The Federal Trade Commission announced that it reached a $2.6 million settlement with Arizona-based Coulter Motor Company, resolving allegations that the auto dealer deceived consumers about its prices and engaged in other illegal practices. (A day later, the FTC announced a settlement with another auto group as well.)
In the case, the FTC alleged that the company advertised cars online at significant discounts from the car's suggested retail prices, but that when consumers arrived at the dealership, they were told that those prices were not available. The FTC also alleged that the dealer added a variety of "junk fees" to increase the prices consumers would have to pay, including so-called "market adjustments," add-ons for pre-installed features, and other miscellaneous fees. In addition, the FTC alleged that the dealer discriminated against Latino consumers in vehicle transactions by charging them more in interest and add-on charges than others.
In the announcement of the case, Samuel Levine, the Director of the FTC's Bureau of Consumer Protection, said, "Coulter used junk fees and other illegal tactics to drive up prices for consumers, especially Latino consumers. The FTC will continue cracking down on practices that drive up prices, cheat consumers, and undercut honest sellers."
Interestingly, although the vote to bring the case and enter into the settlement was 5-0, Commissioners Melissa Holyoak and Andrew N. Ferguson issued Concurring and Dissenting Statements, raising questions about the the extent of the FTC's authority here to pursue discrimination-related claims. Commissioner Holyoak, for example, wrote "Absent Congressional authorization, the Commission should not attempt to broaden the FTC's unfairness consumer protection authority into a comprehensive civil rights authority –- a new standard of liability that may have unintended and pernicious consequences."
What are some important take-aways here? First, the FTC clearly has its eye on auto dealers. So, if you're selling cars, this is a great time to revisit your advertising practices to ensure that they're in line with FTC (and applicable state) standards. Second, the FTC's focus on "junk fees" continues. If you're advertising a price to consumers, it had better the price that consumers are actually going to pay. If you're planning on tacking on a lot of unexpected fees later on, you're setting yourself up for an unwelcome call from the FTC. And, finally, while there may be some disagreement about the scope of the FTC's authority, we've certainly seen the FTC, in recent years, focus on how deceptive practices can be used to target specific communities. There's no doubt that this focus will continue.
"The FTC will continue cracking down on practices that drive up prices, cheat consumers, and undercut honest sellers"
This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.