Perhaps the gauntlet has been thrown by the Federal Trade Commission about claims automakers and dealerships make when it comes to promoting their certified pre-owned vehicles.

Jessica Rich, director of the FTC’s Bureau of Consumer Protection, offered a strong statement on Thursday during a conference call following an announcement about General Motors, Jim Koons Management and Lithia Motors all agreeing to settle separate administrative complaint allegations.

“These are three actions, but we really do hope these actions send a signal to the marketplace as a whole about the need to disclose unrepaired safety recalls, especially when you’re making bold claims about inspections that you’re undertaking or the safety that your used cars may have,” Rich said.

“We really want it to have widespread effects,” she continued.

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.

“These actions stand for a simple proposition. Companies should not mislead consumers shopping for cars, especially when it comes to safety,” Rich said.

“Although dealer inspections can benefit consumers, and manufacturers and dealers may advertise these inspections, their ads can’t overstate the safety assurances that these safety inspections provide or deceive consumers about recalls and other important safety issues,” she continued.

“These cases also underscore the FTC’s continued commitment to protection consumers from deceptive advertising in the auto marketplace,” Rich went on to say.

Neither GM nor Koons nor Lithia faced any financial penalties in conjunction with the settlements. However, Rich pointed out the proposed consent orders remain in effect for 20 years. Each violation of such an order may result in a civil penalty of up to $16,000.

“In these cases, actions do not involve any fines or money remedies. However, if the companies do violate the orders, they could be liable for substantial civil penalties. We do monitor our orders very closely and we do take action when companies violate them,” Rich said.

“And violations can be calculated in various different ways. If a large company with many customers is engaged in violations, it could come to a very large number indeed,” she went on to say.

GM’s response

GM acknowledged in a filing with the Securities and Exchange Commission last June that the automaker received notice of an investigation from the FTC concerning certified pre-owned vehicle advertising where dealers had certified vehicles allegedly needing recall repairs.

On Thursday, GM spokesperson Jim Cain told Auto Remarketing, “We made changes to our certified pre-owned marketing program last year to address the FTC’s concerns, and we are pleased with the proposed resolution of the matter.”

Lithia officials declined to comment about the development when reached by Auto Remarketing on Thursday. Efforts to contact Koons for comment weren’t successful.

More FTC action ahead?

Rich indicated she couldn’t divulge how many more investigations in the CPO space are ongoing. But she acknowledged how the volume of vehicles needing recall repairs makes it possible that the regulator could be handing out more actions similar to what involved GM, Koons and Lithia.

“We don’t have an exact count but we do believe from the public reports we’ve seen that there may be millions of cars with unrepaired safety recalls that are being sold today,” Rich said.

“While we can’t comment on other investigations that are underway because they’re non-public, you may very well see other actions in this area,” she continued.

Rich reiterated Thursday’s announcements “are just part of the larger program we have to protect consumers in the automobile marketplace,” noting that the FTC has been involved in 40 cases to date

“This case addresses deceptive claims and failure to disclose critical information that would ensure the claims aren’t deceptive,” Rich said.

“Here, the companies made broad claims about rigorous inspections that involve safety without disclosing the potential existence of unrepaired safety recalls in the inventory of the cars they were selling,” she continued. “That, we allege, was deceptive.

“That’s why the companies are compelled under the orders to make prominent disclosures to consumers about the recalls,” Rich went on to say.