FTC Continues Aggressive Enforcement Actions To Deter Deceptive Pricing Practices By Car Dealers

On Thursday, August 15, 2024, the Federal Trade Commission (FTC) and Arizona Attorney General announced a $2.6 million settlement to resolve claims that Coulter Motor Company used deceptive online advertising to lure customers into its two Arizona dealerships; duped consumers into paying for unwanted “add-on” products; and engaged in discriminatory practices by charging Latino customers more in financing charges and for these “add-ons” than non-Latino white customers.

The complaint, filed by the FTC and Arizona Attorney General in federal court in Arizona, alleges that the dealer group “lure[d] consumers into their automobile dealerships with low advertised prices,” but then charged prices that were often thousands of dollars higher than advertised “due to a surprise ‘market adjustment’ on the vehicle and other bogus fees and charges.”  According to the complaint, the dealer group charged consumers for unauthorized “add-ons” like theft protection, paint coating, window tint, and nitrogen-inflated tires, “which in the aggregate can cost several hundred dollars to several thousand dollars.”  The complaint also alleged that the dealer group and its dealerships discriminated against Latino consumers in connection with financing and the price of these “add-ons.”

In a contemporaneously filed Stipulated Order, while not admitting or denying the allegations of the Complaint, the dealer group agreed to entry of a permanent injunction barring it and its dealerships from engaging in similar conduct in the future.  It also agreed to pay a judgment of $2.6 million, $250,000 as a civil penalty to be deposited in the Arizona Consumer Protection-Consumer Fraud Revolving Fund and the balance to be deposited in a fund administered by the FTC to be used for consumer relief.  In a press release announcing the enforcement action and settlement, Samuel Levine, Director of the FTC Bureau of Consumer Protection warned that “[t]he FTC will continue cracking down on practices that drive up prices, cheat consumers, and undercut honest sellers.”

This most recent enforcement action is not the first against a dealer and is part of a long-term focus on the automotive retail market since the Dodd-Frank Act in 2010 gave the FTC new and expanded authority regarding motor vehicle dealers. In December 2023, the FTC launched its much-anticipated “Combating Auto Retail Scams” or “CARS” Rule targeting allegedly misleading advertising and sales tactics by new car dealers. Initially slated to take effect on July 30, 2024, the FTC has since paused the effective date of the final rule pending resolution of an administrative challenge filed with the U.S. Court of Appeals for the Fifth Circuit by the National Automobile Dealers Association (NADA) and another industry trade association. A panel of the Fifth Circuit is slated to hear that challenge on October 7, 2024.