Auto DefenseUsed-Car Dealerships

Pitfalls in Advertisement

Pitfalls in Advertisement

Advertising online is one of a dealer’s most valuable tools. It allows them to connect with their customers instantly. In an era where comparison-shopping can be done on a widespread scale over a specific location, dealers are taking every advantage available to them to ensure that their advertisements are noticed by a potential buyer.
It is certainly no secret that consumers, by and large, are price driven in their search for used vehicles. It is also no secret that a vehicle purchased at auction with an announcement; i.e. frame/unibody damage, true miles unknown, prior rental; likely will garner a lower price at auction, and conversely, will be sold for a lower price at retail. This also means that the dealer who purchases these types of negative history vehicles will be able to list these vehicle at a lower purchase price, thus gaining more views for their advertisements over similar vehicles without any negative history. Here is lies the trap for the unwary. California has adopted the broad approach that advertisements by dealers cannot contain false or misleading statements, and even goes as far as to prohibit false or misleading statements both intentionally made and where the dealer should have known that the advertisement was false or misleading. (Cal. Veh. Code s 11614(a).) While California generally does not require that an advertisement for a non-certified used vehicle disclose that vehicle’s prior accident history, the California Vehicle Code does require that a dealer “clearly and conspicuously” disclose a vehicle’s past history “as a demonstrator, executive vehicle, service vehicle, rental, loaner, or lease vehicle.” (Cal. Veh. Code § 11614.1(b).) Disclosing this history in the text of the vehicle’s description should be sufficient. However, many dealers also choose to link vehicle history reports, such as CarFax® or AutoCheck®, to their advertisements.
In making vehicle history reports available to potential customers by way of a link on an online advertisement, dealers are often opening themselves up to a claim of deceptive advertising, even if the goal is to provide the customer with exactly what they are demanding, a vehicle history report. Given the inaccuracies that are often present in vehicle history reports, it is fairly common for an auction announcement not to find its way to a vehicle history report, particularly a CarFax® report. When this happens, even if the negative history is later disclosed prior to the sale by way of a signed disclosure, the customer may have a claim for deceptive advertising. Generally, the customer will claim that the advertising itself was deceptive and that the negative history was not disclosed until well into the process to purchase the vehicle.
This then begs the question, what should a dealer do to avoid this potential liability? We have found that the most successful approach is where dealers take an all or nothing approach to disclosures in advertising. If a dealer does choose to provide a vehicle history report in its advertisements, it should also make sure to include any auction announcements that do not appear on that vehicle history report in the text of the advertisement itself. To be safe, that information should also be “clearly and conspicuously” disclosed in the advertisement. This approach avoids any claims that the advertisement was deceptive in that only a “clean” vehicle history report was provided while the dealer knew of the vehicle’s negative history not indicated on the provided vehicle history report.

James S. Sifers, Esq.
jsifers@madisonlawapc.com

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