Washington state Attorney General Rob McKenna's office is sounding the siren on marketing firms accused of using deceptive advertising and prize promotions to steer consumers to buy cars. The state announced two new lawsuits this week as part of an ongoing effort to enforce fair marketing practices.
"We've warned dealers and ad firms that they need to make sure their promotions comply with state laws," said Assistant Attorney General Mary Lobdell. "Now we've set up a roadblock to stop those businesses that continue to drive down the wrong side of the legal road."
The Attorney General's Consumer Protection Division filed a complaint Monday in Pierce County Superior Court accusing Big Ideas Direct, LLC, of Woodinville, and owners Jeffrey Watts and Michael Nealy, both of Snohomish County, of violating Washington's consumer protection and prizes/promotions laws.
State attorneys filed a similar complaint May 19 in Thurston County Superior Court against Smart Automotive Group, LLC, of Metairie, La., and its president, Bernard E. Burst III, of New Orleans.
In both cases, the defendants are accused of:
• Advertising fictitious bank repo sales and creating a false sense of urgency. Big Ideas Direct alleged created a fictitious entity called the "National Automobile Clearance House" to suggest that vehicles are from some other source than a dealer's regular inventory. Smart Automotive Group allegedly used terms such as "Forced Liquidation" in its advertisements.
• Advertising false savings, Big Ideas Direct allegedly made statements such as "75 percent off the manufacturer's suggested retail price (MSRP) on a used vehicle." Lobdell said the MSRP isn't the industry pricing standard for used vehicles. Smart Automotive Group suggested vehicles would be sold at 95 percent off the original price without defining the "original price."
• Making misleading statements about the availability of financing such as "$0 DOWN DELIVERS!" in a Big Ideas Direct ad. Smart Automotive Group allegedly advertised "Buy these vehicles for pennies on the dollar," and "205 vehicles will be sold to the public for $77 per month" without establishing that the dealer regularly sells at those prices or provides consumers such credit terms. Another Big Ideas Direct ad allegedly stated "Your current loan will be paid off NO MATTER WHAT YOU OWE," while the small print said that negative equity would be added to the cost of the new vehicle.
• Advertising "free" merchandise and prizes without adequately disclosing that consumers would need to pay shipping and handling fees.
• Using simulated checks that lacked mandatory disclosures. Any simulated check used as part of a promotion must state "This is Not a Check" diagonally in a large font.
• Failing to advertise the documentary fee. In some cases, Big Ideas Direct allegedly advertised a greater fee than allowed by law.
The state is seeking court orders to stop the deceptive practices and civil penalties, as well as reimbursement of legal costs and restitution for any affected consumers.
The Attorney General's Office reached settlements in 2007 and 2008 with three other companies concerning similar allegations. The office created a Web page at www.atg.wa.gov/dealers.aspx with tips to help dealers comply with advertising laws.