Published March 8, 2016, Dealer’s Voice –There’s no such thing as a free lunch, right? In the world of business and selling cars, there is a whole lot of truth to this age-old adage. If a dealership isn’t careful about how it uses the word “free” in an advertisement, that ad could cost it a lot more than the price of print space in the local newspaper or magazine.
Many dealers have embraced value-added programs to increase sales. These business to consumer incentive plans give a quid quo pro bonus when someone purchases a vehicle from the dealership. For example, free oil changes for life with the purchase of a vehicle. Dealers should know, however, that the Federal Trade Commission heavily regulates the use of the word “free” in advertisements.
Specifically, FTC regulations provide that if a product or service is usually sold at a price arrived at through a bargaining process, as distinguished from a set or fixed price, it is improper to represent that another product or service is being offered as free with the sale. Since the sale price of a car is usually established through a bargaining process, caution should be employed when using the word free in advertisements.
Just how costly could improper use of the four-letter word be? Extremely. The FTC recently pursued an online advertiser for its misuse of free advertising. In its spam emails, the advertiser used the enticement of free gifts to generate traffic on its website. The advertisement, however, failed to disclose that consumers had to spend money to receive the free gifts.
To qualify for the free products, consumers had to participate in a series of third-party promotions, such as purchasing products or applying for credit cards. The FTC sued the online advertiser for violating the FTC Act, alleging that the online advertiser’s failure to disclose that consumers had to pay money or provide some other consideration to get the free product was a deceptive practice. As a result, the online advertiser had to pay $200,000 in penalties.
When crafting advertisements for value-added programs, dealerships must be certain to familiarize themselves with all FTC regulations. Contact MLG Automotive Law to determine whether your current or proposed advertising campaign complies with FTC regulations.