State AGs Go After Mad Men for Advertising Misrepresentations

Ten state attorneys general recently reached settled with an ad agency over allegations that the firm's ads misrepresented the origins of cars sold during used car dealers' sales events. According to the complaint, ads created by Action Integrated Marketing led to misperceptions regard the origins of the advertised vehicles. For instance, some ads included terms such as "The Repo Joe Sale" and "Government Vehicle Disposal," even though the vehicles sold at these events were allegedly from the dealers' regular inventory. In addition, the attorneys general asserted that the ads fostered a false sense of urgency regarding the length of the sale, and did not adequately disclose vehicle prices, including all mandatory fees and credit terms. Under the terms of the settlement, Action Integrated Marketing agreed to pay a $150,000 fine to the participating states and restrict its future marketing practices. What is particularly interesting about this complaint and settlement is that it only appears to involve the ad agency who created the ads and not the auto dealers. Going after the Mad Men instead of the manufacturers behind the ads is a relatively rare occurrence, but not unprecedented. The FTC has taken the position that ad agencies may be held liable for misleading claims in ads where the agency actively participated in the creation of the ad at issue and knew or reasonably should have known the claim was false. See here and here. The FTC has asserted it believes advertising agencies and media outlets have a duty to make an independent check on the information used to substantiate ad claims. The FTC has published guidelines for third parties to spot certain types of prevalent deceptive claims such as here and here. The states apparently agree that liability can extend beyond the seller, and during a time when many enforcement dollars (or in some states exclusive enforcement dollars) from the consumer protection budgets are being spend to focus on financial fraud and deception, ad agencies, as well as marketers, would do well to pay particular attention to substantiation for any ads promising a deal of a lifetime. – Amy Mudge and Brian Feinstein

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