FTC, CarMax, Others Reach Settlement on Recall Disclosures

In a settlement with the Federal Trade Commission (FTC) announced late last week, CarMax, Asbury Automotive Group and West-Herr Automotive Group are now required to disclose the status of any recalls affecting their used cars. The deal puts to rest allegations made by the FTC and consumer groups that the companies, despite touting rigorous and lengthy inspection processes for their vehicles, failed to adequately disclose that some used cars were subject to unfixed recalls.

In a public statement, the FTC said it hopes the settlement will empower consumers to make more informed car purchases, while incentivizing dealers to repair open recalls in the vehicles they advertise.

“Dealers that repair all of their cars can continue to make truthful claims that they are recall-free, and can benefit from the competitive advantages of doing so,” the FTC said. “Dealers that cannot, or do not, repaid all of their cars must instead prominently disclose that the cars may have open recalls when they make certain safety-related claims, such as claims about comprehensive inspections.”

In addition to rumblings from watchdog groups, the impetus for the FTC’s complaints were boasts from the companies, often hyped in TV commercials and radio ads, of their used vehicles being subject to rigorous, 120-plus-point safety inspections before being sold to consumers. What the companies usually failed to mention, the FTC alleged, was that some of their vehicles suffered from potential life-threatening safety issues—such as the Takata air bag defect and GM ignition switch defect—that were never fixed.

The proposed consent orders handed down by the FTC prohibit the companies from making any claims about the safety of their vehicles—or if the cars have been subject to an inspection for safety-related issues—unless they’re free of open recalls. The consent orders also call for the companies, absent any boasts of safety and inspections, to clearly and unambiguously disclose if any of their vehicles may be subject to unrepaired recalls for safety concerns. Further, the FTC announcement continued, it is up to the companies to explain to consumers how they can determine whether a vehicle might be subject to a safety recall.

As somewhat of a catchall, the FTC’s proposed orders also call for companies to inform recent customers by mail if cars purchased as far back as July 1, 2013, may be affected by an open recall.

“In these enforcement actions, the Commission is challenging what we allege are deceptive advertising claims by these companies that highlight the rigorous inspections they perform on their used cars, but fail to clearly disclose the existence of unrepaired safety recalls,” the FTC statement said.

It should be noted that the FTC’s consent agreements reached with CarMax, Asbury Automotive Group and West-Herr Automotive Group will be subject to a 30-day public comment period, after which time the agency will decide whether to finalize the terms.