Protecting your dealership under FTC scrutiny

Shannon Robertson joins Inside Automotive to discuss the FTC’s recent warning letters to 97 auto groups and the implications for dealership compliance. Robertson outlines why transparent pricing, robust training, and adherence to federal and state regulations are critical in maintaining consumer trust and avoiding enforcement actions. She emphasizes that consistent online-to-in-store pricing, combined with documented processes and staff education, can protect dealerships while enhancing brand credibility.

•  Overview of the FTC warning letters and their targets 
•  Importance of aligning online advertised prices with in-store quotes 
•  Dealer training strategies to ensure compliance across staff and departments 
•  How written processes and legal guidance provide a “safe harbor” defense 
•  The role of compliance in protecting profitability and building consumer trust 
•  Integrating transparency and compliance into dealership marketing and operations 

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Transcript

Why Dealers Are On Edge

Jim Fitzpatrick 0:07

Welcome to Inside Automotive with Jim Fitzpatrick. Hey everyone, Jim Fitzpatrick. Thanks so much for joining me this morning here at Inside Automotive on CBT News. The FTC warning letters have been sent to 97 auto groups over advertising and sales has sparked some uh of dealers out there that are very concerned about this. A lot of conversation around compliance and pricing transparency. Joining me now to break down what prompted these letters and what they could mean for dealers moving forward is Shannon Robertson. You've seen him here before on CBT News. He's the executive director of AFib and the host of CBT News newest show, Compliance That Works. Thanks so much for joining me, Shannon, this morning to talk about this very, very important issue.

SPEAKER_00 0:52

Thank you for having me on. I appreciate it.

What Triggers FTC Warning Letters

Jim Fitzpatrick 0:54

Sure. So what specifically prompted this FTC to issue these warning letters and what uh what patterns or practices are they most concerned about right now?

SPEAKER_00 1:05

So I think what prompts these letters are complaints. You know, what drives our industry, what drives government interaction is just consumer complaints or dealer complaints, because we all know dealers turn in other dealers.

Jim Fitzpatrick 1:16

Yeah.

SPEAKER_00 1:17

So there's a combination there, but an overall complaint. And I think the concern from a government, either the federal or state standpoint, is the lack of transparency of what a customer would pay for a vehicle versus what they see online and then show up on site.

Jim Fitzpatrick 1:36

Yeah.

SPEAKER_00 1:36

Yeah.

Warning Shot Or Real Enforcement

Jim Fitzpatrick 1:37

Yeah. It's it's uh it's something we've been challenged with in the industry. I always got into the industry back in the 80s. Can't believe I just said that. That's pretty far, long, pretty long time ago. But uh, but we were dealing with similar situations back then. So um do you view this as more of a warning shot from the FTC or the beginning of more active enforcement? I mean, is there is there going to be some teeth in this or what?

SPEAKER_00 2:01

Um I think there might be some teeth in this. I think that you know what we have been saying for the last 18 months is that the state, the states would take over the aggressiveness from the FTC.

Jim Fitzpatrick 2:14

Ah, okay.

SPEAKER_00 2:15

And I think this letter is interesting because this comes directly from the FTC. Um, and they're saying they're involved and they're watching over these specific items. And, you know, as they say they're not going to tolerate it, but at some point, you know, they'll make an example if they continue to find examples like this. Right. Um, and there are people on social media that have made a living off recording themselves, calling dealers and asking what the price is, I know, and then talking about how it doesn't match. So not only does the FTC look at it, um, I mean, there are, you know, influencers that are using this as a way to make a living just to expose what some dealers are doing.

The Transparency Gap In Pricing

Jim Fitzpatrick 2:56

That's right. That's right. Yeah, it's it's like never before. There's no question about it. And uh, and dealers are, you know, I I think if you talk to a lot of dealers on this topic, they'll they'll, you know, if you say, hey, you know, you don't have the dock fee included in this, you don't have some other fees, or maybe you've got some discounts that uh aren't given to everybody, you gotta be in the military or whatever. But um, they'll point to their competitor and say, well, that's what they're doing down the block, or that's what they're doing across town, and therefore we're forced to do the same thing. That's not going to be a a uh feasible defense for them, is it?

Turning Clear Pricing Into Brand Trust

SPEAKER_00 3:30

It's not, and the letter's designed to put everybody on the same playing field. Now, whether it'll work that way or not's a different conversation. Yeah. But at some point, everybody should be complying with this. Right. And and there are states' laws that have had this in place for a while. I mean, Florida is an all-in price when it comes to online. Yeah. You know, prior to the FTC letter, the Florida Attorney General sent letters out about 18 months ago, two years ago, that told the dealers our laws have not changed. You have to be upfront in the online price. Right. So this is a it is and has been a recurring theme, and everybody points the competition. Right. Right. And it at some point somebody's going to get hit if everybody doesn't start to comply. But I also think dealers can use this to their advantage.

Jim Fitzpatrick 4:21

How so? Right.

SPEAKER_00 4:22

I think that it would be helpful if you put online, you can put a disclaimer, right? Here's the online, here's the price of the vehicle. This is an all-in price, excluding only government required fees, and then have a compliance statement, right? We want to be transparent. The price you see online is the price you pay in our stores. We have no hidden fees. We're not, you know, you can use that as a as a disclaimer and a marking advantage, sure. Right, to combat what you know maybe some other dealers are doing.

Jim Fitzpatrick 4:52

Right, right. But you know, uh dealers don't typically trust the car buyer. They're they're they're thinking that every car buyer is just gonna look at the ads or they're gonna look, they're gonna call up and they're gonna say, you know, here's my number, here's our number, and you and the the the consumer is gonna go, wow, that's two grand less than what you know, these guys that say they're all out front and they're full transparency. You know, that that's you know, that that's a steep number there. I'm gonna come to you, uh, Mr. or Mrs. Dealer, because you hit me with a lot lower number, only to find out at the dealership level or the showroom level, oh, guess what? We're adding a$1,000 dock fee or we're adding these other fees on there, and the sale goes to the one that was not always playing the the way they should, right?

SPEAKER_00 5:35

Well, and if they're shopping and they're shopping properly, I mean, the consumer should learn through experience where's the right place to buy that vehicle. Yeah. Right? If I call you and you tell me I have an all-in price, no hidden fees, my addendums are everything included, and then I go somewhere else and they raise it three to four thousand, then they should know where to go buy that car. Whether that's realistic or not, that's what the FTC is saying would happen.

Jim Fitzpatrick 5:58

Right. And and so to your point, the dealer needs to lean in on that story, not just show the price, but also use it as part of their branding, maybe of their store, to say, hey, we're we're gonna shoot you straight. This is the number that you're gonna buy the car for. It's not gonna be a nickel less or a nickel more once you hit the showroom, which is different from many of our competitors out there. In other words, lean in and own that and say that that this is who we are.

Training Teams To Quote One Price

SPEAKER_00 6:24

Absolutely. And, you know, there's a whole side of this letter that I think is being missed, and that's the training side of it. I can look online and see a price, but if I'm the government, how do I know if my online price doesn't match on site? Somebody either has to complain or somebody has to call the store and say, I saw this vehicle online, what's my price? Right. And so, as part of this letter, one of the things that the dealer should be doing is training their BDC sales inside sales team that if somebody calls in, they should be trained that the price they give the customer over the phone matches online with the disclaimer. This is our online price, right? This is everything included except for government required fees, tax, it, and license. And and let's be clear, we're speaking at a federal level what the federal requirements are, right? We I mean, part of the issue with this letter the FTC sent is that if I comply, I could violate state laws. There are some states because the dock fee is negotiable, you cannot include it in the price of the vehicle when you advertise it. You have to have a separate statement for it. Right. So we're we're speaking at a federal level without factoring in state laws in that statement, just to be clear.

When Federal Rules Clash With States

Jim Fitzpatrick 7:43

Right. And to your point, I think earlier you were saying that if you you could follow all of the federal uh guidelines or the laws on this and still be breaking state laws. So it's not a, you know, it's not a you don't get a free pass here if you go, hey, we've checked all the boxes on the on the FTC, but there's going to be some state laws that you've got to make sure that you're compliant uh with, right?

SPEAKER_00 8:05

Correct. I mean, federal law is supposed to trump state law, or you know, federal law comes first, state laws can get more specific. Right. That's how it's supposed to work. So obviously, if I'm a dealer, I want to take both of that in consideration and speak with legal counsel. But even if regardless of state, let's look at the spirit of what the FTC wants. Full transparency. Right. Right. I need to make sure that I know online what I'm gonna pay for that vehicle without double clicks, right? Taking out rebates not available for everybody. Right. Right? You you have to be clear, this is the price, and not and you don't want to and not require them to do math.

Jim Fitzpatrick 8:45

Right, right. Now get back to the training part of it. I mean, that that's something what you're recommending is that that their training has got to happen with the BDC, with the sales department, with the management team, um, right? I mean, that that's because if in the event that the FTC comes in with a fine or your state comes in with a fine, and your defense is that, oh, we didn't train anybody, we didn't even pay any attention to this, you really have no defense. And then also if your people are doing it and they don't know that they're doing something wrong because they've never been trained or told differently, right? That that's absolutely yeah, yeah.

SPEAKER_00 9:20

I mean, there is I mean, a dealer can have safe harbor defense, you know, uh, if they have a written process approved by legal, right? Trained, monitored, and enforced. If they have that, they can have a defense when they're not perfect. Yeah. But but and as part of that is the training. And like I said earlier, how do I know my online price doesn't match on site? Yeah, somebody has to interact with the store, which means people at the store are not trained to quote the same price. Right. Or if we watch some of these examples online, TikTok, social media, if somebody calls in and asks for the price of the vehicle, why are we having to meet with somebody to give a price? Why does it take a callback?

Jim Fitzpatrick 10:03

That's right.

SPEAKER_00 10:04

Why do we have to come to the store to get the price? That's right. If it's online and it's advertised, that's the price you will quote, and you should be quick to quote it. Yep. I'm looking at the same car you are online. The online price is our on-site price. Right. They have a word track, they have a disclaimer. Uh, but that's where those complaints and that potential that I don't I don't want to say every dealer is being deceptive, but that's where that fear of deception comes in. Sure. Is when they're they're unwilling to give that price over the phone, or they make them come on-site for that price.

Why Those 97 Groups Got Letters

Jim Fitzpatrick 10:38

Right. I think also we should mention that if you were not one of the 97 auto groups that received the letter, that does not exclude you from uh being uh scrutinized, right, by the FTC or the state association, uh not the state uh laws out there.

SPEAKER_00 10:54

Absolutely. Though the there was a letter, the warning letter went to 97 dealers, but they press released it for every everybody.

Jim Fitzpatrick 11:02

Yeah.

SPEAKER_00 11:02

And we've had several dealers of the 97 reach out to AFIP and ask for assistance. And I've seen the different version of the letters. And the version of the 97, it doesn't say they were violating. The letter says that you may be advertising prices for cars that are lower than what you actually charge. Right. And the letter is not intended to be a comprehensive statement of concerns that may exist, nor is it intended to represent any conclusions on whether you're engaging in these practices. So I think those 97 dealers, um, in my opinion, were probably dealers that had received complaints at the state or federal level. Okay. And that's why they got the letter. Most of the dealers that contacted us were larger dealer groups within a state. Right? Or two, dealers that were high-ranking dealers because of sales volume. Yeah. And and I think though, and and of course, if you have 60 stores in a state, you're gonna have some complaints. Nobody's perfect.

Jim Fitzpatrick 12:06

Right.

SPEAKER_00 12:06

If you're selling eleven hundred cars out of one location, you're just by the sheer odds, you're gonna have some complaints. Right. So I I think that's where that list of 97 came from. Whether the attorney general submitted that list to the FTC, okay, whether they pulled it themselves, we I can't factually answer. Sure. But I'm confident that's how the 97 were comprised.

How Easy It Is To Investigate Dealers

Jim Fitzpatrick 12:28

Yeah, yeah, makes sense. Makes sense. But dealers beyond notice because what now that the letters have been sent, you can be sure they're going to be looking for people that don't comply or dealers that don't comply, and then have a whopping, you know, fine out there that makes headlines across all of the news associations uh and and organizations out there to really send the signal to the automotive community, dealer community, to say, hey, you know, you don't want to be zapped with a half a you know million-dollar fine because you didn't, you know, comply to what what they wanted in the letters, right?

SPEAKER_00 13:01

I agree. I mean, I I mean, we know state attorney generals are going to be aggressive. The FTC has sent the letter. We've all been warned. Uh, we have no excuse not to comply. Right. Um, and the the thing that I would say as a dealer, the reason why the advertising concern for a dealer should be high on the list is how easily can somebody from the state government sit at home and pull and kind of do not mystery shop, but investigate. How many dealers could you in an eight-hour day look up a price online, call the dealer, and see if price matches? Or go to a store. Right. But from a from a state standpoint or federal standpoint, this is very easy for them to investigate without leaving their home.

Jim Fitzpatrick 13:50

No question about it. Yep, without a doubt. Yep. You got you don't have to you don't have to leave your your workstation there and you've got all the information you need, whether it be the price online, to your point, call the dealership. It's it's all right there. Very, very easy.

Templates, Controls, And Final Takeaways

SPEAKER_00 14:03

So I agree. And and you, you know, as we talk training, just this jumped in my head, but as we talk training, dealerships have somebody in the sales department that posts the vehicles online, have written training for that salesperson. So when you have a new sales manager, you already have the template for what he's allowed to say, put online, how it's supposed to be structured, and control their creative ability to kind of make some changes so that everything looks the same. And just I would throw that in from a training standpoint as well.

Jim Fitzpatrick 14:33

That's right.

SPEAKER_00 14:34

That's right.

Jim Fitzpatrick 14:35

Uh Shannon Robertson, executive director of AFIP, the Association of Finance and Insurance Professionals. Thank you so much for joining us on the show to talk about uh this very, very important issue. This is this is something that dealers need to uh you know really pay attention to. As we said, we don't want them getting big fines. And uh and then you know make the necessary changes within their organization so that they are compliant. So thank you so much for your time today, and uh and thanks for all of the content that you share with our viewers in your show. Um so compliance matters. Thanks, thank you so much.

SPEAKER_00 15:09

Thank you. I appreciate the time. All right.

Jim Fitzpatrick 15:15

Thanks for watching Inside Automotive with Jim Fitzpatrick.