Pub. 16 2017-2018 Issue 4

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 31 new jersey auto retailer W W W . N J C A R . O R G for subsequent violations. These penalties can be imposed per advertisement and per vehicle. Thus, depending on the number of non-compliant advertisements, the financial exposure can be very high. Also, violations of the advertising regulations can poten- tially support consumer fraud lawsuits and class actions brought by private plaintiffs’ attorneys, which could also lead to massive liability. Considering this exposure, NJ CAR recommends that dealers continually confer with both their legal counsel and ad- vertising agencies to ensure that all advertisements are compliant. That being said, NJ CAR appreciates that the world that existed when the DCA’s advertising regulations were formulated was vastly different than the world of today. These advertising regu- lations were initially adopted long before the rise of the Internet, and last revised more than 20 years ago, in 1996. Since then, the Internet has become ubiquitous. As a result, the way consumers search for vehicles and compare prices has changed. New Jer- sey dealers are now forced to compete directly with dealers far outside their traditional market area. When a consumer scours the Internet for a vehicle to buy or lease, Internet search engines and lead generation websites such as “cars.com ” typically sort available vehicles by price, first and foremost. Websites linked to the lowest priced vehicles (of the same year, make, model, and mile- age) will appear at the top of the list of search results. All things being equal, websites that quote the lowest price for the desired vehicle will be viewed first by the consumer. If the price is right, the website that a New Jersey consumer ultimately visits could be that of a dealer or broker in neighboring New York, Pennsyl- vania, or some other state. If distance is not prohibitive, then the out-of-state dealer will likely get the business. Of course, there’s nothing wrong with that result in a free market. Unfortunately, however, the applicable motor vehicle advertising regulations differ state-to-state. Thus, New Jersey dealers are forced to compete with out-of-state dealers, who, in practice, need not comply with the strict set of rules that New Jersey dealers must obey when advertising on the Internet. Notably, DCA recently changed its position regarding the inclusion of dealer documentary fees (“doc fees”) in advertised prices. That is, doc fees must now be included within an advertised price, even in Internet advertise- ments. For example, if the sale price of a vehicle is $20,000 and the doc fee is $300, then the advertised price must be $20,300. On the other hand, in practice, dealers in neighboring states and elsewhere will only need to state $20,000 as the vehicle’s advertised price in their Internet advertising. As a result, New Jersey dealers’ advertised prices on the Internet will be higher, in most cases, than dealers located in neighboring states and elsewhere. Obviously, this places them at a substantial competitive disadvantage on the Internet, where almost all consumers first look for their vehicles and searches are driven entirely by price. New Jersey dealers are therefore forced to balance this competi- tive disadvantage and related loss of profits against the potential for massive financial exposure resulting from non-compliance. Oddly, under the DCA’s new requirement to include doc fees in advertised prices, the only way for the DCA to determine whether a dealer has complied is to conduct an on-site investigation of the sales prices of individual car deals and check the prices against the advertised prices at the time of sale. This makes it harder for the DCA to enforce the disclosure of doc fees in price advertising. Accordingly, many dealers are suspicious as to whether their com- petitors are complying with the new requirement, or whether they are skirting the requirement to gain market share. This presents a conundrum for dealers–that is, if they are steadfastly compliant with this new requirement, it may not matter because they will be driven out of business by non-compliant New Jersey dealers and out-of-state competitors. The DCA has both the discretion and flexibility to amend its motor vehicle advertising regulations to address these issues. Accordingly, NJ CAR has requested that DCA simply allow inclusion of an additional doc fee disclaimer in Internet advertisements, rather than mandate inclusion of the doc fee in the price itself. This change would essentially allow dealers to revert to a practice that was allowed by the DCA before its recent change of position. NJ CAR hopes that the newDirector of the DCAwill be receptive to this argument, especially considering the substantial economic activity and related tax revenue generated by automotive sales in New Jersey. In the interim, NJ CAR recommends strict com- pliance until a regulatory fix can be achieved in Trenton. Anthony Anastasio is NJ CAR’s Director of Legal & Regulatory Affairs. He can be reached at 609.883.5056, x350 or via email at aanastasio@njcar.org . New Jersey dealers are therefore forced to balance this competitive disadvantage and related loss of profits against the potential for massive financial exposure resulting from non-compliance.