By Diane Bartz
WASHINGTON, Jan 9 (Reuters) - Nine auto dealerships in six states have agreed to stop what the U.S. government called deceptive advertising, and the Federal Trade Commission said on Thursday it would litigate against another as part of an effort to convince dealers to make sure their advertising is accurate.
The dealers who settled with the commission were accused of behaviors that included advertising car prices that were $5,000 higher than real prices, advertising zero-dollar-down leases when there were actually substantial upfront fees, and advertising low interest rates when in fact rates went up shortly after a loan agreement was signed.
In one case, a dealership in Michigan sent mailers that claimed consumers had won sweepstakes prizes when, in fact, they had not.
“We hope that these actions not only stop the specific conduct that we have challenged in this instance but also put all dealers on notice,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “We have many other investigations ongoing. This is a priority area for the FTC.”
About 75,000 people complained to the commission about poor treatment by automotive dealers in the last year for which figures are available, Rich said in a press conference in Los Angeles.
Rich said that the FTC, which worked with the Los Angeles Department of Consumer Affairs on “Operation Steer Clear,” could not fine dealers for breaking deceptive advertising rules - but it could fine them $16,000 per infraction if they fail to live up to agreements to advertise accurately.
“We believe there is a lot of deception out there. That’s not to say all auto dealers are deceptive,” she said, adding, “We can’t sue everybody, and we do have limited resources.”
The National Automobile Dealers Association, which represents nearly 16,000 dealerships, said the government action was a bit of a wake-up call.
“It (NADA) reminds all dealers to review their advertising, whether online, in print or over the air to ensure that it is not misleading, and that it includes the required disclosures to be clear and conspicuous,” the group said in a statement.
The FTC filed an administrative complaint against Courtesy Auto Group in Massachusetts.
Courtesy General Manager Steven Silva said the FTC had contacted them last summer about a video on the dealer’s website which had been made by a company that did hundreds of such videos. “We feel we’ve done nothing wrong. It’s not our video,” said Silva.
The commission reached agreements with dealers in California (Casino Auto Sales, Rainbow Auto Sales, Honda of Hollywood and Norm Reeves Honda); Georgia (Nissan of South Atlanta); Illinois (Infiniti of Clarendon Hills); North Carolina (Paramount Kia); Michigan (Fowlerville Ford); and Texas (Southwest Kia).
Norm Reeves Honda Superstore said in a statement that the FTC had been concerned about a advertisement in March 2013 which used a template that “resulted in an unclear lease offer.” It said it had changed its advertising.
The other dealerships did not respond to requests for comment.