Dunphy Nissan, Inc., et al.; Marty Sussman Organization, Inc., et al.; Norristown Automobile Co., Inc., et al.; Northeast Auto Outlet, Inc., et al.; Pacifico Ardmore, Inc., et al.; and Pacifico Ford, Inc., et al.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File Nos. 992 3082; 992 3078; 992 3081; 992 3080; 992 3116; and 992

3079]

Dunphy Nissan, Inc., et al.; Marty Sussman Organization, Inc., et

al.; Norristown Automobile Co., Inc., et al.; Northeast Auto Outlet,

Inc., et al.; Pacifico Ardmore, Inc., et al.; and Pacifico Ford, Inc.,

et al.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreements.

-----------------------------------------------------------------------

SUMMARY: The consent agreements in these six matters settle alleged

violations of federal law prohibiting unfair or deceptive acts or

practices or unfair methods of competition. The attached Analysis to

Aid Public Comment describes both the allegations in the draft

complaints that accompany the consent agreements and the terms of the

consent orders--embodied in the consent agreements--that would settle

these allegations.

DATES: Comments must be received on or before January 31, 2000.

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

Room 159, 600 Pennsylvania, Ave., NW, Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: Sally Pitofsky, FTC/S-4429, 600

Pennsylvania Ave., NW, Washington, D.C. 20580. (202) 326-3318.

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

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

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

given that the above-captioned consent agreements containing consent

orders to cease and desist, having been filed with and accepted,

subject to final approval, by the Commission, have been placed on the

public record for a period of sixty (60) days. The following Analysis

to Aid Public Comment describes the terms of the consent agreements,

and the allegations in the complaints. Electronic copies of the full

text of the consent agreement packages can be obtained from the FTC

Home Page (for December 2, 1999), on the World Wide Web, at ``http://

www.ftc.gov/os/actions97.htm.'' Paper copies can be obtained from the

FTC Public Reference Room, Room H-130, 600 Pennsylvania Avenue, NW,

Washington, D.C. 20580, either in person or by calling (202) 326-3627.

Public comment is invited. Comments should be directed to: FTC/

Office of the Secretary, Room 159, 600 Pennsylvania. Ave., NW,

Washington, D.C. 20580. Two paper copies of each comment should be

filed, and should be accompanied, if possible, by a 3\1/2\ inch

diskette containing an electronic copy of the comment. 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

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

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

Analysis of Proposed Consent Orders To Aid Public Comment

Summary: The Federal Trade Commission has accepted separate

[[Page 68688]]

agreements, subject to final approval, from respondents Dunphy Nissan,

Inc. and Serge Naumovsky (``Dunphy''); Norristown Automobile Co., Inc.

and William Milliken (``Norristown''); Northeast Auto Outlet, Inc. and

Arthur Micchelli (``Northeast''); Pacifico Ardmore, Inc. and Kerry J.

Pacifico (``Pacifico Ardmore''); Pacifico Ford, Inc. and Kerry T.

Pacifico (``Pacifico Ford''); and Marty Sussman Organization, Inc. and

Martin E. Sussman (``Sussman'') (together ``respondents''). The persons

named in these actions are named individually and as officers of their

respective corporations.

The proposed consent orders have been placed on the public record

for sixty (60) days for receipt 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

agreements and the comments received and will decide whether it should

withdraw from the agreement or make final the agreements' proposed

orders.

I. Complaint Allegations

A. FTC Act Violations

The complaints against the respondents allege that their automobile

lease advertisements violate the Federal Trade Commission Act (``FTC

Act''), the Consumer Leasing Act (``CLA''), and Regulation M. The

complaints also allege that respondents' credit advertisements have

violated the Truth in Lending Act (``TILA'') and Regulation Z. Section

5 of the FTC Act prohibits false, misleading, or deceptive

representations or omissions of materials information in

advertisements. In addition, Congress established statutory disclosure

requirements for lease and credit advertising under the CLA and the

TILA, respectively, and directed the Federal Reserve Board (``Board'')

to promulgate regulations implementing such statutes--Regulations M and

Z respectively. See 15 U.S.C. 1601-1667e; 12 CFR part 213; 12 CFR part

226.

The complaints against respondents allege that their lease

advertisements represent that consumers can lease the advertised

vehicles at the terms prominently stated in the advertisements,

including but not necessarily limited to the monthly payment amount and

the downpayment amount. These lease advertisements, according to the

complaints, have failed to disclose, and/or failed to disclose

adequately, additional terms pertaining to the lease offer, such as the

total amount due at lease inception. The complaints allege that this

information does not appear at all or appears in fine print in the

advertisements and that the information would be material to consumers

in deciding whether to visit respondents' dealerships and/or whether to

lease an automobile from respondents. These practices, according to the

complaints, constitute deceptive practices in violation of Section 5(a)

of the FTC Act.

The complaints against Dunphy and Northeast also allege that these

respondents misrepresent that consumers can purchase the advertised

vehicles for the monthly payment amounts prominently stated in the

advertisements. According to the complaints, the monthly payment

amounts prominently stated in the advertisements are components of

lease offers and not credit offers. These practices, according to the

complaints, constitute deceptive practices in violation of Section 5(a)

of the FTC Act.

The complaint against Dunphy further alleges that Dunphy

misrepresents that the amount stated as ``down'' or ``downpayment'' is

the total amount consumers must pay at lease inception to lease the

advertised vehicles. According to the complaint, however, consumers are

required to pay additional fees beyond the amount stated as ``down'' or

``downpayment,'' including but not limited to the first month's

payment, a security deposit, and/or a bank fee. This practice,

according to the complaint, constitutes a deceptive practice in

violation of Section 5(a) of the FTC Act.

The complaint against Northeast also alleges that Northeast

misrepresents that the offer to double consumers' downpayments up to

$4,000 applied to the lease or credit offers advertised. According to

the complaint, the offer to double consumers' downpayments up to $4,000

was not available with the advertised lease or credit offers. This

practice, according to the complaint, constitutes a deceptive practice

in violation of Section 5(a) of the FTC Act.

The complaints against Dunphy, Northeast, Norristown, and Pacifico

Ardmore allege that their credit advertisements represent that

consumers can purchase the advertised vehicles at the terms prominently

stated in the advertisements, including but not necessarily limited to

the sales price and/or downpayment amount. According to the complaints,

these credit advertisements fail to disclose additional terms

pertaining to the credit offer, such as the terms of repayment and the

annual percentage rate. Such information is alleged to be material to

consumers in deciding whether to visit respondents' dealerships and/or

whether to purchase an automobile from respondents. These practices,

according to the complaints, constitute deceptive practices in

violation of Section 5(a) of the FTC Act.

B. CLA and Regulation M Violations

The complaints allege that all respondents violated the CLA and

Regulation M. The complaints allege that respondents' lease ads state a

monthly payment amount and/or downpayment amount, but fail to disclose,

and/or fail to disclose clearly and conspicuously, one or more of the

following required terms: that the transaction advertised is a lease;

the total amount due prior to or at consummation, or by delivery, if

delivery occurs after consummation and that such amount: (1) excludes

third-party fees that vary by state or locality, such as taxes,

licenses, and registration fees, and discloses that fact or (2)

includes third-party fees based on a particular state or locality and

discloses that fact and the fact that such fees may vary by state or

locality; whether or not a security deposit is required; the number,

amounts, and timing of scheduled payments; and that an extra charge may

be imposed at the end of the lease term where the liability of the

consumer is based on the difference between the residual value of the

leased property and its realized value at the end of the lease term.

According to the complaints, the lease disclosures in respondents'

lease advertisements are not clear and conspicuous because they appear

in fine print and/or in an inconspicuous location. These practices,

according to the complaints, violate the advertising requirements of

the CLA and Regulation M.

The complaints also allege that respondents' lease advertisements

state a downpayment amount more prominently than the disclosure of the

total amount due at lease signing. According to the complaints, these

practices violate Regulation M.

C. TILA and Regulation Z Violations

The complaints against Dunphy, Norristown, Northeast, Pacifico

Ardmore, and Pacifico Ford allege that these respondents violated the

TILA and Regulation Z. According to the complaints, these respondents

state a monthly amount and/or a downpayment amount as terms for

financing the purchase of the advertised vehicles, but fail to disclose

the following items of information required by Regulation Z: the annual

percentage rate and the terms

[[Page 68689]]

of repayment. In addition, the complaints against all respondents

allege that their credit ads do not properly state the finance charge

as the annual percentage rate, as required by Regulation Z.

II. Proposed Orders

The proposed orders prohibit respondents from disseminating

advertisements that state the amount of any payment due at inception

(excluding the monthly payment amount) or the fact that any or no

inception payment is due without also disclosing with ``equal

prominence'' the total amount a consumer must pay at lease signing or

delivery. This requirement parallels an identical requirement found in

Regulation M.

The proposed orders also prohibit respondents from disseminating

advertisements that state the amount of any payment or that any or no

initial payment is required at lease signing or delivery, if delivery

occurs after consummation, without disclosing clearly and conspicuously

all of the terms required by Regulation M, as follows: that the

transaction advertised is a lease; the total amount due at lease

signing or delivery; whether or not a security deposit is required; the

number, amounts, and timing of scheduled payments; and that an extra

charge may be imposed at the end of the lease term in a lease in which

the liability of the consumer at the end of the lease term is based on

the anticipated residual value of the vehicle. This requirement is

intended to enjoin the respondents from deceptively advertising only

the most attractive portions of its lease offers by requiring clear and

conspicuous disclosure of the information necessary for consumers to

make informed decisions about advertised lease offers. This paragraph

parallels the advertising disclosure requirements from the CLA and

Regulation M. The proposed orders also prohibit respondents from

violating the CLA and Regulation M.

In addition, the proposed order for Dunphy prohibits Dunphy from

misrepresenting the costs of leasing, including the total due at lease

inception. The proposed orders for respondents Dunphy and Northeast

prohibit these respondents from misrepresenting that advertised terms

apply to a cash or credit offer, when, in fact, the terms apply to an

offer to lease the advertised vehicle. The proposed order for Northeast

also prohibits Northeast from misrepresenting the availability of any

advertised offer.

With respect to credit advertisements, the proposed orders prohibit

respondents from stating the amount or percentage of any downpayment,

the number of payments or period of repayment, the amount of any

payment, or the amount of any finance charge, without disclosing

clearly and conspicuously all of the terms required by Regulation Z, as

follows: the amount or percentage of the downpayment; the terms of

repayment; and the correct annual percentage rate, using that term or

the abbreviation ``APR.'' If the annual percentage rate may be

increased after consummation of the credit transaction, that fact must

also be disclosed.

The proposed orders also prohibit respondents from stating a rate

of finance charge without stating the rate as an ``annual percentage

rate'' or ``APR.'' The proposed orders also prohibit all respondents

from violating the TILA or Regulation Z.

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

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

interpretation of the agreements and proposed orders or to modify in

any way their terms.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 99-31795 Filed 12-1-99; 8:45 am]

BILLING CODE 6750-01-M