New FAQ Publication Addresses Excluded Fees and Shared Responsibilities Among Dealers, Third-Party Advertisers and Manufacturers

By Mike Sayre, MRAA Director of Government Relations

Earlier this year, the FTC sent a warning letter to 97 auto dealer groups stating that the agency believed those dealer groups might be in violation of rules governing how dealers can advertise the price of a vehicle. The requirement boils down to this: if a price is included in an advertisement, it must include all required fees and costs imposed by the dealer. Also, only government-imposed taxes and fees on the buyer can be excluded from the advertised cost. 

At the time, the MRAA published some guidance noting that while the FTC has been focusing on auto dealers, the rules also apply to marine dealers. If you haven’t reviewed that guidance, check it out now. Everything here will be building on and clarifying some details from that guidance.  

More recently, the FTC published a series of Frequently Asked Questions based on the feedback the agency received in response to those warning letters. This remains an important issue as the FTC continues to focus on what it considers deceptive advertising by dealerships. The agency recently announced a settlement with an auto dealership group over these very issues on Oct. 8. 

Key Takeaways from FAQ 

A point made over and over again in the FTC’s FAQ is the importance of price transparency. More specifically, the price a consumer sees in an advertisement should reflect what the consumer will actually pay for that product. A consumer should not have to make the trip to a dealership only to learn the actual cost is hundreds or thousands of dollars more than was advertised. Not only does this frustrate that individual buyer, the impact of one dealer advertising an inaccurately low price hits every dealer in the area who plays by the rules. The FTC even encourages dealers hurt by the bad behavior of another to report violations. As it turns out, that’s one of the most common ways for an investigation to begin. 

The next common point made several times in the FAQ is that these are not new requirements but long-standing law. There was some confusion around whether or not these were new rules with a grace period for dealers to come into compliance. That simply is not the case. The only real change is a renewed focus on enforcement by the FTC. Some of the confusion stemmed from a new set of regulations, the Combating Auto Retail Scams Rule or “CARS Rule” which was struck down on procedural grounds before it could fully take effect. That rule would have created a significant compliance burden on all dealers. The MRAA was able to exclude marine dealers from the final rule before it was eventually struck down. However, that case left the FTC’s long-standing authority under which the rule was created in place. 

Practical Info for Dealers When Crafting Compliant Advertisements

Now for the meat of the new FAQ. 

• First and potentially most challenging: every place a consumer encounters a price for a boat must comply with the rules. The obvious things here are the paid advertisements, billboards, third-party websites, social media; they all must comply. Most dealers need to consider that text messages, emails or even phone calls must follow these rules. If there is a price in a communication to a consumer, that price must reflect all dealer-required costs. 
• Second and probably easiest to understand: The most prominently displayed price must be the actual price. Dealers can include MSRP or another price, so long as the actual price is the most prominent.
• Third and a notable clarification: The inclusion of documentation fees in the advertised price. Even in the few states that don’t require it, or actively prohibit including one, a documentation fee is still required. Just know that federal law trumps state law. So the FTC’s requirement is that the price in an advertisement is the actual price any consumer could walk in the door and pay for a boat. 
• Finally, focus on what affects your customer. We’re talking about government-imposed taxes and fees that can actually be excluded from the advertised cost. It is important to note that these must be taxes or fees that are imposed on the buyer! They are not imposed on the dealer and then passed on to the buyer. What matters is not who is collecting the tax but which party is legally responsible for the tax. For example, the buyer is responsible for sales tax, so it can be excluded from the advertised price. However, a dealer inventory tax, which the dealer is legally responsible for, can also be passed on to the buyer. However, it must be included in the advertised price. 

Additional Info: AI, In Transit and Sold Units

The FAQ covers a few issues that have little to do with the advertised price but are still important for dealers to understand. 

• Boat photography and AI use: First, when and how can a dealer use a representative photo for a particular boat? 
  • For new boats, it is generally acceptable to use a representative image of that boat so long as a reasonable consumer would understand that the image is representative and not the exact boat in question. The FTC considers this more acceptable for new boats where stock imagery is more common. 
  • For used boats, where questions about the condition of that specific boat are very important to the consumer, it is best to use real photos of that exact boat or no images at all. 
  • If altering the image of any boat, new or used, be very sure that you are not altering anything about the boat itself. Using AI to change the background would be fine. Using AI to cover up damage or materially alter the boat would be a clear violation. 
• Boats in transit or offsite: Second, how do you advertise a boat that is not currently sitting at the dealership? 
  • The simple answer is to disclose as clearly as possible that the boat in the advertisement is in transit or stored offsite and is not currently at the dealership. Transparency is key here, which also means that the boat in the advertisement must actually be available for purchase by any consumer. 
  • In turn, this means it is not acceptable to advertise a boat that is in transit but has already been presold to a customer. That boat is considered sold and shouldn’t be advertised. 
• Sold boats: Dealers must not advertise recently sold boats that have already been paid for or are otherwise not available to any consumer who might walk in the door. Ensure advertisements for a sold boat get taken down quickly; wherever that ad is. 

Shared Responsibilities

One of the most important issues addressed here is the shared responsibility of dealers, third-party advertisers and manufacturers regarding accurately disclosing the price in an advertisement. The FAQ reads, “Everyone who has control over the advertising is responsible for making sure the ads state the actual price as the most prominent amount.” This means dealers must abide by all the rules laid out here and ensure that the information provided to a third-party advertiser is accurate. For the third-party advertiser, it means the most prominent price displayed is the actual price provided by the dealer. 

Lastly, if a manufacturer has policies or practices that conflict with the FTC’s requirements, they share responsibility for those violations with the dealer. This is an issue the MRAA is actively working with the National Marine Manufacturers Association (NMMA) and our boat builder members to address.

Reach out if you are subject to manufacturer policies on how you advertise the price of a boat that may violate the FTC’s rules laid out here and in the previous guidance the MRAA published. We can work to bring those policies into compliance and remove the liability for your dealership and that manufacturer.

Price Comparison & Negotiation

The point of these policies is to give a consumer the ability to objectively compare prices across dealerships, not to remove the ability to negotiate over prices. These policies are an attempt to create a ceiling for a price, not a floor. The price in an advertisement must be the most a customer would be required to pay to leave the dealership with a boat (minus taxes, of course). However, that doesn’t stop you from negotiating the best price for that customer UNDER that ceiling. 

About the Author

Mike Sayre, MRAA Director of Government Relations, leads advocacy efforts on policy issues affecting marine retailers and the recreational boating industry. Before joining MRAA, Sayre spent seven years with the American Motorcyclist Association (AMA), where his work included government relations and grassroots advocacy on recreation and infrastructure issues. He holds a master’s degree in public policy from Michigan State University. Outside work, he enjoys spending time with his family and dog, gardening and motorcycling.