Special Pricing For Online Sales Can Lead To Trouble
With more dealerships working to beef up their internet sales during the pandemic . . .
With more dealerships working to beef up their internet sales during the pandemic, TIADA has received some questions from members who are considering increasing their online presence. One of the more frequently asked questions the association has received during the pandemic is: “I've seen internet offers popping up online. Can the pricing for an online sale differ from the on-site price?”
TIADA's understanding of the issue is that a vehicle may only have one price independently of where it is advertised. There should be no distinction made between cash price, credit price, internet price, and so on.
Naturally, we wanted to dig a little deeper and consulted with legal counsel on this very subject. Below is a list of just some of the items dealers need to keep in mind when considering online sales and advertising:
• Online Advertisements: Say you post a sales price for your vehicle on your Facebook page. Under federal law, that post would be considered an advertisement under federal law. Under federal law, any message to the public, however communicated, which promotes a product or service is considered “advertising” or an “advertisement”. (Note - there are some exclusions to this definition for Reg. M and Reg Z.) So, if your customer saw an advertisement online and went to the dealership based upon the advertised price, the dealer may have a “bait and switch” claim. Under this scenario, the customer could sue the dealer for specific performance – asking a judge to order dealer to honor the advertised price.
• Be Ready to Honor Sales Price: When featuring a sales price of a new or used motor vehicle in an advertisement, including online ads, the dealer must be willing to sell the motor vehicle for that featured sales price to any retail buyer. Remember, the featured sales price shall be the price before the addition or subtraction of any other negotiated items. Destination and dealer preparation charges must be included in the featured online sales price.
• Discount Offers Are a ‘No': No person may advertise a savings claim or discount offer on a used motor vehicle. Such offers can only be made on new motor vehicles by franchise dealers.
• Verbiage: Steer clear of advertising “internet price”, “e-price” or using similar terms that indicate or create an impression that there is a different or unique sales price. for an online or internet consumer or transaction is prohibited. See Texas Administrative Code 43 TAC 255.250 (d-e).
• Negotiating a Price: Some dealers have interpreted the Herbie's enforcement action to mean that prices cannot be negotiated at all. And in fact, many dealers choose not to negotiate price on any deal, period, which is certainly their right; that practice reduces the risk of a regulatory action. However, as stated above, there is currently no federal or state law that explicitly prohibits price negotiation on the sale of a vehicle, as long as substantially similar negotiation takes place in both cash and credit sales.
Keep in mind, following these guidelines won't clear a dealership from being sued, but it will help minimize one's risk of a lawsuit.