By Mark Sanborn
Senior Product and Regulatory Counsel
Fiction: Dealers may assume that using OEM advertisements automatically ensures compliance with advertising regulations.
Fact: Dealers are often subject to a different set of legal advertising regulations than the OEM. As a result, OEM advertisements are frequently not compliant for dealer use across all 50 states.
Hey there Compliance Connoisseurs! Today we are in for another installment of “Fact or Fiction.” Today’s topic: the often-misunderstood world of dealer use of OEM advertising. Buckle up; it’s about to get real.
There’s a widespread belief in the auto industry that OEM-produced advertisements can be used by dealers without a second thought—fully compliant and ready for dealers to use. Dealers, so the thinking goes, don’t need to make any tweaks before slapping these ads on their websites, social media, or other platforms. If it’s good enough for the OEM it must be good enough for dealers, right?
Spoiler alert: That assumption is often dead wrong. Dealers should exercise extreme caution before adopting OEM-generated advertisements and should subject them to the same rigorous review process they use for their own advertising.
Why OEM Ads Aren’t a Free Pass
Once an advertisement is published by or for a dealer, including on the dealer’s website or social media accounts, it becomes the dealer’s advertisement for all legal compliance purposes.
OEM advertisements generally aim to comply with federal regulations, such as Regulation M for leases and Regulation Z for finance offers. Sounds reassuring, right? Not so fast. Even at the federal level, some OEM advertising might miss required disclosures.
But the headache for dealers comes not only from federal law—but also state law. Many states impose unique requirements on motor vehicle advertising, and here’s the kicker: those requirements typically apply only to dealers. OEMs, on the other hand, aren’t bound by all the same advertising regulations.1
Dealers should also be aware that OEM reviews of dealer advertisements are generally limited to ensuring compliance with OEM branding and image standards; they do not extend to evaluating compliance with federal and state laws applicable to the dealer.
The State Law Minefield
The State Law MinefieldEven if an OEM ad checks every box for federal compliance, it may still violate state-specific laws. Here’s where things get messy.
Take fee disclosures, for example. Many states regulate how fees like destination charges, preparation costs, and dealer fees are presented in advertisements. OEM ads often exclude these fees in the fine print, which is a big no-no in states that require such fees to be included in the advertised terms.
The State Law Patchwork
State-specific advertising laws create a complex and inconsistent landscape, posing significant challenges for dealers relying on OEM ads. These variations often require disclosures that go beyond what OEMs typically include, highlighting the broader issue: there’s no one-size-fits-all solution when it comes to compliance.
For example:
- New Jersey: Lease ads must include a detailed list of disclosures, such as whether there’s an option to purchase the vehicle (and at what cost), the type of transmission, total lease cost, and a specific statement mandated by state law.2
- California: Lease advertisements must clearly disclose the mileage limit and the per-mile charge for exceeding it.3
- Texas: It’s prohibited to advertise prices that include rebates or discounts not available to all customers. These must be listed separately from the price.4
These examples illustrate a larger trend: state-specific nuances make it nearly impossible for OEM advertisements to be fully compliant across all jurisdictions. What works in one state can easily land a dealer in hot water in another, underscoring the importance of adapting advertisements to meet local requirements.
The Challenge of Document Fees
Let’s talk about the wild west of dealer document processing fees. In some states, these fees must be included in the advertised price. In Oregon, they must not be included.5 Then there are states that allow the fee to be included, but only if the amount is disclosed in the ad.6 Good luck finding an OEM ad that satisfies all these conflicting requirements.
The Bottom Line
OEM advertisements can provide a great starting point, but dealers should never assume they’re compliant as-is. Review every ad with a fine-tooth comb—or better yet, consult your compliance team. A little diligence now can save you a mountain of headaches later.
ComplyAuto Makes it Easy
ComplyAuto’s Guardian provides unparalleled tools to assist dealerships by automating compliance checks, scanning advertisements, and conducting deal jacket audits. Leveraging AI-based technology, Guardian is tailored to help dealerships comply with both current federal and state regulations. This tool offers an efficient solution for navigating federal and state regulations, helping to ensure consistent, accurate compliance practices in a dealership’s operations. Reach out to ComplyAuto today to learn more about the most powerful AI compliance tools available.
Stay compliant, stay savvy, and keep asking the right questions. Until next time, Compliance Connoisseurs!
1 For example: California Vehicle Code Section 11713.16: “It is a violation of this code for the holder of any dealer’s license issued under this article to do any of the following. . . .” [emphasis added]; Code of Maine Rules 26, 239, ch. 104: “This chapter describes advertising practices by new and used motor vehicle dealers that are unfair and deceptive in violation of the Maine Unfair Trade Practices Act. . . .” [emphasis added]; Florida Statutes 501.976: “It is an unfair or deceptive act or practice, actionable under the Florida Deceptive and Unfair Trade Practices Act, for a dealer to. . . .” [emphasis added].
2 NJ Admin. Code § 13:45A-26A.6(a)(4)(f).
3 California Civil Code § 2985.71(b)(2).
4 43 TAC § 215.250(j).
5 OAR 137-020-0020(2)(v).
6 Conn. Gen. Stat. § 14-62a(a).