Importance of Dealership Compliance with State and Federal Advertising Laws
Updated: Feb 24, 2021
Dealer advertising of vehicles, products and other services is a significant part of a dealership’s overall business operations and can consume a sizeable portion of its operating budget. In addition to a dealership’s fundamental obligation to lawfully advertise, the foregoing business reasons should provide ample justification for a dealership to ensure compliance.
Compliance, however, can be challenging because dealer advertising is extensively regulated at both the state and federal levels. Advertising is also frequently scrutinized by law enforcement, regulators, and customers. This article will discuss the importance of the Illinois dealers’ compliance obligation under Illinois law, which includes without limitation, the Illinois Motor Vehicle Advertising Regulations and the Illinois Consumer Fraud and Deceptive Business Practices Act. However, there are other state and numerous federal laws applicable to dealer advertising. These include the Federal Trade Commission Act, Truth-in-Lending Act, Regulation Z, Consumer Leasing Act and Regulation M, among others.
In Illinois, the Attorney General’s Office is charged with enforcing Illinois laws intended to protect Illinois consumers against unfair and deceptive practices. The Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq.) generally prohibits such unfair methods of competition and unfair or deceptive acts or practices which include:
• any deception, fraud, false pretense, false promise, misrepresentation, or
• any concealment, suppression or omission of any material fact, or
• any practice described in the "Uniform Deceptive Trade Practices Act".
This law applies to advertising and to business practices and transactions. And pursuant to Section 4 of the Consumer Fraud Act, the Illinois Motor Vehicle Advertising Regulations (14 Ill. Admin. Code 475, 15 Ill. Reg. 17950) were promulgated in 1991 relating to dealer advertising. The Attorney General is authorized to investigate advertising practices for compliance with these Regulations – whether or not there are complaints – when it appears an unlawful practice has been or is being committed, or when it’s in the public interest. This includes subpoena powers. The Illinois Attorney General can also bring a civil enforcement lawsuit against the person or business engaging in the unlawful practice. Available remedies for advertising and other violations of the Consumer Fraud Act include: injunctive relief, civil penalties, revocation or suspension of licensure, and restitution.
Dealership staff, media personnel and third party agents involved in the dealership’s advertising should all undertake thorough review of the Motor Vehicle Advertising Regulations to ensure their understanding and advertising compliance. The Regulations can be found at: http://www.illinoisattorneygeneral.gov/consumers/vehicle_advertis.html. Questions of compliance or interpretation about the Regulations and their applicability should be discussed with knowledgeable legal counsel for the dealership.
The Regulations apply to all forms of advertising, including without limitation print, broadcast, direct mail, website and digital, social media, signs, billboards, window stickers and all oral, written and pictorial statements. This list is not exhaustive. Each dealership is responsible for the content of its advertisements. So, dealers should hold accountable their staffs, media representatives, website providers, manufacturers, ad agencies, marketing companies and anyone who prepares and is involved in placement of ads for the dealership.
Before finalizing any advertisement, dealerships should perform an internal compliance assessment to ensure the ad does not contain prohibited claims and that disclosures and other requirements are satisfied. The following checklist, while not exhaustive nor a substitute for review and application of the Regulations to ensure compliance, might aid dealers in their internal compliance review:
• Is the substance of the advertisement prohibited (for example, dealer rebates, guaranteed trade-in amount, “free” or similar offers, limited rebates included within advertised price or payment)?
• Does the substance of the proposed advertisement require a particular format?
• Does the nature of the advertisement require certain disclosures (for example, credit advertising Truth-in-Lending; limitation as to quantity of advertised vehicles; limitation as to the effective period of the advertised offer)?
• Is the advertised vehicle price the total advertised price?
• Does the advertising format adequately distinguish between lease and sale offers if both are present?
• If the advertisement refers to a credit sale, are there “triggering” terms, and are all required disclosures included; or if the advertisement refers to a consumer lease, are there “triggering” terms, and are all required disclosures included?
• Are disclosures published in a “clear and conspicuous” manner?
• Are the disclosures understandable in light of the content of the advertisement?
• Has the dealership arranged for a responsible person to review the advertising “proof” for compliance and possible errors?
Dealers can also consult with experienced counsel who can assist in advising about the applicability of the Regulations and state and federal laws to dealership advertising. By properly handling advertising compliance on the front end, dealers can enhance their customers’ experience and resulting satisfaction about an advertised offer, and simultaneously help themselves avoid or, at least, reduce exposure to compliance problems and costs associated with regulatory scrutiny and enforcement.