Pub. 1 2012 Issue 1

Summer Issue 2012 19 very low net advertised price. Most dealers do a decent job of including a brief description of the criteria necessary to qualify for these rebates, but is this a safe compliance practice? How Low Can You Go? CNCDA has received complaints about competitor dealer advertisements for vehicles at a net price thousands of dollars below dealer cost. One now-notorious advertisement included a Loyalty Rebate, a College Graduate Rebate, a Military Rebate, Conquest Rebate, and a Trade-in Assistance Rebate. (i.e., “$30,000 MSRP - $2,500 Loyalty Rebate - $2,500 College Graduate Rebate - $2,500 Military Rebate - $2,500 Conquest Rebate - $2,500Trade-in Assistance Rebate = $17,500 Net Price to Buyer”). The advertisement was supposedly targeting military personnel who graduated from college and owned both a vehicle of the same line make, and another line-make, and traded-in one of those vehicles. Although the arithmetic disclosure was made, some regulators would argue that because only a miniscule number of purchasers would qualify for all the rebates, the advertisement doesn’t pass the “smell test.” The Smell Test Several state and federal laws impose subjective standards prohibiting untrue or misleading advertisements—if the advertisement is likely to mislead the public, it’s unlawful. If it fails the “smell test,” an advertise- ment may be judged as deceptive even though it complies with certain disclosure requirements. As a general rule of thumb, if an advertisement is likely to deceive the public—it fails the smell test. The Military Personnel, College Graduate, Conquest, Loyalty, Trade-In Assistance Rebate Advertisement? Since only a miniscule number of purchasers are likely to qualify for the net advertised price in the advertisement described above, one could reasonably conclude that the advertisement would have a tendency to mislead a customer into believing that they have some chance of pur- chasing the vehicle at the net advertised price. A safer approach for this dealer would have been to list the various rebate programs, qualifications for the programs, and to show the amount for each rebate. While not as sexy as showing an unrealistically low net price, this approach would significantly reduce any risks of running afoul of the “smell test.” And don’t forget, all of these laws apply to internet advertising as well. Formore information on this important topic, reviewyour CaliforniaAutoDealer Advertising LawManual: Chapter 46, “Rebates and Cash Back,” beginning on page 173, and Chapter 56, “Truth in Advertising,” beginning on page 213. You can also contact JonathanMorrison, Director of Legal & Regulatory Affairs for the California New Car Dealers Association at jmorrison@cncda.org or at (916) 441-2599.