The Federal Trade Commission just announced that it has issued new guidance on “price transparency" for auto dealers.  The Automobile Industry Pricing Transparency:  FAQ guidance reminds the industry that “the advertised price of a vehicle must be the actual price that any consumer can walk in and pay to purchase the vehicle, excluding only charges that the government requires the consumer to pay.”  

In announcing the release of the new guidance, FTC Bureau of Consumer Protection Director Christopher Mufarrige said, “The FTC Act requires truthful and accurate pricing, which brings significant benefits for consumers and competition.  Price transparency is a priority for the Trump-Vance FTC, and today's guidance is intended to help dealers and others in the auto industry better understand how the law applies to their advertising.”  

Here are some of the highlights from the new guidance:

Why is the FTC focused on price transparency?

The FTC said that “ensuring that advertising pricing is transparent and truthful” is one of its enforcement priorities.   This means that the FTC expects that “the price consumers see in advertising is the actual price they will pay, aside from required government charges like taxes.” 

What needs to be included in the advertised price?  

The FTC emphasized that the advertised price must be the “actual price any consumer can walk in and pay.”  The means that, if there are any fees that a dealer charges, they must be included in the advertised price.  The FTC said that the only thing that can be excluded from the advertised price are government-required charges, in other words, the amounts that a government agency requires consumers to pay directly. 

In what advertisements do dealers have to be transparent and truthful about pricing? 

The FTC said that its all-in pricing requirements apply to advertising in all media.  

For internet ads with a price, must all webpages list the actual price? 

If a price is advertised online, the actual price that consumers must pay must be the most prominent amount shown.  

Can the MSRP or discounts and rebates be included in ads? 

The FTC said that the MSRP, as well as discounts and rebates, can be included in advertising, so long as the actual price is the “most prominently displayed amount.”  The FTC explained that this means that if advertising includes the promotion of an available discount, such as a $1,000 discount for first responders, the price that consumers actually has to pay must be placed more prominently than the promotion of the discount.  

How should document fees be disclosed? 

The FTC says that document fees must be included in the advertised price.  

How should dealers comply with state laws on disclosing document fees? 

The FTC said that it's all-in pricing requirement is in addition to any disclosures that may be required by state law.  So, even if a state requires document fees to be listed separately, they still must be included in the advertised price. 

How should a processing fee be disclosed in a leasing advertisement? 

According to the FTC, if there are processing fees due in connection with a leasing transaction, they must be included in the price that consumers are required to pay upfront. 

How should dealers account for price negotiations and optional items when advertising prices? 

The FTC said that it's fine for dealers to negotiate with consumers and to agree to sell the car for a price that is lower than the advertised price.  The FTC cautioned, however, that “any advertised price must reflect the actual price that any consumer can pay to purchase the car, whether they negotiate or not.  That means a dealer cannot advertise a price around a discount or rebate only available to a subset of buyers.” 

Regarding optional items, the FTC acknowledged that it's fine for dealers to offer optional goods and services, so long as the dealers don't mislead consumers about them. 

Can dealers advertise a car that is in transit, in the dealers' inventory but at an offsite location, or recently sold? 

The FTC said that if dealers advertise a car that is not “physically on the lot” at the time the advertising runs, the advertising should make that clear.  The FTC explained, “If a vehicle is in transit or located elsewhere, the ad must plainly state that fact.” 

Not surprisingly, the FTC also said that, as a general matter, dealers should not advertise cars that have already been sold or that are otherwise not available. 

Can dealers use a representative photo of a particular vehicle in an ad? 

The FTC said that dealers can use a representative photo to advertise a new car, so long as it is “truly representative of the vehicle being sold."  That means that the car pictured must be the same in make, model, condition, and all other material characteristics.  The FTC also said that consumers must understand that “the picture is illustrative rather than the actual car.”  

When advertising used cars, however, the FTC said that the actual photo of the car should be shown.  

Who is responsible for accurately disclosing price in ads – dealers, third party advertisers, or OEMs?

The FTC emphasized that “everyone who has control over the advertising is responsible for making sure the ads state the actual price as the most prominent amount.” 

Regarding OEMs, the FTC said, “OEMs should make sure none of their policies or practices conflict with these requirements and keep in mind that everyone who has control over the advertising is responsible for making sure ads state the actual price as the most prominent amount.”