Essential Lessons: Arizona dealership settles enforcement action for $2.6 million over deceptive advertising and hidden add-ons

March 26, 2025

Illustration: zygotehasnobrain/Dreamstime

By J. Lawrence McCormley, Tara M. Young, Mina C. O’Boyle, Michael A. Wrapp, and Malcolm A. Giles

A recent joint action by the Federal Trade Commission (“FTC”) and the Arizona Attorney General (“Arizona AG”) against a Tempe-based automotive dealership, resulting in a $2.6 million settlement, underscores the need for automotive dealerships to periodically reassess their advertising practices and the sale of add-on products and services to ensure continued alignment with federal and state regulations.

UNDERSTANDING THE ALLEGATIONS: KEY ISSUES IN THE FTC AND ARIZONA AG COMPLAINT

The FTC and Arizona AG’s complaint identified, among other issues, alleged deceptive advertising practices and the improper handling of add-on sales. The complaint asserted that the dealership engaged in misleading advertising by promoting vehicles at prices that were not actually available to consumers due to undisclosed fees and markups. Specifically, the FTC and Arizona AG alleged that the dealership “lure[d] consumers into their automobile dealerships with low advertised prices for new and used vehicles” only to impose additional charges through a “surprise ‘market adjustment’ on the vehicle and other bogus fees and charges.” Such conduct was cited as a violation of Section 5(a) of the FTC Act (15 U.S.C. § 45(a)), which prohibits unfair or deceptive acts or practices in commerce, and the Arizona Consumer Fraud Act (A.R.S. §§ 44-1521 to 44-1534), which mandates truthfulness in advertising and sales practices.

The complaint also alleged that the dealership’s approach to selling add-on products such as theft protection, paint coatings, and window tinting violated Section 5(a) of the FTC Act and the Arizona Consumer Fraud Act. The FTC and Arizona AG alleged that these add-ons were frequently included without the customer’s explicit consent or were falsely presented as mandatory as part of the vehicle purchase. As noted in the complaint, “[i]n many instances, Defendants charge consumers for add-on items the consumers have not authorized, Defendants tell consumers that such add-ons are required, or charge consumers twice for the same add-ons.” The FTC and Arizona AG maintain that these practices violate both federal and state consumer protection laws, which require clear and conspicuous disclosure and an informed customer agreement for any charges that exceed the advertised price.

COMPLIANCE CONSIDERATIONS FOR ARIZONA DEALERSHIPS

Beyond general prohibitions against consumer fraud, Arizona law provides limited statutory guidance on dealership advertising or the sale of add-on products and services. However, the complaint and broader industry standards offer practical guidance for dealerships aiming to align their practices with regulatory expectations.

Advertising Practices: The National Automobile Dealers Association recommends that advertisements, regardless of the medium, should not “misrepresent the total price consumers are to pay” for vehicles, products, or services. Best practices dictate that advertisements should clearly “advertise the amount a consumer would need to pay to purchase the identified vehicle, as equipped.” Although certain government-imposed fees (e.g., taxes and licensing fees) may be excluded from the advertised price, the advertisement should clearly state that such fees will be required in addition to the advertised price. Similarly, Arizona law requires that advertisements clearly and conspicuously disclose whether a document fee will be charged as part of the transaction. Moreover, any material restrictions or conditions associated with the advertised price—such as the expiration date of an offer—should be conspicuously disclosed.

Add-On Products and Services: When offering optional products and services, dealerships should conduct a review of such products and services with customers at the point of sale and incorporate an optional add-on products and services disclosure form into the deal jacket. This form should comprehensively list all optional products and services, along with their respective prices, and clearly state that these items are not required for the purchase, financing, or leasing of a vehicle. Additionally, the form should require customers to acknowledge that the products are optional and that the benefits, terms, and conditions of each add-on have been fully explained, thereby ensuring an informed purchasing decision. Proper documentation of these disclosures can serve as a defense against claims of unauthorized charges.

Given the limited statutory guidance under Arizona law, staying abreast of FTC and Arizona AG enforcement actions is critical for ensuring compliance with federal and state laws that govern dealership practices. The recent FTC and Arizona AG complaint discussed above underscores key compliance measures, such as transparent advertising, clear and conspicuous disclosures of optional products and services, and obtaining explicit customer consent for add-ons.

Help With Staying Compliant

If your dealership requires representation in matters involving advertising or add-on product claims, or assistance in assessing its regulatory compliance, Tiffany & Bosco’s automotive law team is available to provide experienced counsel and support.