The Federal Trade Commission (FTC) recently sent a warning letter to 97 auto dealer groups stating that the FTC believes those dealer groups may be violating the FTC’s rules regarding advertised price rules and encouraged the dealer groups to review their advertising and pricing practices to ensure compliance. What do marine retailers need to know?

The warning boils down to the FTC asserting that an advertised price of a vehicle MUST reflect all non-optional costs, whether they are service fees or pre-installed equipment that the consumer cannot opt-out of. Additionally, the advertised price cannot reflect any discount or rebate that is not available to all consumers.

This may sound familiar, but there have been some updates. First, the MRAA fought the FTC’s proposed “Combating Auto Retail Scams” (CARS) Rule, which resulted in the final version excluding marine dealers from the rule’s burdensome compliance requirements. However, the rule was thrown out shortly thereafter, as the court found that the FTC didn’t follow the correct procedure when issuing the rule in the first place.

Why the FTC is taking action

Today, the reason we are still seeing this kind of enforcement activity is because the court’s findings did not invalidate the underlying legal authority of the rule – just that the rulemaking process was not properly followed by the FTC.

What this means is that while new compliance requirements of the CARS Rule are now gone, the pre-existing FTC requirements related to advertised pricing practices are still very much in place and apply to ALL dealers – not just auto dealers.

BOTTOM LINE: The rules that the FTC are enforcing for auto dealers right now also apply to boat dealers.

While most federal agencies – including the FTC – are working to deregulate, that has not meant a lack of enforcement actions at the federal and state levels. In fact, with state-level enforcement actions occurring in both red and blue states, this is a bipartisan effort.

Six advertising practices flagged by the FTC

The FTC, along with state-level agencies, have been actively pursuing action against the practices laid out in this warning letter. Those practices fall into six categories listed here:

1. Advertising a price that does not reflect all required fees
2. Advertising a price that reflects rebates or discounts not available to all consumers
3. Advertising a price that fails to take into account the amount of an additional required down payment
4. Conditioning the advertised price on consumers using dealer financing
5. Requiring consumers to buy additional items not reflected in the advertised price
6. Advertising unavailable or non-existent vehicles

While this is not legal advice, MRAA wants to provide further details on these six practices so marine dealers can begin to review their own advertising and pricing practices.

1. Advertising a price that does not reflect all required fees

• This means all fees required by the dealer, such as a documentation fee, destination charges, bank processing fees, etc., must appear in the advertised price. Optional fees must truly be optional in order to be excluded from the advertised price.
• This is limited to fees required by the dealer itself. State fees and taxes, etc. can be omitted from the advertised price.

2. Advertising a price that reflects rebates or discounts not available to all consumers

• An advertised price can only reflect a discount or rebate if that discount or rebate is truly available to all consumers, there can be no qualifying requirements or barriers to that discount.
• A dealer can advertise the potential discount or rebates alongside the advertised price if they are not available to all consumers, just as long as they are not subtracted from the advertised price.

3. Conditioning an advertised price on consumers using dealer financing

• If a consumer must use the dealer’s financing program in order to get the advertised price, the FTC considers that the same as a discount with qualifying requirements which means the advertised price cannot reflect a discount that requires the consumer to use dealer financing.
• Just like other discounts or rebates that are not available to all consumers, a dealer can advertise that the discount for using dealer financing exists but the advertised price cannot reflect that discount.

4. Advertising a price that fails to take into account the amount of an additional required down payment

• A down payment is part of the cost of the boat and must be reflected in the advertised price.
• Simply put, if an advertised price of a boat is $50,000 but that price is only available with an additional $5,000 down payment, that advertised price would violate this rule and should instead be advertised as $55,000.

5. Requiring consumers to buy additional items not reflected in the advertised price

• Any mandatory add-ons must be reflected in the advertised price. This includes pre-installed accessories, any F&I products the dealer requires, service contracts, subscription services, etc.
• Those items must truly be optional in order to be excluded from the advertised price.

6. Advertising unavailable or non-existent boats

• A dealer can’t advertise a boat that will never actually show up at their dealership. If a boat is in transit, this must be noted in the advertisement.
• Have a process to remove sold inventory from any advertising.

Additional considerations for marine retailers

There are a couple additional things a dealer should consider about their advertised pricing practices:

First, disclaimers stating that additional charges may apply to the advertised price are red flags to enforcement agencies. If those fees are required, disclaiming that fact in the advertisement is essentially raising your hand and telling the agency that you are violating their rule. Ensure your disclaimers only refer to truly optional equipment, fees, etc. if they appear in your advertisement.

Second, review your state’s disclosure requirements. There is a wide range of rules on disclosure of documentation fees across the states and state consumer protection agencies have been just as active as the FTC in pursuing violations of these rules.

Finally, remember that this does not constitute legal advice, but the MRAA will continue to monitor the FTC’s activity in this area. Auto dealers continue to be the main target of enforcement actions, as there are so many more auto dealers and most Americans depend on a motor vehicle for their daily lives, making bad behavior of auto dealers a bigger threat to everyday Americans than boat dealers.

It’s important to remember that boat dealers are not free of scrutiny!

Protect yourself and review your advertising practices to ensure you won’t be on the receiving end of one of the FTC’s warning letters.

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