Whistleblower: Minnesota companies take note after deceptive ads draw sanctions

Car dealerships lure customers into showrooms by promising everything from thousands of dollars off a vehicle to a free 32-inch plasma television. Companies selling weight-loss products tell consumers they can shed pounds in less time than it takes to reach for that doughnut.

Questionable sales pitches in those industries prompted the Federal Trade Commission last week to sanction nine auto dealerships across the United States and issue $34 million in fines to four companies making false weight-loss claims.

The two enforcement actions, "Operation Steer Clear" and "Operation Failed Resolution" and are the latest in the agency's fight against deceptive advertising, which the FTC says costs consumers billions of dollars each year.

The auto dealerships, based in California, Georgia, Texas and other states, claimed that consumers would pay nothing upfront to lease a vehicle, but the advertised amounts excluded "substantial fees and other amounts." One dealership in Michigan claimed consumers had won a sweepstakes, but the agency determined the prize didn't exist.

Jessica Rich, director of the FTC's Bureau of Consumer Protection, said in a news conference Thursday that the agency believes there are many more dealerships making similar deceptive claims. Just last year, the agency received 75,000 complaints against auto dealers, she said.

The dealerships targeted last week were not fined, but if they continue to falsely advertise, they face a penalty of up to $16,000 per violation per day.

None of the dealerships sanctioned were in Minnesota, where the Better Business Bureau of Minnesota and North Dakota works in collaboration with the Minnesota Automobile Dealers Association to review car advertising. Last year the BBB contacted 105 different auto dealers to discuss potentially misleading or confusing language in advertisements.

The BBB's partnership with the auto industry began 30 years ago. The BBB has two staff members dedicated to reviewing print, online and television ads to ensure that the prices and terms advertised are not deceptive.

About half of the BBB's interactions with auto dealers last year were before publication, where an auto dealership sends the proposed ad materials to the BBB to ensure it is complying with the industry's Minnesota Automotive Advertising Standards, FTC guidelines and the BBB Code of Advertising.

Although the BBB does not have any enforcement power like the FTC, dealerships tend to follow the BBB guidance, said Scott Lambert, executive vice president of the Minnesota Automobile Dealers Association. The FTC's actions, Lambert said, should serve as a reminder to dealers that they need to be transparent with their claims.

"It serves to know that somebody is watching," Lambert said.

Also last week, the FTC fined the makers of four weight-loss products a total of $34 million. The maker of Sensa, a product that was sprinkled on food, was fined $26.5 million for what the FTC said were unfounded weight-loss claims. Sensa claimed the product worked by enhancing "food's smell and taste, making users feel full faster, so they eat less and lose weight, without dieting, and without changing their exercise regime," the FTC said.

The product cost $50 for a one-month supply. Another product was a lotion made by L'Occitane Inc. that claimed to shed up to 1.3 inches in fat in four weeks. The company was ordered to pay $450,000 for its false claims, the FTC said.