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BBB-CATA ad review program, regulations studied at seminar

November 22, 2010

The treatment of limited rebates versus general rebates in vehicle ads took center stage at a recent CATA seminar on compliance with the Illinois advertising statutes, and common infractions of those statutes.

 

Advertising a vehicle’s price consistently across media—and not offering Internet-only specials—was another topic reviewed by Dennis O’Keefe, the CATA’sgeneral counsel; and Steve Bernas, vice president of operations for the Better Business Bureau in Chicago. About 60 dealers and advertising agents attended the May 25 seminar. 

Bernas oversees the BBB-CATA Automobile Advertising Review Program, established in 1996 as a sort of firewall between dealers and the Illinois attorney general.

 

Under the cooperative, the BBB notifies dealers whose ads don’t comply with the state’s rules on vehicle advertising. If subsequent ads are not brought into compliance, then the attorney general’s office is notified.  

The dealer’s advertising agency also is accountable to the AG’s office, recent lawsuits have shown.

 

The BBB issued 500 violation notices in 2004. Of those, 10 cases advanced to the attorney general’s office, and six resulted in lawsuits. Therefore, more than 95 percent of offending ads were made compliant after BBB notices. 

Limited rebates

 

General rebates can be subtracted from a vehicle’s sale price in an ad. But limited rebates, which generally are not available to every customer, cannot be. Similarly, an ad cannot depict a monthly payment of, say, $400 if that price point is reached by factoring in a limited rebate.

 

Also, an ad cannot declare "Save $10,000 off MSRP" if any part of that savings is derived from a limited rebate.

 

"If the average customer can’t get the rebate (Chrysler Financial bonus cash allowance, for instance), then you can’t put it in the advertised price," Bernas said.

 

However, referencing "0% financing" as a path to a price does not constitute a limited rebate, Bernas said.

 

The BBB does request deal jackets to confirm vehicle selling prices, he said.

 

Advertised price

 

If a Vehicle Identification Number appears in an ad, then that vehicle must not be sold for more than its advertised price. Further, the advertised price must be consistent in all media. The popular Internet-only pricing strategy is a violation, courts have ruled, because not everyone has access to the Internet.

 

To relieve themselves of having to sell a vehicle today at a price advertised months earlier, dealers should indicate a date in all advertisements when the sale price expires.

 

O’Keefe said dealers who sold a car for more than its advertised price faced treble damages from the attorney general.

 

Gifts

 

Dealers can bestow gifts for shoppers who take a test drive, for instance, but gifts cannot be given on condition that the shopper buy a vehicle whose price is negotiable. However, gifts can be given with a vehicle purchase if the gift is paid for by a manufacturer or a dealer advertising association.

 

"You can’t pick and choose when to negotiate. You can’t say: ‘That car hasn’t moved. I’ll sell it for $15,000, not negotiate, and throw in a gift,’ " said

Bernas.

 

Showroom signs—or any form of advertisement in connection with vehicle sales—that declare "tires for life" or "oil for life" are not permitted if an individual dealer is paying for the program. And neither can such programs be given away unadvertised—because the giveaway inevitably would be mentioned, and the state advertising regulations consider such an oral representation to be an advertisement.

 

Other

 

  • Dealers may not use coupons in connection with the sale of vehicles, including pop-up coupons on a dealer’s Web site. Coupons may be used for service work.  
  • It is permissible to target consumers with poor credit, but dealer advertisements must not use the word "bankrupt," or other terms that suggest bankruptcy, like "bk."
  • The attorney general is concerned about direct-mail promises of "We’ll pay off your trade-in." However, "We’ll transfer your equity to your next car" is acceptable. 
  • Dealers who pledge in an ad that customers can "get the best price here" must substantiate that assurance with comparisons to nearby dealers. The more nebulous "get the best deal here" would not demand substantiation.

 

The state’s rules on motor vehicle advertising were established in 1991 at the urging of the CATA, to level the playing field for dealers. The BBB is a business organization, not a unit of government.  

Besides monitoring print and electronic ads, the BBB sends about 20 "shoppers" to area dealerships to confirm that any vehicle can be purchased for its advertised price.

 

Any tip the BBB receives about a noncompliant ad is treated anonymously, so the offending dealer cannot learn who notified officials. 

Some advertisers at the seminar questioned certain BBB notices of alleged infractions.

 

"If you believe I’m wrong, tell me," Bernas said. "There is an appellate process available. This is self-regulation in motion."

 

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