The Federal Trade Commission (FTC) and the state of Connecticut recently alleged that Manchester City Nissan engaged in deceptive and unfair practices by adding illegal junk fees to the cost of cars. Although not the battle of titans present in many recent FTC Big Tech matters, the case is a master class in the FTC’s war on junk fees and offers a number of lessons and insights into the agency. A few examples:
- Drip pricing – The defendants advertised their products with a low price, a limited warranty and a certified inspection. However, defendants allegedly piled on hundreds and sometimes thousands of dollars in fees on top of the advertised price. The complaint provides the example of a consumer that was looking to buy a “certified pre-owned” car that was advertised for only $15,700 who were shocked to see an added $5,295 “inspection fee.”
- Misrepresenting the nature of a fee – The complaint alleges that certain fees were identified as Connecticut Safety and Reconditioning, leading consumers to mistakenly believe that such fees were mandated by the state.
- Misrepresenting who gets the fee – The complaint alleges that other fees that were mandatory, such as state registration, were inflated beyond the actual amount of the state fee without any disclosure that the dealer was pocketing the additional funds.
- Ignoring warnings upsets regulators – Connecticut had previously warned the dealership about some of these practices, but the complaint alleges that even though Connecticut had previously warned the dealership about some of these practices, the practices continued.
- Individual liability isn’t just for CEOs – The complaint names six individuals (the two managing partners, the general manager, two sales managers and the finance manager) for their alleged wrongdoings.
- Fighting the FTC in court is popular these days – The FTC is litigating more cases these days than we, at least, can remember. Many are against large, well-funded companies, but add this one to the list, at least for the time being. Defendants were perhaps emboldened by the recent industry challenge to the recently finalized FTC CARS rule.
- Finally, be you a large or small seller, bear in mind that the regulators are taking junk fees seriously. Given that the FTC has already received over 50,000 comments in response to its proposed junk fee rule, that isn’t surprising.
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