Federal Trade Commission officials said on Thursday that General Motors, Jim Koons Management and Lithia Motors all agreed to settle separate administrative complaint allegations from the regulator.
The FTC indicated each company touted how rigorously they inspect their vehicles, yet failed to disclose that some of the used models they were selling were subject to unrepaired safety recalls.
The FTC’s complaint against GM cites the company’s representations for certified pre-owned vehicles such as when the automaker claimed:
“Our 172-Point Vehicle Inspection and Reconditioning Process is conducted only by highly trained technicians and adheres to strict, factory-set standards to ensure that every vehicle’s engine, chassis, and body are in excellent condition. The technicians ensure that everything from the drivetrain to the windshield wipers is in good working order, or they recondition it to our exacting standards.”
The FTC alleges that GM advertised numerous CPO vehicles at its local dealerships using these claims without disclosing that certain used vehicles offered for sale were subject to previously announced open (unrepaired) recalls for safety issues.
According to the FTC’s complaint, those vehicles subject to recalls had defects that can cause serious injury, including a key ignition switch defect that can affect engine power, power steering, braking and airbag deployment, problems in the body control module connection system that can affect braking, and chassis electronic module defects that can cause engine stalls.
The FTC’s complaint against Jim Koons Management Company, which also does business as Jim Koons Automotive Companies, involves the company’s purported “guarantee” that “every certified Koons Outlet vehicle must pass a rigorous and extensive quality inspection before it can be sold. Our certified mechanics check all major mechanical and electrical systems and every power accessory as part of our rigid quality controls.”
The complaint alleges that some vehicles were subject to unrepaired recalls, including those involving the key ignition switch, alternator-related defects that could cause unexpected vehicle shutdown or an electrical fire, and a rear suspension defect that could result in a fuel leak or fire.
Jim Koons Management has 15 dealerships in the Mid-Atlantic region.
The FTC’s complaint against Lithia cites claims for its dealer-backed “60- Day/3000 Mile” warranty, including:
“ . . . vehicles are put through an exhaustive 160-checkpoint Quality Assurance Inspection. We inspect everything from the tires and the brakes to suspension, drive train, engine components and even the undercarriage.”
Nonetheless, the FTC complaint alleges, some of the vehicle Lithia advertised were subject to unrepaired recalls involving defects in the key ignition switch and other safety issues.
Lithia operates more than 100 dealerships
Under the proposed consent orders, which would remain in effect for 20 years, the FTC said the companies are prohibited from claiming that their used vehicles are safe or have been subject to a rigorous inspection unless they are free of unrepaired safety recalls, or unless the companies clearly disclose the existence of the recalls in close proximity to the inspection claims.
The regulator added the proposed orders also would prohibit the companies from misrepresenting material facts about the safety of used vehicles they advertise.
These proposed orders will also require the companies to inform recent customers, by mail, that their vehicles may have an open recall.
For GM this requirement applies to CPO vehicles purchased between July 1, 2013 and the final order date.
For Lithia, this requirement applies to Lithia Warranty used vehicles purchased during the same time period.
For Koons, it applies to certified used vehicles purchased between July 1, 2013 and June 15 of last year.
“Safety is one of the biggest considerations for consumers shopping for a car,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection.
“So companies touting the comprehensiveness of their vehicle inspections need to be straight with consumers about safety-related recalls, which can raise major safety concerns,” Rich continued.