A few weeks ago, we talked about the Federal Trade Commission’s introduction of new rules known as Rule 5 or Section 5, specifically targeting auto dealer marketing and sales processes.
Regulatory Changes and Consent Decrees: In a recent article from Auto Remarketing magazine, it’s highlighted that beyond merely passing rules, the Federal Trade Commission (FTC) is actively altering car dealership activities and operating procedures. This transformation involves the implementation of consent decrees, a mechanism that reshapes how dealerships function.
FTC Investigation Process: Under a consent decree, the FTC conducts thorough investigations into dealership environments, scrutinizing operating policies, business practices, and advertising strategies. If any questionable practices are identified, the FTC may file a complaint or take regulatory action against the dealership.
Negotiations and Consent Decree Signing: Dealerships faced with FTC actions have a choice: fight the charges in court or negotiate with the FTC. However, the ultimate resolution often involves signing a consent decree. By doing so, the dealership agrees to cease the use of contested tactics and abide by specific rules set forth by the FTC.
Clarifying Vague Rules: Consent decrees serve as a tool to clarify vague rules that may apply to car dealerships. Instead of generic mandates like avoiding misleading practices, the FTC can use a consent decree to establish precise requirements. For instance, a dealership might commit to refraining from advertising specific prices without including a corresponding VIN number for the vehicle offered for sale.
Creating Precedents and Ensuring Compliance: By establishing consent decrees with individual dealerships and applying them across multiple establishments, the FTC sets a precedent. This model fosters widespread compliance within the automotive industry, ensuring that dealers adhere to specific rules and practices, ultimately reducing anti-competitive behavior.
Leveraging Consent Decrees for Industry-Wide Compliance
Consent decrees become a leverage item for the FTC in promoting industry-wide compliance among car dealerships. Whether it pertains to advertising, pricing, business models, or add-ons in the finance department, these decrees serve as a powerful tool to ensure proper operations within the realms of advertising, marketing, and sales tactics.