RALEIGH, N.C. — A dealer has to be concerned with
advertising regulation and rules while marketing his own vehicles, but also
needs to be careful when enlisting the help of others. A recent case that dealt
with a Louisiana-based marketing firm allegedly pitching false sales events and
advertising at North Carolina dealerships focused on this very issue.

North Carolina Attorney General Roy Cooper said late last
week that "Using false promises and bogus prizes to lure customers is no way to
do business. Consumers deserve straight-forward information when they're
preparing to make such a big purchase."

He was referring to Level 10 Marketing, which as alleged in
Cooper's complaint, had sold advertising and sales packages to North Carolina
auto dealers designed to increase sales of the dealers' used-vehicle inventories.

Though this case came down hard on the marketing firm
involved, The Car Counselor to the automobile industry Keith Whann cautioned
that dealers can bear the brunt of a out-of-dealership dishonest advertising
campaign gone awry, as well.

Especially one that involves promoting weekend sales
designed to clear out older inventory on a lot.

"The first thing is the dealer and dealership needs to
remember that anything that these (marketing and advertising firms) companies
do, the dealership is liable for," Whann said. "Often, they (dealers) think
since an independent contractor came in or some other company, and they have
insurance, then it may be alright. But, that is just not the case. You are
going to be liable for all of that."

Highlighting the case in more detail, the marketing firm has
been permanently banned from automobile advertising and marketing in North
Carolina, Cooper said in a statement. North Carolina joined Arizona, Iowa,
Kentucky, Maryland, Oregon and Pennsylvania in bringing the case.

Apparently, the marketing material  falsely claimed that the sales events
involved vehicles brought in from elsewhere by using terms such as "lender's
inventory sale" or "repossessed vehicle event" and used other misleading terms
to create a false sense of urgency, such as "emergency disposal," and
"liquidation."

 Furthermore, the
company advertisements also claimed that used vehicles would be sold at "90
percent off original price," which was actually a comparison with the
Manufacturer's Retail Price (MSRP) of the vehicle when new, according to the
complaint, and falsely claimed that "some vehicles will be available for $1
down, $114 per month," according to Cooper.

What Dealers Should Watch Out For

To give dealers an idea of what they should keep an eye out
for to avoid such a situation themselves, sister publication Auto Remarketing chatted with Whann
to offer dealers some "red flags" as well as questions they should pose before
agreeing to working with an outside advertiser to promote weekend event sales,
in particular.

"When you are selling cars, remember that in most states,
you can only sell a car if the dealership owns the car on one side, and you are
dealing with a licensed sales person," Ohio attorney Whann said.

"So the question comes when you deal with a company such as
this, ‘What are they doing, and do they need come kind of licensing?'" he
added.

In other words, don't simply be allured by the promise of
driving traffic.

And the biggest issue here is knowing all these statements
being made on behalf of the dealership are true, Whann noted.

But he also stressed he realized these weekend sales events
are designed to create more room on the lots.

"Virtually all these event sales that occur, you are trying to
create some sense of urgency. And everyone gets that. You want the belief in
the customer's mind that there is a good deal or opportunity, but you have tell
them the truth," Whann said.

He also explained that in the digital age, it is becoming
harder and harder to "fool" a consumer.

"Today, in this day and age, you are praying on someone
naivety in thinking they are somehow getting the deal of their lifetime on this
car," Whann said. "But, now, more than ever, in this electronic age, it is so
easy for people to check into these things and to get information on them.
There is no getting around it; you are going to get caught."

Whann went on to say there is no "shortcut" to holding a
successful event sale.

"If you want to have a valid event sale, and you are
overstocked or you are going to get aggressive in pricing or you have some
additional lenders on hand,  you can tell
the truth and the whole story and do it right," he said.

Also, experienced dealers know their market best and what
works for their audience, a fact they shouldn't forget when working with
advertising firms, Whann said.

If a marketing firm comes in and tells you they can sell
half your monthly income in one weekend, for example, Whann said, dealers
should "scratch their head" and wonder how exactly the company plans to do
this.

"If it sounds too good to be true, it probably is," he
added.

So, what are some ways to make sure and avoid this type of
problem?

"When all else fails, you want to keep yourself surrounded
by advisors who understand the industry – from a business perspective, from a
legal and regulatory perspective, from an accounting perspective. You need
advisors who are able to tell you the right thing," Whann said.

He also offered the following five questions to keep in mind
when presented with a marketing or advertising plan by an outside firm:

1.    Is this
something I can do as a dealer, without outside help?

2.    Are these people
acting appropriately under my dealer's license?

3.    Do we need to be
licensed as a sales person?

4.    Are there any
problems with the contracts and agreements?

5.    Are all the
promotional and marketing materials accurate and in compliance with the law?

"The umbrella over this whole thing is simply tell the
truth," Whann concluded.

Sarah Rubenoff can be reached at srubenoff@subprimenews.com. Continue the conversation with SubPrime Auto Finance News on LinkedIn and Twitter.