description ["hard-core pornography"], and perhaps I could never succeed in intelligibly doing so. But I know it when I see it…”

Finally, I respectfully suggest that you use the following language in your contracts with your dealers, the advertising covenants and franchise agreements, “Any additional payment required of the customer in order to obtain the advertised payment or price, except government fees or taxes, must be conspicuously displayed immediately adjacent to the price or payment and in the same font size, style, and color.”

When most dealers and manufacturers are abiding by the law, we will have reached the tipping point so that the outliers will be obvious and the FTC can easily enforce the law so that everybody does so. With almost all advertising being honest and transparent, no manufacturer or car dealer will have a competitive advantage based solely on deception. The car buyers will be free to choose the best price by shopping and comparing with different dealers and manufacturers the way the free marketplace is supposed to work. The lowest price or monthly payment they see advertised will really be the lowest. This will raise the image of car manufacturers and car dealers and it will increase their sales and profits.

2 comments:

  1. Well said. Actually, since I was a child, I've never believed car advertisement prices any more than I believed in Santa Claus or the Easter Bunny. Your suggestions would bring a refreshing change.

    ReplyDelete
  2. Hopefully, this will encourage people like us who read this blog with your advocacy as quoted here: "Educating the public and the car dealers might be the first step toward resolving this serious issue." This will bring great turn around specially with competition and costumer servicing.

    ReplyDelete

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