Myth Busters

Can a penny dropped from the top of the Empire States Building really be deadly?  Can you survive a multi-story elevator fall by jumping right before the elevator hits the ground? 

If these questions sound familiar or interesting to you, you might watch my new favorite TV show.  I’m talking about “MythBusters,” where two scientists conduct wild and crazy stunts, testing the validity of modern myths, rumors, and urban legends.  Some of my favorite episodes are, “is yawning contagious?” and “how many balloons does it take to lift a three year old off the ground?”

Have I given you a frightening peek into the window of my soul?  Perhaps.  Do I have a point?  Absolutely.  Here it goes. 

As a compliance lawyer, I spend a bunch of time “busting” the compliance myths that grow like toxic mold out in Dealer-ville.  Fortunately, unlike the TV “MythBusters,” I don’t have to conduct any wild and crazy stunts to disprove these “myths”—I’ve got brave dealers to do it for me.  With that in mind, here are two of the biggest myths floating around out there when it comes to dealer ads.     

Myth #1:  I’ve Got People Who Take Care of That Stuff For Me. 
Do you remember the story back in 2004 about the Minnesota dealer who paid $250,000 to the state attorney general’s office because of non-compliant mailers?  The story ran in Automotive News, which quoted the dealer as saying that he relied on the representations of his marketing company when it promised him that the ad complied with all applicable laws.  Unfortunately, the dealer learned about my “Myth #1” the hard way. 
We hear the same tune sung by dealers far too often, as many dealers routinely rely on marketing companies for advertising compliance.  In 2007, our firm reported on a number of advertisement enforcement actions by state attorney generals.  Many of these targeted dealers who were simply following the lead of third party ad companies. 
Just ask the Washington state dealer who, along with a Louisiana advertising company, had to cough-up tens of thousands of dollars in fines in 2007 for allegedly sending mailers that, among other things, contained misleading price information and used envelopes that resembled official certified mail.  While I don’t know for certain, I’d bet dollars to doughnuts that the dealership relied on the ad company’s promises the materials were compliant.
At other times, we hear tales about various “mercenary” sales outfits that come to a dealership and run special sales “extravaganzas” for some days.  Sadly, we usually hear about these crews long after the last balloon has shriveled up and died.  We hear about dealers facing citations from the local authorities because the sales outfit failed to obtain the required sales permits as it promised the dealer.  We hear about dealers being forced to buy back the deals it sold to the bank because the third-party sales crew assigned contracts that didn’t comply with the reps and warranties in the dealership’s agreement with the bank.  The worst stories we here are about dealers facing the potential of criminal fraud charges because the rent-a-salesmen falsified information they submitted to the bank on behalf of the dealership.  In almost all of these situations, the dealer relied on the promises of the sales crew, who incidentally is nowhere to be found when things go wrong. 
Myth #2:  I Can Take Off My “Dealer Hat” When Running Ads.   
Because I don’t like being ignored at parties, I usually don’t introduce myself as a lawyer when I go out.  But, no matter where I go and how I’m known, I keep some basic “lawyering” rules in mind.  (‘Cause being the hit of the party is usually not worth getting disbarred, right?) It works much the same way with dealer advertising—it’s very difficult for dealers to escape their legal requirements when it comes to ads.  Which brings us to Myth #2.
We sometimes hear stories about dealers who are, shall I say, not particularly forthcoming about their identities when advertising to customers.  Often, this can be as simple as when a dealer (or, zealous salesperson) runs an ad in a local newspaper without identifying the dealership (i.e., “Call Nate at 555-1212”).  I’ve even heard of dealers using more sophisticated techniques and blind advertisements to accomplish the same goal—to attract customers who wouldn’t otherwise respond to a dealership’s ad. 
At other times, dealers let go of their compliance savvy when they cross over into the brave new world of on-line advertising.  Dealers who impose a strict vetting process for radio and print ads often stand by as their on-line ads fall prey to their in-house cyber geek’s fancy.   
While your ad obligations will vary from state to state, you typically can’t “take off your dealer hat” to circumvent the restrictions under the dealer laws.  Instead, you’ll need to know how those laws will apply to all of your ads. 
For example, does state law require you to disclosure your dealer number?  The stock number of the vehicle?  Must you include the price of certain fees and charges in the advertised prices?  Is an “Internet-only price” permitted?  Depending on your state laws, these sorts of requirements may follow you wherever and however you advertise.       
So, there you have it.  Two advertising compliance myths busted, and two rules to help keep you out of the AG brag book for 2008.  
Good luck!      
*Emily Marlow Beck is a partner in the Maryland office of Hudson Cook, LLP.  Prior to starting her legal career, she spent years working in a family-owned dealership.  Emily is an editor and one of the authors of the CARLAW® F&I Legal Desk Book, available at www.counselorlibrary.com.  She can be reached at 410-865-5438 or by e-mail at ebeck@hudco.com.  Copyright CounselorLibrary.com 2008, all rights reserved.  Based on an article from Spot Delivery. Single print publication rights only, to Special Finance Insider.  HC# 4832-1038-0546 (1/08).
 
Vol. 2, Issue 1