FTC Cracks Down on Dealer Advertising — Seth Dobbs Explains

Seth Dobbs, Partner and Co-Chair of the National Automotive Practice at Fox Rothschild, joins Inside Automotive to break down the Federal Trade Commission’s recent wave of warning letters sent to nearly 100 dealerships. The move signals a more aggressive stance on advertising compliance, with increased scrutiny on pricing transparency, vendor oversight, and consumer disclosures.

Dobbs explains how the FTC is holding dealers accountable not only for their own advertising, but also for third-party vendors managing listings and marketing content. He outlines the potential financial and reputational risks tied to non-compliance, especially as state attorneys general ramp up parallel enforcement efforts. The conversation also covers practical steps dealers can take to strengthen compliance programs, from internal audits to staff training. As regulatory pressure intensifies, Dobbs emphasizes that proactive oversight and consistent execution will be critical to avoiding penalties and maintaining consumer trust.

Key discussion points:

•  Why the FTC issued warning letters to dealerships nationwide 
•  New expectations around pricing transparency and consistent advertising 
•  Dealer responsibility for third-party vendor compliance 
•  Risks of federal and state enforcement actions 
•  Practical steps to strengthen dealership compliance programs 

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Transcript

Welcome And Why It Matters

SPEAKER_00 0:07

Welcome to Inside Automotive with Jim Fitzpatrick.

What The FTC Letters Signal

Jim Fitzpatrick 0:11

Hey everyone, Jim Fitzpatrick. Welcome back to another edition of Inside Automotive right here at CBTnews.com. The FTC is turning up the heat on dealers and signaling a broader focus on enforcement across the industry. So what exactly are regulators looking for and what should dealers, whether they received a warning letter or not, be doing right now? Joining me now to break down the implications is Seth Dobbs, his partner and co-chair of the National Automotive Practice at Fox Rothschild. So thank you so much, Seth Dobbs, for joining us on the show today.

SPEAKER_02 0:43

Pleasure to be here. Thanks for having me.

Jim Fitzpatrick 0:45

Sure. So Seth, let's uh starting at a high level, what is the FTC signaling with these warning letters that uh has been sent out to? I see, I think 97 different dealers.

SPEAKER_02 0:56

Uh I think what the FTC is trying to accomplish uh is what they failed with the CARS rule that they put out uh a few years back that that didn't make its way through uh over a ton of objection from the the dealer body.

Jim Fitzpatrick 1:09

Yeah.

SPEAKER_02 1:09

So they're what they're trying to accomplish, I think, is um what they failed through um rulemaking, they're trying to push through through enforcement. Um so they they sent out letters to 97 dealers across the country, putting them on notice and giving them fair warning that these are issues that the FTC intends on enforcing across the board. Um what's important about the letter that came out is that under section five of the FTC, uh the dealer needs to be put on, the dealer needs to have to have knowledge in order for the FTC to go after them. So by sending out the letters to these 97 dealers, uh secretively what they're doing is ensuring that the dealer is on notice. Okay. So if they do bring an enforcement action, the enforcement action will have teeth and the dealer won't be able to say that they had no no knowledge of uh these these violations that the FPC is alleging against the dealership.

Jim Fitzpatrick 2:07

So this could really be the prelude. It's kind of a they're putting the cheese in the in the mousetrap right now.

SPEAKER_02 2:13

Sure. This is definitely a shot across the bow uh to dealers to to put everybody on notice that they're coming.

All In Pricing In Real Ads

Jim Fitzpatrick 2:20

Yeah, for sure. When we talk about pricing transparency, what does that actually mean in practice for for dealerships advertising?

SPEAKER_02 2:29

Um I think what the FTC is trying to accomplish is an all-in price. So that the consumer, when when looking at a dealership advertisement, knows what they're going to pay when they get to the dealership. So they're trying to avoid things like um uh uh added mandatory fees, um certain rebates that not everybody would qualify for, um things that that a lot of dealers uh unscrupulously uh uh force upon consumers um across the country. Right. So they're trying to make it such that when someone's sitting at home and looking at an advertisement, uh they know exactly what it is that they're gonna pay. Right. Uh one of the one of the other things that the FTC is is enforcing is that all advertisements are gonna be treated equally. So the dealer is gonna have to ensure that whatever advertisements are out there, there is continuity between them. So that if one advertising source is advertising a vehicle for 10,000 and one is for 12,000, the FTC is gonna hold the dealer accountable to make sure that that pricing is even across the board.

Third Party Listings And Liability

Jim Fitzpatrick 3:34

Okay, I've been around the car business a very long period of time. Something tells me somebody's gonna get a fine then, because to try to get these dealers to say, to all play nice and read from the same sheet of music with regard to pricing, especially online, because as you know, one dealer points to the other and goes, well, if if he's advertising that Corolla for, you know,$26,000 and I'm at$28,000, uh, or vice versa, you know, it's just not it's not a fair level playing field. So this thing is there, there's gonna be more to come on this for sure, right? Absolutely, without a doubt.

SPEAKER_02 4:09

And and there's gonna be some, it's it's gonna be difficult because dealers are gonna say, hey, I don't I don't even control that third-party source where they're advertising that vehicle. They're pulling information from cars.com or they're pulling their information from somewhere else. I don't have any level of control over that advertisement. Uh and you see that as a defense at um a lot of the state attorney generals and divisions of consumer protection, division of consumer affairs, uh, you see that as a defense a lot that that holds water because if the dealer can't control what that advertisement looks like or states, how could they possibly be held accountable for a price discrepancy between that and um their native dealership website?

Jim Fitzpatrick 4:49

Right. So where what is that a is that a plausible defense?

SPEAKER_02 4:53

Uh remains to be seen, right? Right. There's been no enforcement from the FTC on these issues. At the state level, I can say that uh yes. Uh the the state attorney generals and division of consumer affair hearings that we've been a part of all over the country, that that seems to hold water. If the dealership does not have control over that third-party advertising source, then again, how could the dealership be accountable? Um so that they will look to the dealer's website, they will look to the advertisements that the dealership can control. If there's a discrepancy there, that's a different story.

Jim Fitzpatrick 5:26

Okay, but wouldn't the dealer have have the option to not advertise on those third-party sites that is advertising the car wrong? I mean, it would seem to me that if you if you know that your vendor is not doing right, then you don't use that vendor any longer. Isn't there I would think there'd there would be there would be some culpability on behalf of the dealer to say, well, wait a minute, if you're gonna point to this third party, then don't use the third party.

SPEAKER_02 5:50

That's that's what the FTC is trying to enforce. Yeah. Is to make sure that the dealer takes a hands-on role to ensure that the third parties that are work the vendors that are working for the dealership remain in compliance.

Jim Fitzpatrick 6:02

Right, right, exactly. So so then, you know, if it if it if it then the focus becomes the dealer's website, as you know, there's dealers out there, and don't send me any uh emails on this dealer'cause I'll paint with a broad brush or just give me a little latitude here. Dealers' websites are no better than the third-party sites on this particular topic across the board, because the the consumer goes right to the dealer's website and goes, oh, here's the car for you know$39,500. That doesn't include doc fee, doesn't include maybe they also to your point already includes discounts, military, first-time, you know, loyalty, whatever the case might be. So there's a whole can of worms right there at the dealer's website as well, right?

State AGs Join The Crackdown

SPEAKER_02 6:42

Absolutely. Yes. Yeah, at the end of the day, the dealers are gonna have to take uh a much closer look at compliance. And they need to make sure that the the advertisements that they put out there um are sufficient that they're not gonna end up in with substantial fines from the FTC. Uh and what we've also seen is a major uptick now since these letters have come out in state attorney general subpoenas have gone out. In the past two weeks, I've received more AG subpoenas around the country um piggybacking off of what the FTC has started.

Jim Fitzpatrick 7:18

Right, right. So this this this is something that dealers definitely, for dealers that are watching, this is something you got to pay attention to. I mean, it don't don't don't think that a defense is gonna be, well, the guy down the street's doing it, the other Nissan store is doing it, the other Toyota store. We all are doing this. This is the way it is, you know, in our market, because you don't want to be slapped with a you know a half a million dollar uh judgment or or fine against you. Um it just it just and then of course once you're under the microscope, you're gonna be under it forever with that AG of that state or the federal government, right? What in terms of um the the federal government trumps the state or how does that work?

SPEAKER_02 8:01

Um it not necessarily trumps. You could you could be found to be violating both state and federal regulations. So where the FTC could be going after you, which is what we're seeing, by the way. Yeah. Um if the FTC is going after you for one issue, the state could be going after you for the very same issue. Wow. Uh and the the penalties are are severe. I mean, if you look at the the FTC's statute, um it the fines can be up to$5,000 per violation,$50,000 per violation. So, you know, how many how many times if you roll through a dealer's advertisements, how many cars are you sitting on the lot, each one of those is a$50,000 violation. Wow.

Jim Fitzpatrick 8:36

That's not good. That's not good. And the other thing that dealers know is that it's one thing to pay the fine or negotiate a lower fine with the state or what have you, but what you just did in terms of the PR with the car buyers in your market is just you you can't get that back, right? Because it's gonna make the headlines, it's gonna be on the news without a doubt that this particular dealer group is either overcharging or not transparent with their numbers, and they just got a big, huge fine for ripping off the consumer, even though they're not necessarily doing that. And uh you can't really can't put a number on that, right?

SPEAKER_02 9:10

No, no, and they uh they're very colorful with the adjectives that they use in their press releases to describe these dealers. Yeah, um, and because you're dealing with governmental entities, um the the resolutions are public. Yeah. So, you know, whether they put out it, whether the AG or the FTC puts out a press release, someone's gonna get their hand on it and it will hit the news. And that's gonna be something that dealers are gonna have to deal with uh on a PR basis.

Jim Fitzpatrick 9:39

There's no question about it. So what what what news organization out there, with the exception of CBT News, doesn't love to report negative stuff about local car dealers, right? I mean, it's just it's it's just amazing to me that anything derogatory relating to dealers, man, they'd be front page, every consumer uh, you know, investigative reporter is at your doorstep, you know, asking a million questions, right? So for dealers that received the letter, they should be worried, right?

SPEAKER_02 10:04

Yeah, they should, because it's somebody will be made an example of. We don't know who, but um, I don't see this as going away. I think this is is simply a warning shot. And again, um I think it was strategically done to make sure that when they go for enforcement, the dealers can't say that they had no knowledge of these issues. So the dealers that receive those letters and every other dealer should make sure that they're in compliance and make sure that if there are issues, they're fixed.

Jim Fitzpatrick 10:33

Yeah. What role should legal or compliance teams be playing in a dealership's day-to-day marketing decisions right now?

SPEAKER_02 10:41

I think that uh all website advertisements should be reviewed. Um I think that uh in addition to that, and anything that's public-facing, uh, I think that the dealers need to make sure it's compliant. Uh and in that, then the very next step is make sure your documents are compliant. I think that uh with these subpoenas that come out from the FTC and the state organizations, they're looking at your advertisements and they're looking at your disclosures and your documents. So deal jacket reviews for for cash deals, deal jacket reviews for finance deals. Uh it's important to make sure that your disclosures are disclosing openly, clearly, and conspicuously.

Jim Fitzpatrick 11:20

Yeah, yeah. Compliance training uh isn't always fun for dealership personnel or for dealers. It's just kind of like one of those things that, you know, when you talk about compliance training, most dealers are like, ah, what's this gonna be about, right? But uh but it's so vitally important now because of the fact that where the auto industry is now under this microscope. And uh to your point, uh Seth, they are gonna be looking to make uh an example out of somebody or uh multiple dealer groups, right? Yeah. Yeah, there's no question about it. What immediate steps should dealers be taking today to review and tighten up their advertising and sales practices?

SPEAKER_02 11:58

I would I would contact your your local your the attorney that handles your compliance work, or if you have a third-party vendor handling compliance, uh, I'd make sure that they're closely reviewing the websites that you have out there and any other advertisements that you have. And the very net the next step after that is to make sure that the documents that are put in the hands of consumers clearly disclose what needs to be disclosed and that you're you're in compliance.

Jim Fitzpatrick 12:23

Yeah, for sure. And I would also add that for the managers that are pushing, you know, if the if the dealer uh has compliance in place, has training in place, what have you, it only takes one rogue sales manager that's placing those ads on those third parties or putting those ads um, you know, online or on, you know, putting them on the numbers on the dealer's website. Um one rogue person that wants to sell a whole bunch of cars that weekend or, you know, put something out there that isn't isn't right, you could be in trouble. So this has to be, I think, one of those situations where it's zero tolerance, where if a dealer has somebody that's doing that, they gotta go bye-bye because it's a huge liability. I mean, it it really is. And uh, you know, they're basically they're basically writing a check for you, right, Seth, when they make that decision to say, well, let's take this Corolla or this Nissan or whatever, put it out there, don't have the D the doc fee in there, put in there every single, you know, discount that uh we we think the car is eligible for, even though the consumer's not. And man, all it takes is that one opportunity. And uh they don't you gotta be right every day, as they say. Um and and and they only have to be right once. And when they come to your website to go, here's the vehicle that we're talking about right here. You can't get to that number, and and it doesn't include the dock fee. And they're gonna be presented the dock fee when they come, you know, to buy that car, right?

SPEAKER_02 13:46

Yeah, yeah. The dealership is only as uh strong as its weakest link.

Building A Living Compliance Program

Jim Fitzpatrick 13:50

Yeah, yeah, there's no there's no question about it. From your perspective, what separates dealerships that stay ahead of compliance issues from those that end up facing enforcement actions?

SPEAKER_02 13:59

You have to take an active role. It's not something that's a set it and forget it. Um the rules are constantly changing. Um, you should have a regular calendared compliance review, whether it's uh done on a bi-annual basis, but it should be part of the process that's just of ordinary course for a dealer.

Jim Fitzpatrick 14:17

Yeah, for sure. Seth, do you actually do that for your the the dealers and the dealer groups that you work for? Do you either either you or have people from your firm go in and provide training to the whole team or or do they have to get that somewhere else?

SPEAKER_02 14:31

No, we have we have a robust compliance department that handles um compliance across the country for both advertisements, um, documents that the dealership would have. Uh we've conducted trainings in the past. So yeah, we're we're we work hand in hand with uh our dealer groups to try and keep them as compliant as uh as we can.

Jim Fitzpatrick 14:50

Right. And as you guys, uh you know, you dealers know out there, if a diff you you'd have somewhat of a defense, you're an attorney, I'm not, but you'd have somewhat of a defense if you had a very robust compliance training uh initiative among your stores. Um and you get then suddenly you get caught. Maybe somebody does something wrong and the ad gets out there, what have you, and then of course the state or the feds come in, as long as you can prove that you you say, no, here's our training. We have it every month. This is the law firm that conducts it. We sign off, everybody's got a sign that they were attending the training. At least that's something rather than having nothing, right? When somebody says, Well, you know, if if a state's attorney says, you know, what what do you do to prevent this from happening or happening again, and you got nothing? That's not that's not a good picture, is it, Seth?

SPEAKER_02 15:39

No, and it goes a long way in in resolving uh some of these claims that pop up. Um, having a robust compliance program will minimize some of those settlements that are out there.

Final Warnings For Dealers

Jim Fitzpatrick 15:50

Yeah, yeah, for sure, for sure. Because it could be it just happened once or twice, or maybe as I mentioned, it was a rogue person that put the number out there. But as long as the state and the feds see that you are paying attention to this, you're making every effort that you can to sit up and fly right, then uh then yeah, they'll have a tendency to say, all right, well, maybe a slap on the hand, don't do it again, or maybe the fine is not terrible, something you can live with. But uh, Seth Dobbs, partner and co-chair of the National Automotive Practice at Fox Rothschild, thank you so much for stopping in. I'm sure we're gonna need you back here again to continue this conversation because you can be sure my uh fellow uh brothers and sisters in retail automotive will try this to the very end. In fact, I'm I know right now the dealers and the managers that I that I know, uh, I know the ones that might push the envelope a little bit, right? Which is what might get that dealer in trouble. So for those of you that are out there, don't push the envelope. For those of you that are doing a good job, congratulations, you got nothing to worry about. So, Seth, thanks so much. Really appreciate it.

SPEAKER_02 16:53

Thanks so much for having me. Pleasure to be here. Yep. Thanks.