Increased Scrutiny on Car Dealers Following FTC Regulations
Car dealerships are facing heightened regulatory attention after the FTC deemed advertising vehicles that aren’t available as illegal. Experts in the industry are suggesting that dealers should remove listings for sold cars within a day.
The FTC has intensified its monitoring of dealer advertising tactics, zeroing in on ads for vehicles that are either out of stock or completely non-existent. Patricia Covington, a lawyer who discussed the issue with Automotive News, noted that the penalties could be steep, with fines exceeding $50,000 for each violation, in addition to potential restitution for affected customers.
This month, Christopher Mufarige, the FTC’s Director of Consumer Protection, sent letters to 97 dealer groups, indicating that they might be breaking six advertising regulations seen as unlawful. Five of these relate to price discrepancies, such as showing a lower price than what customers would find in the dealership, leaving out mandatory dealer fees, or advertising contingent prices depending on down payments or financing. The sixth violation specifically pertains to inventory accuracy.
Mufarige pointed out that advertising vehicles that aren’t available is a significant breach, presenting a challenge for dealers who need to balance effective marketing with maintaining fresh inventory. Adam Crowell, a legal and strategy officer at KPA, mentioned in an interview that not removing listings promptly could lead to serious issues.
During a recent webinar, Brad Miller, co-CEO and chief legal officer at ComplyAuto, spoke to dealers about the importance of having a process for quickly removing ads. He recommended aiming to take down listings within 24 hours. While the FTC hasn’t provided a specific compliance deadline, they have refrained from offering legal guidelines.
Chris Cleveland, also co-CEO of ComplyAuto, suggested implementing clear disclaimers about the removal process and recommended regularly updating inventories to show vehicle availability. He emphasized that time stamps can make inventory data trustworthy, confirming each vehicle’s physical presence or its in-transit status with an expected arrival date. He cautioned against using vague disclaimers that indicate a vehicle “may not be available,” as this could signal to regulators that the dealer is promoting a car that isn’t selling.
Many larger dealership chains are turning to automated systems to manage their inventories. The Rick Case Automotive Group, based in Sunrise, Florida, operates 12 dealerships and recently reported selling 28,458 new vehicles in 2024, ranking 25th among U.S. dealer groups. CEO Rita Case noted on March 26 that they utilize both automated tools and manual checks to ensure advertising is accurate.
On the state level, enforcement actions have also taken place, such as the Swickard Auto Group agreeing to pay $800,000 and a suspended $200,000 fine to resolve allegations from the Alaska Department of Justice regarding unfair advertising practices. This settlement, announced on March 24, accused Swickard of promoting models that were unavailable and refusing to sell cars at the advertised rates.
Alaska Attorney General Stephen Cox stated, “Car dealers can’t advertise one price and charge another. Or advertise a car that doesn’t actually exist. This is a bait-and-switch and it’s illegal.”
