GNYADA October 2013 Newsletter

FTC Investigates Price Competition Issues

7

8 The Federal Trade Commission (FTC) is investigating whether deal- ers colluded to block TrueCar in 2011 and 2012 over concerns regard- ing vehicle price competition. The FTC revealed in a letter that it is investigating whether some dealer- ships committed anticompetitive acts “by agreeing to refuse to deal with TrueCar .” During 2010 and 2011, dealers criti- cized TrueCar 's model and some par- ticipating dealers dropped TrueCar . TrueCar , prodded by dealers, subse- quently changed some of its methods and some dealers have since rejoined Automobile Dealer Advertising is overseen by multiple agencies. Of those, the New York Attorney General’s Office and the Federal Trade Commission are independently reviewing current dealer advertising activity. New York Advertising Guidlines The A.G.’s guidelines say that selling a vehicle for more than the adver- tised price is deceptive unless the ad requires the consumer to mention or produce the ad to obtain that price. The A.G. told a dealer who did not include that requirement in the con- tent of his ads, and who did not sell vehicles at the advertised price, to send refunds to customers to reflect the lower price – regardless if those customers knew about the lower price had been advertised.

the site. A number of state regulators questioned whether TrueCar was violating state advertising and consumer laws in 2012. TrueCar CEO Scott Painter said in an interview that the investigation did not stem from a complaint by TrueCar . The FTC has not disclosed the scope of its investigation and would not even confirm that an investigation is underway. Anti-trust enforcement The FTC enforces the anti-trust laws to promote vigorous competition and protect consumers from anticompeti- The Attorney General “requested” the dealer to “review all contracts for the last three years whereby the actual selling price was higher than the advertised selling price” and requested refunds for “all such over- charges.” Feds Focus on “Discount” Ads The FTC has issued proposed con- sent orders to two dealers regarding rebate ads on their websites. One dealer advertised particular models at a specific dealer discount when the rebates were available for some, but not all, of the models advertised. In the other case, the dealer adver- tised specific dealer discounts and prices even though there were signif- icant restrictions on the availability of the discounts. Some rebates required being a member of the

tive business practices. Agreements that tend to raise prices or to restrain trade are per se illegal. Those include agreements among competitors to fix prices or output, rig bids, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce. The Department of Justice prose- cutes participants in hard-core “cartel” agreements criminally. Dealers should adopt and enforce anti-trust compliance policies in their businesses.

A.G. and FTC Scrutinize Dealer Advertising

military, being a recent college grad- uate, possessing a bank account at a particular bank, or owning a vehicle on which there is a lien. What a dealer can do Dealers should establish, distribute and enforce an ad compliance policy. Designate and train an “advertising compliance officer” (who may be someone on your staff, an outside contractor, or your attorney) to review all ad copy – in every medium. If, despite your best efforts, your dealership runs a non-compliant ad, penalties may be mitigated if you can demonstrate that the dealership has an ad compliance policy and has made good faith efforts to enforce it.

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

The Newsletter • October 2013

4