For months, we’ve been warning dealers that the Federal Trade Commission’s focus on vehicle price transparency should not be dismissed as political noise, regulatory saber-rattling or another government initiative that might eventually disappear.

We discussed this at our Compliance Unleashed Conference. We’ve written about it in publications, and we’ve spoken on this subject at industry events.

If there was still any doubt, recent events should put them to rest. For those of you living under a rock, it’s time to get serious about pricing transparency. All dealers should pay attention, because the progression from warning, to guidance, to enforcement gives us a clear direction of the road ahead.

It started with 97 letters

On March 13, the FTC announced that it was sending letters to 97 dealership groups warning that advertised vehicle prices must represent the price consumers can actually pay, including mandatory dealer fees and charges.

The basic concept sounds simple: If you advertise a vehicle for $25,000, a consumer should be able to purchase that vehicle for $25,000, excluding government-required charges such as taxes and registration.

The implications are significant.

The FTC specifically identified practices such as advertising prices that exclude mandatory dealer fees, incorporating rebates or discounts that aren’t available to everyone, requiring additional down payments, conditioning an advertised price on dealer financing, requiring additional products that aren’t included in the advertised price, and advertising vehicles that aren’t actually available.

At the time, some dealers questioned whether the letters were simply warnings without much enforcement behind them.

We cautioned against that thinking.

Next came the FAQs

In September, the FTC eliminated much of the remaining ambiguity by publishing detailed pricing transparency FAQs for the automobile industry. These FAQs make clear that the FTC’s position extends far beyond the price displayed on a vehicle detail page.

According to the FTC, if a dealer requires a consumer to pay a fee to purchase the vehicle, that fee generally needs to be reflected in the advertised price. That includes mandatory document fees.

The agency also addressed conditional rebates and discounts. Dealers can advertise them, but the price available to any consumer must be the most prominent price. A special discount available only to military members, first responders, recent graduates or consumers using a particular financing source cannot be used to create the primary advertised price available to the general public.

The FTC also made clear that price transparency applies across advertising channels. Dealer websites, third-party websites, social media, print advertising, signs, telephone calls and text messages can all create advertising issues.

And blaming the advertising vendor isn’t necessarily going to solve the problem. The FTC said everyone who has control over advertising has responsibility for ensuring that the pricing is accurate. Dealers therefore need to know what their vendors are publishing on their behalf.

The last FAQ — No. 14 — was particularly concerning because in it, the FTC specifically encourages the public, including other dealers, to report suspected pricing violations and submit supporting documentation such as advertisements and contracts.

Your advertising isn’t just being viewed by prospective customers anymore. Competitors, attorneys, regulators and others can see them, too. How long will it be before lawyers send Freedom of Information Act requests to the FTC to discover the identity of those dealers being turned in to identify their next targets?

And now comes enforcement

On Oct. 8, the FTC announced a proposed settlement with an auto group over allegations involving its advertising and pricing practices.

According to the FTC’s complaint, the group advertised vehicles at prices thousands of dollars below what many consumers were ultimately charged. The FTC alleges that more than 92% of the transactions it examined included charges above the advertised price, averaging more than $3,350.

The alleged additional charges included administrative fees, dealer fees, delivery fees and processing fees. The FTC also alleges that advertised prices sometimes included conditional rebates and discounts unavailable to all consumers.

But there is another detail dealers should notice.

This group received one of the FTC’s March warning letters.

According to the FTC, after receiving that warning, the dealer group added assurances about price transparency to its websites while allegedly continuing practices the agency considered problematic.

In other words, the March letters weren’t theoretical.

The consequences go beyond changing an ad

Dealers sometimes think about regulatory enforcement primarily in terms of fines.

That misses a major part of the risk.

The proposed published order contains extensive ongoing compliance requirements. The dealer group will be required to maintain certain advertising, transaction and compliance records for five years. That includes records involving advertisements, deal worksheets, complaints, scripts and training materials.

Certain employees and managers must receive the order and acknowledge its content. The company must provide compliance reporting to the FTC and report certain business changes for years.  The FTC can also request records, sworn reports, depositions and employee interviews as part of compliance monitoring.

Perhaps most importantly for dealers trying to understand the new environment, the order permits the FTC to monitor compliance without announcing itself, including by having representatives pose as ordinary consumers.

Think about that the next time someone calls, texts, emails or submits an internet lead asking about an advertised price.

Compliance has to reach the showroom

Changing numbers on your website isn’t enough. Dealers should be looking at the entire path from advertisement to completed transaction.

Does the advertised price match what the customer is quoted when they call?

Does the BDC provide consistent information?

Do salespeople understand which discounts are conditional? Are mandatory products or fees being added later?

Does the deal jacket support what was advertised?

Are third-party websites and the dealership’s social media displaying the same pricing as the dealership’s own website?

Are managers, salespeople, BDC personnel and advertising vendors working from the same rules? Are personnel being adequately trained?

Advertising compliance can no longer live solely with the marketing department. It is now everyone’s responsibility and dealers need demonstrable compliance.  That means reviewing advertisements, auditing completed deals, training employees, reviewing scripts and templates, monitoring vendors and documenting the steps the dealership is taking.

The warning period is over

No dealer should assume, “We’re too small. The FTC isn’t looking at us.”  Nor should a dealer assume it can wait until every competitor in the market changes its advertising first.  Don’t worry about what others are doing, worry about yourself.

Dealers must also remember that advertising violations like this could also give rise to private lawsuits and scrutiny from your state regulator.

Dealers have been given a pretty clear roadmap of what the FTC expects. Dealers are now on notice.  Will they be able to demonstrate they listened?

Steve Levine and Joe Allen are with Ignite Dealer Compliance Group, which offers guidance on protecting the dealership through compliance, training, operations and best practices. They can be reached at [email protected]. For more information go to IgniteDealerCompliance.com.