Dealers nationwide are facing amplified scrutiny from the Federal Trade Commission (FTC) after the agency sent nearly 100 warning letters to dealerships, signaling a shift toward more aggressive enforcement of advertising practices.
“What the FTC is trying to enforce is to make sure that the dealer takes a hands-on role to ensure that the third parties that are the vendors that are working for the dealership remain in compliance.”
On the latest episode of Inside Automotive, Seth Dobbs, Partner and Co-Chair of the National Automotive Practice at Fox Rothschild, says the letters are designed to ensure dealers are aware of compliance requirements, giving the FTC stronger grounds to pursue penalties under Section 5 of the FTC Act.
The agency is emphasizing pricing transparency, requiring dealers to display all-in vehicle costs, including fees and applicable discounts, and to maintain consistent pricing across websites and third-party platforms. While some dealers have expressed concern over listings they do not control, the FTC expects them to actively monitor vendor compliance and take corrective action if discrepancies arise. However, Dobbs says, “I don’t see this as going away. I think this is simply a warning shot.”
State attorneys general are also increasing oversight, issuing subpoenas that mirror federal concerns, Dobbs expressed. He also notes that dealers face significant financial and reputational risks due to the possibility of simultaneous state and federal enforcement actions for the same violations. Because enforcement actions are publicly disclosed and penalties can amount to tens of thousands of dollars per violation, a dealership’s local reputation is also potentially at stake.
Moreover, Dobbs stresses that legal and compliance teams must play an active role in daily operations, reviewing advertisements, consumer-facing materials, and transaction documents. He believes that even a single non-compliant action by an employee can expose the entire dealership to liability.
“At the end of the day, the dealers are going to have to take a much closer look at compliance and they need to make sure that the advertisements they put out there are sufficient that they’re not going to end up with substantial fines from the FTC.”
Immediate steps dealers should take, according to Dobbs, include:
- Contacting their compliance attorney or vendor to review all website and advertising materials
- Ensure all consumer documents clearly disclose required information
- Implement regular compliance training for staff.
- Monitor both internal and third-party advertising, and any rogue employees placing inaccurate ads must be addressed promptly to avoid exposure to fines or enforcement actions.
Nevertheless, a sustained regulatory focus from the FTC is evident in its recent actions. Dobbs states that in order to avoid financial penalties and long-term harm to their credibility and customer trust, dealers will need to adapt. Ultimately, those who implement strong compliance programs will be better equipped to handle the increasingly rigorous regulatory environment.
* Editor’s Note: NADA and the FTC are encouraging dealers to register for this April 6 webinar to learn more about the warning letters and the agency’s perspective on dealer advertising.
