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Playing With Fire

Two attorneys issue a warning about a new sales
trick circulating through the industry.
Their advice: If it’s too good to be true, it probably is.

BY CHRISTIAN SCALI AND MONICA BAUMANN

Have you heard the new one? A sales sales tactic and others designed to circum- In some cases, a prosecutor may allege
trainer is suggesting a new sales trick that vent the ad price rule could put your deal- that this amounts to “payment packing,”
has salespeople regularly selling vehicles ership in legal hot water. But even if your or quoting a price or monthly payment to
for more than the advertised price. The dealership’s sales staff never gets wind of a customer that includes products or ser-
practice essentially invites customers to this specific tactic, it is important to know vices that the customer did not request.
pay an additional amount above the ad- that prosecutors and plaintiff’s attorneys California has explicitly prohibited this
vertised price as a tip for excellent service are always on the lookout for unfair and practice. In other states, prosecutors have
or for getting an exceptional deal. The deceptive practices. These cases can result relied on their UDAP statutes to target
trainer claims this is kosher, provided the in big penalties and even bigger headlines these practices. For example, New York
additional amount is fully disclosed to the for your dealership. Attorney General Eric Schneiderman has
customer and the customer agrees to it. brought nearly a dozen cases in the last
The sales trick is likely prohibited in states several years charging dealers with “jam-
It sounds too good to be true, right? That’s that clearly mandate that vehicles be sold ming,” another word for payment packing.
because it probably is. Most states have at or below the advertised price. For exam-
laws that explicitly require that dealerships ple, the California Department of Motor This practice also could invite scrutiny
sell vehicles at or below the advertised Vehicles’ regulation states that advertised from the FTC and Department of Justice
price, often referred to as the “ad price vehicles “must be sold at or below the ad- (for dealers engaged in indirect vehicle
rule.” But even if your state does not have vertised price irrespective of whether or financing) and the Consumer Financial
a clear rule, your state’s unfair or deceptive not the advertised price has been com- Protection Bureau (for dealers who hold
acts or practices (UDAP) statute may bar municated to the purchaser.” California their own paper). The CFPB has expressed
this sales tactic. law does not recognize any exception to skepticism about aftermarket products
this rule. Further, these are relatively sim- generally, and specifically warned that
Keep in mind prosecutors and, in some ple lawsuits, as the prosecutor can simply dealerships that sell aftermarket products
states, plaintiffs’ attorneys, use these laws compare the final vehicle price to the ad- at variable prices could be subject to a dis-
to challenge unfair business practices. vertised price. parate impact lawsuit.
Further, the Federal Trade Commission
(FTC) is very much interested in unfair Can you avoid the ad price rule by add- If, for example, your dealership sells
and deceptive practices, and has built a ing the additional cost to an aftermarket more of an aftermarket product to Span-
body of case law it or state prosecutors can product? You may be able to get away with ish-speaking customers and at a higher
use against your dealership. such a practice for a while, as it would be price than to English-speaking customers
harder for a prosecutor to spot the viola- — and a legitimate business reason for the
Penalties and Headlines tion by looking at the sales contract, but pricing difference does not exist — this
This article briefly analyzes how this new this is playing with fire. could be the basis for a lawsuit that al-

12 | GIADA Independent Auto Dealer JUNE 2017