FTC Cracks Down on Net Advertising Fraud

Ending the first U.S. Federal Trade Commission (FTC) case focusing on Internet auto lease ads, car dealers in Colorado, New York and Pennsylvania have settled charges that they ran deceptive lease advertisements on the Internet.

The FTC had charged the dealers and their principals with violations of federal law in failing to disclose the true costs of vehicle leasing. According to the FTC, the dealers either did not report all costs — such as money due at lease signing — or buried the information in “inconspicuous or unreadable fine print.”

Buying Cars Online

The FTC is cracking down on deceptive Internet ads as online buying gains popularity among consumers. Auto buying, selling and leasing is one of the fastest growing markets.

J.D. Power and Associates said 55 percent of Americans who buy cars this year will use the Internet at some point in the process. That number is expected to grow to 80 percent by 2003.

The firm also predicts that vehicle purchases made over the Web will total more than $40 billion (US$) this year, up from $13.5 billion in 1999.

“More and more auto dealers are providing information to consumers on the Internet,” said Jodie Bernstein, director of the FTC’s Bureau of Consumer Protection. “Internet vehicle advertising can be very useful to consumers, allowing them to comparison shop among many offers without leaving home. But the advertised terms must not be misleading, and the key costs must be clearly disclosed.”

Buried Terms

The FTC said the following dealers and principals advertised low monthly costs for car leases, but failed to adequately disclose costs that could total $2,000 or more: R.N. Motors Inc., Red Noland Cadillac, Inc. and their owner, Nelson B. Noland of Colorado; and Simmons Rockwell Ford Mercury, Inc., Simmons Rockwell Autoplaza, Inc., Don Simmons, Inc. and their owners, Donald M. Simmons II and Richard L. Rockwell of New York and Pennsylvania.

Costs that were omitted from or buried in the ads included security deposits, taxes, licenses and registration fees.

The Noland complaint also alleged that the ads did not mention that advertised rates may not be an accurate reflection of the actual cost of financing the lease. Simmons Rockwell, according to the FTC, omitted important terms of advertised leases, or stated them in “blurry, unreadable print.”

Online Fraud

In related news, the FTC is monitoring online fraud in personal grooming products as well.

Earlier this month, the commission issued an alert warning parents of advertisements on the Internet containing false information about the effectiveness of head-lice treatment products.

According to the FTC, the sites were “playing on parents’ concern at discovering a lice infestation, and frustration at store-bought remedies that entail time-consuming application.”

The agency also said it warned the advertisers that they could be subject to legal action if they misrepresented or could not substantiate their claims.