Marketing and Advertising Case Study: Deceptive Advertising

July 21, 2008 | No Comments | share on facebook | retweet | share on LinkedIn

by excerpt from DealerTrack Compliance Guide - 2008 Edition

About 10,000 owners of General Motors vehicles received what appeared to be an official notice from GM in the fall of 2006. "URGENT POTENTIAL RECALL NOTIFICATION" the mailing announced in bold type directly above the recipient's name and address. The notices were even postmarked out-of-state from a "Program Headquarters" and bore the logos of the GM brands as well as General Motors' brand logo.

As it turned out, the notices were not from GM but allegedly from a local dealership and there was no recall involved in any of the customers' vehicles. The dealership sent the notices in an effort to cause car owners into believing their vehicles were unsafe and to sell them new cars or service plans on their autos. The phone numbers in the mailings for the customers to call were directed to the dealership's sales offices, where the customers were hard sold to purchase a new vehicle or service plan.

The State's Office of Consumer Affairs filed an action in state court against the dealership alleging this activity to be another step in a repeated practice of sending such false and deceptive advertisements to consumers in the state over the course of 16 years. The suit cited multiple consent decrees with the agency that the dealership had violated. The activity is alleged to have violated the State's Fair Business Practices Act. Even GM, in a letter to the dealership once it learned of the activity, characterized it as constituting "deceptive trade practices under both state law and federal law."

The lawsuit seeks, among other things, penalties of $5,000 per notice (that's $50 million in total); and recovery of all related costs and attorney's fees. Civil lawsuits have also been filed by aggrieved customers seeking actual, statutory and punitive damages, plus attorney's fees, as well.

 

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