Proposed Settlement by FTC Would Continue to Allow Defective, Used Vehicle Sale

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When consumers by a vehicle from a reputable auto manufacturer or dealer, they expect to purchase and take home a safe car or truck. Regardless of whether your car or truck is new or just new to you, vehicle purchasers do not expect to purchase a product that has known, unrepaired defects. In fact, most purchasers of used cars, trucks, and vans would probably simply assume that the dealership takes care of all problems before a car or truck is allowed to be sold.  

In fact, nine out of ten Americans believe that used car dealers should repair defective vehicles before sale. Similar supermajorities support the notion that dealers who advertise multi-point inspections and other rigorous vehicle examinations should not be permitted to sell vehicles with known problems.

Unfortunately, and despite consumer expectations, federal law does not prohibit used vehicle dealers from selling cars and trucks with known, open defects. The FTC seems poised to finalize a settlement with GM and several used car dealerships that would seemingly perpetuate many of these practices. These consent orders are likely to lead to even greater consumer confusion while doing little to address the already existing safety problems created by allowing the sale of defective used cars and trucks.

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FTC Filed Action Against GM, Car Dealerships for Deceptive Advertising Practices

The matter at hand originally arose following a complaint filed by the FTC against General Motors LLC, Jim Koons Management Company, and Lithia Motors in relation to their advertising practices concerning Certified Pre-Owned vehicles. The FTC’s complaints against the companies were largely focused on advertising language utilized to tout the safety of Certified Pre-Owned vehicles. For instance, the complaint against GM cited specific advertisements including:

Our 172-Point Vehicle Inspection and Reconditioning Process is conducted only by highly trained technicians and adheres to strict, factory-set standards to ensure that every vehicle’s engine, chassis, and body are in excellent condition. The technicians ensure that everything from the drivetrain to the windshield wipers is in good working order, or they recondition it to our exacting standards.”

Similarly, Jim Koons advertised that “Our certified mechanics check all major mechanical and electrical systems and every power accessory as part of our rigid quality controls.” The language used by Lithia Motors cited by the FTC included the claim that “…vehicles are put through an exhaustive 160-checkpoint Quality Assurance Inspection…We inspect everything from the tires and the brakes to suspension, drive train, engine components and even the undercarriage.”

The FTC’s allegations against each party were substantially similar. Generally, the FTC alleged that despite the promises in advertisements,  at least some vehicles sold by each entity contained previously announced, known, unrepaired defects. In the case of the GM lawsuit, vehicles were allegedly sold despite the ignition switch defect. The ignition switch defect can result in a loss of power to vehicle systems thereby increasing the likelihood of a loss of vehicle control and an accident. Similar allegations regarding various open defects in vehicles were advanced by the FTC in the Jim Koons and Lithia Motors matters.

FTC’s Problematic Consent Orders Would Remain in Effect for 20 Years

The FTC has preliminarily agreed to settle these administrative complaints with each party. Unfortunately, there appears to be a number of problems with the proposed settlement that would further hinder highway safety efforts. A number of vehicle safety advocates have taken note of the settlement and its problems including the fact that the proposed remedies fail to adequately protect consumers. While these advocates concede that prohibiting the sale of vehicles with open safety defects is outside of the jurisdiction of the FTC, regulation, and prohibition of deceptive advertising is squarely within the FTC’s scope of authority.

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It appears that the language contained in the consent orders would not prohibit the use of deceptive advertising practices in relation to defects in vehicles that the dealer claims have been inspected and is safe. In fact, dealers of used vehicles would be permitted to continue to engage in misleading advertising practices provided that the dealership does two things:

  1. The dealership must include a disclaimer stating that the advertised vehicle or vehicle may still be subject to safety recalls.
  2. The dealership must also provide information regarding how consumers can check to see if their vehicle is covered by a recall.

A logical consideration of this approach would probably sound alarm bells in the mind of any safety watchdog. Consider the fact that consumers will still be bombarded with marketing language detailing a thorough, multi-point inspection. Consumers who are told that their vehicle was “certified” as successfully passing a 150-point inspection covering all major systems are likely to conclude that their vehicle is “safe.” If the dealership tells them that their vehicle is safe and was thoroughly tested, why would they bother looking for safety recalls?

FTC Consent Order Likely to Increase Consumer Confusion

Unfortunately, the FTC seems poised to adopt an approach to advertising certified pre-owned and used vehicles that will significantly increase consumer confusion. The remedy does little to balance the powerful marketing language car and truck dealerships utilize to convince people that used vehicles are safe. Rather, the proposed rules seem to open the door to even more aggressive advertising tactics provided that covered dealers include the relevant fine print.

If you or a loved one have suffered a serious injury due to a vehicle defect, the Philadelphia car accident attorneys of The Reiff Law Firm may be able to fight for you. To schedule a free and confidential consultation, call our Philadelphia law firm at (215) 246-9000 today.

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