605 KAR 1:190. Motor vehicle advertising.
RELATES TO: KRS 190.010-190.990
STATUTORY AUTHORITY: KRS 190.015, 190.020, 190.030, 190.040, 190.058, 190.073
NECESSITY, FUNCTION, AND CONFORMITY: KRS 190.040(1)(i) prohibits a motor vehicle dealer from engaging in "false or misleading advertising"; this is the only statutory or regulatory language which attempts to provide any guideline or standard for dealer advertising. The Motor Vehicle Commission has received numerous inquiries and complaints concerning advertising by licensees. It is the objective of this administrative regulation to define certain conduct which constitutes "false or misleading advertising". KRS 190.073 authorizes the Motor Vehicle Commission to "promulgate appropriate and reasonable regulations for the purpose of carrying out the provisions of this chapter." The purpose of this administrative regulation is to provide for truthful and accurate advertising practices in the sale and lease of motor vehicles by licensed motor vehicle dealers.
Section 1. Definitions. In this section:
(1) "Advertising" means any oral, written or graphic statement which offers vehicles for sale or lease or which indicates the availability of vehicles, including any statements or representation made in a newspaper, pamphlet or circular, other publication, or on radio or television, or contained in any notice, handbill, sign, billboard poster, bill catalog, letter or business card.
(2) "Clear and conspicuous" means a statement, representation or term differing from other statements, representations or terms being made so as to be readily noticeable to the person to whom it is being disclosed either by its size, sound, length of time, color, placement in the ad, or other features.
(3) "Demonstrator, official or executive vehicles": the word "demonstrator" means a vehicle of the current or preceding model year which has never been the subject of a retail sale, and which has been used by dealership personnel for demonstrating performance ability. "Executive" and "official" vehicles when so advertised shall have been used exclusively by executives of the dealer's franchiser.
(4) "Bait advertising" means an alluring but insincere offer to sell or lease a product, to obtain leads to persons interested in buying merchandise of the type advertised and to switch consumers from the advertised product to another product for a higher price or on a basis more advantageous to the dealer. Advertising a new motor vehicle at a price which does not include all equipment listed as standard equipment by the manufacturer without disclosing such fact, or failing to disclose any such equipment for the purpose of advertising a low price and "baiting" the customer into charges above the advertised price is prohibited. No practice shall be pursued by the advertiser which will discourage the sale of the advertised product with the intent and purpose of selling other merchandise instead.
Section 2. Licensees shall not use misleading or bait advertising.
Section 3. Advertisements for the sale or lease of new and used vehicles placed by a licensee shall clearly and conspicuously identify the dealership by including in the text of the advertisement either the word "dealer" or the business name as it appears on the dealer license.
Section 4. (1) Except as provided in subsection (2) of this section, if a specific new motor vehicle is advertised by a dealer as being for sale, that vehicle shall be:
(a) In the possession of the dealer;
(b) Shown; and
(c) Sold as advertised, illustrated or described at the advertised price and terms, at the advertised address.
(2) The advertisement for the sale or lease of a specific new motor vehicle that is not in stock on the date of the advertisement shall state:
(a) "Not in stock"; or
(b) "Order yours now"; or
(c) Other phrases of similar import that clearly indicate the vehicle is not available for immediate delivery; and
(d) Shall disclose a reasonable estimate of the period of time in which delivery will be made.
(3) If an advertisement pertains to one (1) specific vehicle only, this fact shall be disclosed in the advertisement. Listing a stock number is adequate disclosure.
Section 5. The following statements shall not be used in advertising by a dealer, unless such statements are absolutely true with no qualifications:
(1) Statements such as "write your own deal", "name your own price", "name your own monthly payments", "appraise your own car" or statements with similar meaning.
(2) Statements such as "everybody financed", "no credit rejected", "we finance anyone", and other statements representing or implying that no prospective credit purchaser will be rejected because of his inability to qualify for credit.
(3) Statements representing that no other dealer grants greater allowances for trade-ins, however stated.
(4) Statements implying that because of its large sales volume a dealer is able to purchase vehicles for less than another dealer selling the same make of vehicles.
(5)(a) Retail advertising shall not state or imply that the dealer:
1. Is selling vehicles in a manner other than through normal retail channels;
2. Has a special relationship or connection to the manufacturer that other dealers do not have.
(b) Terms such as "wholesale", "factory sale", "factory discount", "factory outlet", "factory branch" and similar terms used in connection with the manufacturer's name are examples of terms that imply that a dealer has a special relationship or connection to a manufacturer that other dealers do not have.
(6)(a) Claims such as "first", "largest", "biggest", shall not be used unless they are valid at the time such claims are made.
(b) If such claims are qualified with regard to area, location, time, or other limitations, upon the direction of the commission, the dealer shall incorporate within the advertisement the terms of such qualification.
Section 6. Since the amount of trade-in allowance will vary depending on the condition, model and age of a buyer's vehicle, no specific trade-in amount or range of amounts shall be used in advertising.
Section 7. An asterisk (*) may be used to give additional information about a word or term; however, use of one (1) or more footnotes or asterisks which, alone or in combination, contradict, confuse, materially modify or unreasonably limit a principal message of the advertisement shall not be used.
Section 8. Any disclosure appearing in advertisements shall clearly and conspicuously feature all necessary information in a manner that can be read and understood or which can be heard and understood. The minimum duration of printed language in a television advertisement shall be five (5) seconds for every three (3) lines.
Section 9. When a motor vehicle advertisement contains an offer of a discount on a new vehicle, the amount of such discount shall be stated by reference to the actual dollar figure of the manufacturer's suggested retail price of the vehicle plus the retail price of dealer-added options.
Section 10. The words "free", "gift" or words of similar import may be used in advertising only when the advertiser is offering an unconditional gift.
Section 11. The manufacturer's suggested retail price (MSRP) dollar figure of a new motor vehicle when advertised in local media by a manufacturer, distributor or regional advertisement council or association shall include all costs and charges for the vehicle advertised including destination charges when those charges are uniform regardless of destination throughout the state; destination charges subject to variance within the state and dealer preparation charges may be excluded from such price, provided that the advertisement conspicuously states that such costs and charges are excluded. When the price of a vehicle is advertised in local media by a licensee, the vehicle shall be fully identified as to year, make, model and if new or used. In addition, the stated price shall include all charges which the customer must pay for the vehicle, including, but not limited to, "freight" or "destination charges", "dealer preparation", "dealer handling", "additional dealer profit", "additional dealer margin", and "undercoating or rustproofing" if the vehicle is already so equipped. The advertised price at which the dealer is advertising a particular motor vehicle shall be the price before consideration for a down-payment, a trade-in allowance, or other similar allowances.
Section 12. Where the words "list" or "sticker" or words of similar import are used in a new motor vehicle advertisement, they shall only refer to the actual dollar figure of the manufacturer's suggested retail price (MSRP) plus the retail price of dealer-added options.
Section 13. Whenever any advertisement relates to a lease, the advertisement shall clearly and conspicuously disclose that the advertisement is for the lease of a vehicle.
Section 14. A dealer offering to sell a demonstrator, program, official or executive vehicle shall clearly and conspicuously identify such former use. Demonstrators shall be offered for sale as such only by a dealer who holds a valid sales agreement or franchise for the sale of the same line make of motor vehicle. Vehicles advertised as official or executive vehicles shall not have been sold or leased to a retail customer prior to the appearance of the advertisement.
Section 15. No reduced interest rate on motor vehicle financing shall be advertised if the cost thereof would be directly or indirectly borne by the buyer unless the advertisement discloses that rate will affect the negotiated price of the vehicle to the buyer.
Section 16. In any action under this administrative regulation, truth shall be an absolute defense. (17 Ky.R. 2575; Am. 17 Ky.R. 3600; 18 Ky.R. 1338; eff. 11-8-91.)