The Federal Trade Commission has issued a new set of frequently asked questions aimed at bringing transparency to automobile advertising. The message could not be much clearer: The price a dealer advertises must be the price any consumer can walk in and pay, excluding only charges that a federal, state or local government requires the consumer to pay directly.
The FTC staff guidance, published Sept. 15, follows warning letters sent earlier this year to 97 automobile dealership groups. The FAQs explain how the FTC Act applies to dealer websites, third-party listings, social media, print ads, signs, telephone calls and text messages.
Here are the questions and the FTC’s answers, condensed for clarity:
Why is the FTC focused on price transparency?
The FTC says false low prices prevent consumers from comparison-shopping and unfairly disadvantage honest dealers. Shoppers may invest time, arrange transportation or negotiate before discovering that the vehicle actually costs hundreds or thousands of dollars more.
What must be included in an advertised price?
Every fee or charge the dealer requires a consumer to pay must be included. Dealers may exclude only charges a government requires the consumer to pay directly. A fee does not become excludable simply because state law authorizes it or because the government requires the dealer to pay it.
Where do these requirements apply?
They apply wherever a price is communicated, including dealer and third-party websites, social media, print advertising, roadside signs, telephone conversations and text messages.
Must every webpage show the actual price?
On any webpage stating an amount a consumer may pay, the actual price must be the most prominent amount. That includes inventory-search results and individual vehicle listings.
Can dealers display MSRP, rebates and discounts?
Yes, but the price available to any consumer must be displayed most prominently. A dealer may advertise a special discount for first responders or customers using dealer financing, but it cannot use that conditional price as the primary advertised price. The terms of the discount must also be clear.
What about document fees?
Mandatory document fees must be included in the advertised price. The FTC gives the example of a $40,000 vehicle carrying a mandatory $85 document fee. The advertised price must be $40,085.
If different customers may be charged different document fees, the advertised price must include the highest mandatory fee that any consumer could be required to pay.
What if state law requires a separate document-fee disclosure?
Dealers must comply with state disclosure requirements, but those rules do not override the FTC Act. The actual price, including every dealer-required charge, must remain the clearest and most prominent amount.
How should a lease processing fee be advertised?
A processing fee due upfront must be included whenever an advertisement states the total amount due at signing. Dealers must also comply with the Consumer Leasing Act, Regulation M, the Truth in Lending Act, Regulation Z and other applicable laws.
Can dealers negotiate below the advertised price?
Certainly. The FTC is not prohibiting negotiation. It says the advertised price must be available to every consumer without negotiation. Dealers cannot base an advertised price on a discount received by only a few previous buyers.
What about optional products and add-ons?
Dealers may offer protection packages, accessories and other products, but they cannot claim an optional product is mandatory, say an installed product cannot be removed when it can, misrepresent its price or charge for something the consumer did not agree to purchase.
Can dealers advertise vehicles that are in transit or stored offsite?
Yes, provided the advertisement clearly says the vehicle is not physically on the lot. An in-transit vehicle must actually be coming to the dealership, be available for purchase after it arrives and not already be allocated to another customer’s paid order.
Dealers also cannot continue advertising an unavailable vehicle as bait to bring shoppers into the dealership and steer them toward more expensive alternatives.
Can a representative photograph be used?
Yes, if the photograph accurately represents the vehicle’s make, model, condition and other material characteristics, and consumers understand that it is illustrative. Because used and antique vehicles can vary substantially, consumers may reasonably expect those ads to show the exact vehicle being offered.
Who is responsible for accurate pricing?
Everyone who controls the advertising may be responsible. That includes the dealer, third-party advertising companies and vehicle manufacturers. Dealers must provide accurate information and take steps within their control to ensure outside vendors display it correctly.
How long do dealers have to comply?
There is no grace period. The FTC says price transparency is not a new requirement and that Section 5 of the FTC Act has prohibited deceptive practices for decades.
What can honest dealers and consumers do about misleading competitors?
The FTC encourages potential violations to be reported at ReportFraud.ftc.gov. Reports should identify the dealership, explain the suspected violation and mention available documentation such as advertisements and sales contracts.
The FTC notes that these FAQs represent the views of its staff and are not binding on the public or the Commission. Individual advertisements will still be evaluated according to their overall impression and specific facts.
Still, the central message leaves little room for interpretation: An advertised price should be a price, not a scavenger hunt. Dealers deserve the freedom to negotiate, sell optional products and make a fair profit, but consumers deserve to know the real starting price before they spend hours at the dealership. Honest dealers, like the ones at CarPro.com should welcome that standard because transparent pricing allows them to compete on the deal they can actually deliver—not on which competitor can hide the most money in the fine print.
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