Deceptive Direct Mail

Think before you print.

State officials across the Midwest have started cracking down on what they’re calling “false premise” ads used to promote used-car sales events.
A producer of these events, has been working with the Iowa Attorney General to settle a lawsuit claiming the company falsely represented vehicles.
Under the agreement, the company promises it will not make or imply false claims about the sources of vehicles or make other false claims. The company will also pay $300,000 in restitution to Iowa and nine other states.
The company’s attorney will now review all ads before they are sent to clients for proofing. Their attorney hadn’t done this before.
“As head of an advertising company and a business owner, I have to be as aggressive as I can without breaking the law,” the owner said. “We are now moving forward with our business and we may not have been a great judge in the past of what was too aggressive when it came to ads. Now we’ve added another step to the process by the addition of a compliance officer who will check ads before they go to clients.”
The company denies doing anything illegal and said the company wasn’t found guilty of any wrong doing. It paid restitution as a way to avoid going to court.
the company is very successful at what it does, the owner said. This takes business away from their clients’ competitors, who may be complaining to the state that someone from out of town is using aggressive advertising in their market area to the detriment of local dealers.
Bill Brauch, director of consumer protection for the Iowa Attorney General’s office, said states are focusing more on ad agencies and their special sale campaigns.
Brauch said the companies claim the vehicles for sale are coming from defunct car rental agencies or bank repossessions.
“The ads we looked at didn’t disclose that the public would be dealing with car dealers,” Brauch said. “We maintain that the aim of these ad claims is to mislead the public. The ads even used phrases such as ‘take over payments,’ implying that a buyer could end up owning a car by taking over a loan payment schedule.”
What the ads don’t say is the vehicles being sold are regular inventory, Brauch said. He warned that car dealers doing business with ad agencies are equally liable for any violations of the law.
The company said one of their clients had to pay any fines or restitution as a result of the attorney general’s investigations.
“The spirit of the agreement was that if we stepped up and made a good decision, the states would not pursue any actions with our client partners,” he said.
They declined to give the names of any clients who may have been investigated.
So far, the state hasn’t gone after many dealers, Brauch said.
Instead they have concentrated their efforts on the ad agencies.
North Dakota Attorney General Wayne Stenehjem also took action against several out-of-state agencies for misleading sales tactics.
Stenehjem secured $10,000 from outside companies.
Representatives from declined to comment on the North Dakota attorney general’s actions.
The lawsuit stemmed from the comapnies event in Fargo, N.D., Stenehjem said.
The company mailed 119,000 fliers to area residents that Stenehjem said contained misleading statements about the terms of the sale, as well as misstatements about credit approval and the number of vehicles for sale.
The North Dakota contest prize law was also violated when scratch-off games were handed out. Each scratch-off card stated that the person holding the card won the jackpot.
Stenehjem also said that the day before the special sale the staff event personnel brought in to run it raised the prices on cars to enable them to offer “better” deals.
Stenehjem also stated in his lawsuit that there were violations of the state’s false advertising laws, consumer fraud laws, and the law requiring out-of-state businesses to obtain a certificate of authority from the Secretary of State before transacting business.
He also alleged that there were violations of a previous agreement that they had entered into in 2004 relating to a staffed event in Jamestown, N.D.
“So-called ‘staffed event’ companies are on notice that they must comply with all state laws, including consumer protection, advertising, licensing and registration, insurance, employment and taxation, if they choose to do business in North Dakota,” Stenehjem said.
He also issued a cease and desist order against Blake Paxton and Paxton & Associates LLC of Lexington, Ky.
Stenehjem said Paxton declined to cooperate with his investigation and that Paxton conducted a sale in which vehicles were repriced and staff made misrepresentations about the cars for sale.
A violation of the cease and desist order is subject to civil penalties of up to $1,000 per violation, as well as civil penalties of up to $5,000 for each violation of the state’s consumer fraud law.