GNYADA July 2014 Newsletter

Dealership Buy/Sell Activity Jumps 60%

8 FTC Updates its Used Auto Parts Guide

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The Guides also specify that certain acts and practices to be unfair or deceptive under the FTC Act, and are thus prohibited. The Guides prohibit misrepresenting: that a used part or assembly is new; the amount of use a part of assembly has had; the identity of anyone who worked on a used part or assembly after its removal from the original vehicle; the condition or the amount of work done to it after the part’s or assembly’s removal from the original vehicle. The terms “remanufactured,” and “factory rebuilt,” should be used only if the product was rebuilt “at a factory generally engaged in the rebuilding of such products.” The Guides now also apply to used tires. n n n n

The Federal Trade Commission (FTC) has published an update to its Guides for the Rebuilt, Reconditioned and Other Used Automobile Parts Industry (Used Auto Parts Guides) . The Used Auto Parts Guide addresses advertising, sale, and installation practices regard- ing previously used motor vehicle parts and assemblies of parts that con- tain previously used parts, such as engines and transmissions (“used parts”). The Used Auto Parts Guides require that used parts must be clearly and conspicuously identified as such in advertisements, on packaging, and, if the product appears new, on the prod- uct itself. Further, the Guides prohibit misrepresenting the identity of the used parts’ rebuilder. The Guides limit what can be described as “rebuilt” or “remanufactured,” and limit use of the term “factory rebuilt’’ to certain used parts. The Federal Trade Commission has approved final consent orders (settle- ments) involving charges against ten auto dealers for deceptive advertising. Under the settlement orders, the dealerships are prohibited from misrepresenting the cost of purchas- ing or leasing a vehicle, or any other material fact about the price, sale, financing, or leasing of a vehicle. In some cases, the consent orders also address the Truth-in-Lending Act and Consumer Leasing Act violations. Dealerships will have to disclose all “required terms” clearly. 10

According to recent reports, dealer- ship buy/sells rose dramatically in the first quarter of 2014. Kerrigan Advisors, a firm specializing in serving dealership sellers, released a report that found a 60% increase on buy/sell activity. Haig Partners Blue Sky Report indicated a tripling of transactions (from 14 to 42) during that same period, compared to a year ago. The Kerrigan Report offers a detailed view of public and private company dealership acquisition activity. In addition to the sharp spike in selling, the report found that that blue sky pricing remains high for most fran- chises and that the market has estab- lished a pricing floor. Erin Kerrigan attributed the growth to, “High blue sky prices, buyer demand for dealerships and a slow- down in dealership profit growth, meaning sellers are concerned about missing the market and want to ensure they exit on top. when acquisition spending by public retailers more than doubled in the first three quarters of the year, com- pared to the same time-frame in 2012. GNYADA’s smaller sample of the market revealed many more buy-sells and new DMV registration applications than previously. Further, the extent to which recent purchases of large groups, such as Lithia’s acquisition of DCH, have affected these numbers was not included in those announcements and may yet be seen in subsequent quarters. These reports continue the trend that GNYADA saw starting in 2013,

The amendments will be effective August 22, 2014.

FTC Settles Deceptive Ad Claims Against Dealers

In those cases where the dealerships misrepresented that consumers had won a prize, the consent order also prohibits misrepresenting material terms of any prize, sweepstakes, giveaway, or other incentive. The cases were part of Operation Steer Clear, a nationwide sweep focusing on misleading advertising associated with the selling, financing, and leasing of motor vehicles. Auto- related complaints remain a priority of the FTC. The agency brought sev- eral cases in the past year against auto dealers.

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • July 2014 5