Nissan Motor Corporation in U.S.A.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 902 3383]

Nissan Motor Corporation in U.S.A.; Proposed Consent Agreement

With Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

require, among other things, a California-based corporation to disclose

clearly and prominently in each advertisement either any significant

restrictions that apply to obtaining a promotional benefit in

connection with a test-drive offer, or that there are significant

restrictions that apply to obtaining the benefit, and would prohibit

the respondent from misrepresenting any conditions, restrictions or

limitations on any promotional benefit it offers consumers in the

future.

DATES: Comments must be received on or before May 20, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Phillip Broyles, Michael Milgrom or Melissa Sternlicht, FTC/Cleveland

Regional Office, 668 Euclid Ave., suite 520-A, Cleveland, Ohio 44114.

(216) 522-4210.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the

Commission's Rules of Practice (16 CFR 2.34), notice is hereby given

that the following consent agreement containing a consent order to

cease and desist, having been filed with and accepted, subject to final

approval, by the Commission, has been placed on the public record for a

period of sixty (60) days. Public comment is invited. Such comments or

views will be considered by the Commission and will be available for

inspection and copying at its principal office in accordance with

Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR

4.9(b)(6)(ii)).

Agreement Containing Consent Order To Cease and Desist

In the Matter of: Nissan Motor Corporation in U.S.A., a

corporation.

The Federal Trade Commission having initiated an investigation of

certain acts and practices of Nissan Motor Corporation in U.S.A., a

corporation (``proposed respondent''), and it now appearing that

proposed respondent is willing to enter into an agreement containing an

Order to Cease and Desist from the use of the acts or practices being

investigated,

It is hereby agreed by and between proposed respondent, by its duly

authorized officer and its attorney and counsel for the Federal Trade

Commission that:

1. Proposed respondent is a corporation organized, existing and

doing business under and by virtue of the laws of the State of

California, with its office and principal place of business located at

18501 South Figueroa Street, Carson, California 90248 (Mailing Address:

Post Office Box 191, Gardena, California 90248-0191).

2. Proposed respondent admits all the jurisdictional facts set

forth in the draft Complaint here attached.

3. Proposed respondent waives:

(a) Any further procedural steps;

(b) The requirement that the Commission's Decision contain a

statement of findings of fact and conclusion of law;

(c) All rights to seek judicial review or otherwise to challenge or

contest the validity of the Order entered pursuant to this Agreement;

and

(d) All claims under the Equal Access to Justice Act.

4. This Agreement shall not become part of the public record of the

proceeding unless and until it is accepted by the Commission. If this

Agreement is accepted by the Commission, it, together with the draft

Complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information with respect thereto

publicly released. The Commission thereafter may either withdraw its

acceptance of this Agreement and so notify proposed respondent, in

which event it will take such action as it may consider appropriate, or

issue and serve its Complaint (in such form as the circumstances may

require) and Decision, in disposition of the proceeding.

5. This Agreement is for settlement purposes only and does not

constitute an admission by proposed respondent that the law has been

violated as alleged in the attached draft Complaint, or that the facts

alleged in the draft complaint, other than the jurisdictional facts,

are true.

6. This Agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of section 2.34 of the

Commission's Rules, the Commission may, without further notice to

proposed respondent, (1) issue its Complaint corresponding in form and

substance with the draft Complaint and its Decision containing the

following Order to Cease and Desist in disposition of the proceeding,

and (2) make information public with respect thereto. When so entered,

the Order to Cease and Desist shall have the same force and effect and

may be altered, modified, or set aside in the same manner and within

the same time provided by statute for other orders. The Order shall

become final upon service. Delivery by the United States Postal Service

of the Complaint and Decision containing the agreed-to Order to

proposed respondent's address as stated in this Agreement shall

constitute service. Proposed respondent waives any right it may have to

any other manner of service. The Complaint attached hereto may be used

in construing the terms of the Order. No agreement, understanding,

representation, or interpretation not contained in the Order or the

Agreement may be used to vary or contradict the terms of the Order.

7. Proposed respondent has read the proposed Complaint and Order

contemplated hereby. Proposed respondent understands that once the

Order has been issued, it will be required to file one or more

compliance reports showing that it has fully complied with the Order.

Proposed respondent further understands that it may be liable for civil

penalties in the amount provided by law for each violation of the Order

after it becomes final.

Order

Definitions

1. ``Promotional benefit'' as used herein shall mean any prize,

award or consideration, including, but not limited to, money, favorable

credit terms and optional equipment packages, having a bona fide retail

value over $25.

2. ``Clearly and prominently'' as used herein shall mean as

follows:

(a) In a television or videotape advertisement, the disclosure

shall be presented simultaneously in both the audio and video portions

of the advertisement. The audio disclosure shall be delivered in a

volume and cadence and for a duration sufficient for an ordinary

consumer to hear and comprehend it. The video disclosure shall be of a

size and shade, and shall appear on the screen for a duration,

sufficient for an ordinary consumer to read and comprehend it.

(b) In a print advertisement, the disclosure shall be in close

proximity to the representation that triggers the disclosure in at

least (12) point type.

(c) In a radio advertisement, the disclosure shall be delivered in

a volume and cadence and for a duration sufficient for an ordinary

consumer to hear and comprehend it.

I

It is ordered that respondent Nissan Motor Corporation in U.S.A., a

corporation, its successors and assigns, and its officers, agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the

advertising, offering for sale, sale or distribution of any motor

vehicle in or affecting commerce, as commerce is defined in the Federal

Trade Commission Act, do forthwith cease and desist from representing,

in any manner, directly or by implication, that persons who test drive

a Nissan motor vehicle can readily obtain a promotional benefit when

significant restrictions prevent consumers from readily obtaining that

promotional benefit without disclosing clearly and prominently in each

advertisement in which the representation is made either the

significant restrictions or that there are significant restrictions

that apply to obtaining the promotional benefit.

II

It is further ordered that respondent Nissan Motor Corporation in

U.S.A., a corporation, its successors and assigns, and its officers,

agents, representatives and employees, directly or through any

corporation, subsidiary, division or other device, in connection with

the advertising, offering for sale, sale or distribution of any motor

vehicle in or affecting commence, as commerce is defined in the Federal

Trade Commission Act, do forthwith cease and desist from

misrepresenting, in any manner, directly or by implication, the

existence, nature or extent of any condition, restriction or limitation

on any promotional benefit offered to consumers.

III

It is further ordered that, for three (3) years from the date that

the advertisements are last disseminated, respondent shall maintain

and, upon request, make available to the Commission for inspection and

copying:

(A) Copies of all advertisements subject to Paragraph I or II of

this Order;

(B) Copies of all communications to affiliated dealers and all

information and other materials supplied by respondent to the dealer in

connection with any representation subject to Paragraphs I or II of

this Order; and

(C) All correspondence received from consumers, whether received by

respondent or by an agent of respondent, related to any promotional

benefit program advertised in a manner subject to Paragraphs I or II of

this Order.

IV

It is further ordered that respondent shall, within sixty (60) days

of service of this Order, distribute a copy of this Order to each of

its operating divisions and to each officer and other person

responsible for the preparation or review of advertising material

including outside advertising agencies, and to a representative of each

of its affiliated dealers and shall secure from each such person a

signed statement acknowledging receipt of a copy of this Order.

V

It is further ordered that respondent shall notify the Commission

at least thirty (30) days prior to the effective date of any proposed

change in the corporation such as dissolution, assignment or sale

resulting in the emergence of a successor corporation, the creation or

dissolution of subsidiaries, or any other change in the corporation

which may affect compliance obligations arising out of this Order.

VI

It is further ordered that respondent shall, within sixty (60) days

after service of this Order, file with the Commission a report, in

writing, setting forth in detail the manner in which it has complied

with this Order.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement to a

proposed consent order from Nissan Motor Corporation in U.S.A., a

marketer of new automobiles.

The proposed consent order has been placed on the public record for

sixty (60) days for the reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and will decide whether it should withdraw from the agreement

or make final the agreement's proposed order.

The Commission's complaint charges that the proposed respondents

disseminated advertisements for the Nissan Stanza Challenge Program, a

promotional program in which consumers were invited to drive the Nissan

Stanza and receive $100 if, after driving the Stanza, they bought one

of two competing cars--either a Toyota Camry or a Honda Accord.

The complaint charges that Nissan represented that consumers could

readily obtain the $100 when, in fact, in order to obtain it, the

consumer could not purchase the competing vehicle on the same day as

the test drive nor more than seven days thereafter, and had to

purchase, take delivery and submit detailed proof of purchase to Nissan

within the seven day time period. Therefore, the Commission charged

that the representation that the $100 could be readily obtained was

false and misleading.

The Commission also charged that the existence of the restrictions

mentioned above would have been material to consumers in deciding

whether to test drive the Stanza or otherwise take part in the program.

Therefore, failure to disclose that the program had significant

restrictions was deceptive.

The proposed consent order contains provisions designed to remedy

the violations charged and to prevent the respondent from engaging in

similar acts and practices in the future. Part I of the proposed order

prohibits Nissan from representing that consumers who test drive a

Nissan vehicle can readily obtain a promotional benefit, when

significant restrictions prevent consumers from obtaining the

promotional benefit, unless Nissan also discloses either (1) the

restrictions that apply, or (2) that significant restrictions apply to

obtaining the promotional benefit.\1\ Part II of the order prohibits

Nissan from misrepresenting the existence, nature, or extent of any

condition, restriction or limitation on any promotional benefit offered

to consumers.

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\1\The proposed order defines ``promotional benefit'' as any

prize, award, or consideration, including but not limited to, money,

favorable credit terms and optional equipment packages, having a

bona fide retail value over $25.

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The remainder of the proposed order consists of standard

recordkeeping and compliance provisions.

The purpose of this analysis is to facilitate public comment on the

proposed order, and it is not intended to constitute an official

interpretation of the agreement and proposed order, or to modify in any

way their terms.

Donald S. Clark,

Secretary.

Joint Dissenting Statement of Chairman Janet D. Steiger and

Commissioner Dennis A. Yao in Nissan Motor Corporation of USA, File No.

902-3383

We dissent from issuance of this proposed consent order with

Nissan Motor Corp. Because the proposed order does not sufficiently

remedy one of the alleged law violations, it may give implicit

approval to the use of seemingly attractive promotional offers that

many consumers simply cannot utilize because of limitations such as

severe time restrictions or extremely difficult documentation

requirements.

Through advertisements for the Nissan Stanza ``Challenge

Program'' Nissan ran a promotional program inviting consumers to

come to a Nissan dealership, test drive the Nissan Stanza and

receive $100 if, after driving the Stanza, they bought either a

Toyota Camry or a Honda Accord. The advertising expressly stated

that there was ``no catch'' to this offer. What consumers were not

told was that, in order to obtain the $100, it was necessary to

purchase and take delivery of the Camry or Accord and submit

detailed proof of purchase (including documents not usually retained

by consumers after purchase) to Nissan, all within seven days (but

not on the same day as the test drive). The complaint alleges that

the failure to disclose that the program had such significant

restrictions was deceptive, and that Nissan's explicit advertising

claim that the offer had ``no catch'' falsely represented that

consumers could readily obtain the $100 payment.

In our view, the proposed consent order may do little to remedy

the failure to disclose allegation. Part I of the proposed order

prohibits Nissan from representing, directly or by implication, that

persons who test drive a Nissan can ``readily obtain'' a promotional

benefit--when significant restrictions prevent consumers from

readily obtaining that benefit--unless Nissan also discloses either

those restrictions or that significant restrictions apply. Since

paragraph 5 of the complaint uses the same term, ``readily obtain,''

to characterize the express ``no catch'' claim in Nissan's ad, and

paragraph 4 of the complaint only references the advertisement with

an express ``no catch'' claim, the order could be interpreted to

require disclosure only when language similar to ``no catch'' or

``no catches'' is used.

To suggest otherwise--namely that the order requires disclosure

any time Nissan offers a promotion and uses very general language

such as ``Come on in and get a [benefit]''--would read out of the

order the ``readily obtain'' limiting language. Consequently,

although we understand that some would read the order differently,

the proposed order might be interpreted as standing for the

proposition that advertisements need not contain any disclosure of

the nature or even existence of limiting conditions, no matter how

onerous, unusual, or unexpected, unless the advertiser uses language

similar to a ``no catches'' claim.

Moreover, even when an affirmative expression such as ``no

catches'' is used in making an offer, the order would allow an

advertiser to disclose only that significant restrictions apply to

the offer, not what those restrictions are or where the consumer can

obtain additional information about them. Although reasonable minds

can differ on whether a disclosure that ``significant restrictions''

apply would adequately inform consumers when ready availability is

implied in an advertisement, such a disclosure for an express ``no

catches'' claim is manifestly contradictory. This order would seem

to allow advertisers to claim to consumers that there are no catches

in connection with the offer, so long as the ad elsewhere discloses

that there are significant restrictions. The use of such

contradictory statements in the same advertisement conflicts with

Commission precedent. See Commission Statement on Deception, 103

F.T.C. 110, 180-81.

Finally, the proposed order does not contain a point of sale

disclosure requirement. Consequently, even if consumers understand

the disclosure of ``significant restrictions'' as overriding the

express ``no catches'' claim, there is no sure way of learning about

the restrictions.

We do not suggest advertisers must disclose every limitation on

their offers in advertising. Consumers generally expect that offers

have reasonable time limits and other conditions. This order may

suggest, however, that even severe restrictions--i.e., those that

make the offer impractical or impossible for many consumers to

redeem--need not be disclosed in an adequate fashion. Such an

approach is not without cost to consumers--especially in cases, such

as this one, where consumers usually shop for the product by

visiting sales locations and, consequently, where such offers could

induce them to make a special visit.

Separate Statement of Commissioner Mary L. Azcuenaga, in Which

Commissioners Deborah K. Owen and Roscoe B. Starek, III, Join, in

Nissan Motor Corporation of USA File No. 902-3383

I write to respond to the concerns expressed in my colleagues'

joint dissenting statement about how the consent order in this

matter might be interpreted and what it would seem to allow in

connection with other promotional advertisements. Like other consent

orders, this order was negotiated in response to particular facts

and circumstances. Although the order identifies conduct the

Commission will not allow, no legal inference properly can be drawn

that conduct not mentioned in the complaint and order has been

approved. The legal standards by which promotional advertisements

are measured are well established in sources having precedential

value. As always, advertisers would be well-advised to consult these

sources to determine the legal standards to which they must conform.

[FR Doc. 94-6534 Filed 3-18-94; 8:45 am]

BILLING CODE 6750-01-M