02-0660

Advertisement Violations

Signed 9/10/02

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

PETITIONER, ) ORDER

)

Petitioner, ) Appeal No. 02-0660

)

v. ) Account No.

)

MOTOR VEHICLE DIVISION OF ) Tax Type: Advertisement Violations

THE UTAH STATE TAX )

COMMISSION, ) Tax Year: 2002

)

Respondent. ) Judge: Davis

_____________________________________

Presiding:

G. Blaine Davis, Administrative Law Judge

Appearances:

For Petitioner: PETITIONER REP, General Manager

For Respondent: Mr. Kip Ingersoll, from the Motor Vehicle Enforcement Division

STATEMENT OF THE CASE

This matter came before the Utah State Tax Commission for an Initial Hearing pursuant to the provisions of Utah Code Ann. '59-1-502.5, on August 14, 2002.

In this matter, Respondent had imposed upon Petitioner a fine of $$$$$ for an alleged advertising violation.

At the hearing, the parties stipulated that there was such a violation, but the fine should be reduced to an amount of $$$$$ instead of the original $$$$$ fine which was proposed.

APPLICABLE LAW

Utah Code Ann. §41-3-210, provides as follows:

(1) The holder of any license issued under this chapter may not:

(a) intentionally publish, display, or circulate any advertising that is misleading or inaccurate in any material fact or that misrepresents any of the products sold, manufactured, remanufactured, handled, or furnished by a licensee;

. . . .

(g) engage in a business respecting the selling or exchanging of new or new and used motor vehicles for which he is not licensed,

. . . .

Utah Admin. Code Rule R877-23V-7, provides as follows:

A. Violation of any of the following standards of practice for the advertising and selling of motor vehicles is a violation of Section 41-3-210.

1. Accuracy. Any advertised statements and offers about a vehicle as to year, make, model, type, condition, equipment, price, trade-in-allowance, terms, and so forth, shall be clearly set forth and based upon facts.

2. Bait. Bait advertising and selling practices may not be used.

. . . .

3. Price. When the price of a vehicle is quoted, the vehicle shall be clearly identified as to make, year, model and if new or used.

. . . .

c) When "list", "sticker", or words of similar import are used in an advertisement, they may refer only to the manufacturer's suggested retail price. If a supplementary price sticker is used, the advertised price must include all items listed on the supplementary sticker.

. . . .

4. Savings and Discount Claims. Because the intrinsic value of a used vehicle is difficult to establish, specific claims of savings may not be used in ad advertisement. This includes statements such as, "Was priced at $….., now priced at $…..

a) The word "wholesale" may not be used in retail automobile advertising.

b) When an automotive advertisement contains an offer of a discount on a new vehicle, the amount of the discount must be stated by reference to the manufacturer's suggested retail price of the vehicle.

1. Down Payments. The amount of the down payment may not be stated in a manner that suggests that it is the selling price of the vehicle. If an advertisement states "You can buy with no money down", or terms of similar import, the customer must be able to leave the dealership with the vehicle without making any outlay.

. . . .

7. Finance. The phrases, "no finance charge", "no carrying charge", or similar expressions may not be used when there is a charge for placing the transaction on a time payment basis. Statements representing or implying that no prospective credit purchaser will be rejected because of inability to qualify for credit may not be used.

. . . .

10. Demonstrators, Executives' and Officials' Cars.

a) "Demonstrator" means a vehicle that has never been sold or leased to a member of the public.

b) Demonstrator vehicles include vehicles used by new vehicle dealers or their personnel for demonstrating performance ability but not vehicles purchased or leased by dealers or their personnel and used as their personal vehicles.

c) A demonstrator vehicle may be advertised for sale only by a dealer franchised for the sale of that make of new vehicle.

d) An executive's or official's vehicle shall have been used exclusively by an executive of the dealer's franchising manufacturer or distributor, or by an executive of the franchised dealership. These vehicles may not have been sold or leased to a member of the public prior to the appearance of the advertisement.

e) Demonstrator's, executive's and official's vehicles shall be clearly and prominently advertised as such. Advertisements shall include the year, make, and model of the vehicle offered for sale.

. . . .

19. Disclosure of Material Facts. Disclosures of material facts that are contained in advertisements and that involve types of vehicle and transactions shall be made in a clear and conspicuous manner.

a) Factors to be taken into consideration include advertisement layout, headlines, illustrations, type size, contrast, crawl speed and editing.

. . . .

c) The disclosure must be made in a typeface and point size comparable to the typeface and point size of the text used throughout the body of the advertisement.

. . . .

21. Television Disclosures. A disclosure appearing in television advertisements must clearly and conspicuously feature all necessary information in a manner that can be read and understood if type is used, or that can be heard and understood if audio is used. Fine print and mouse print do not constitute clear and conspicuous disclosure.

Utah Code Ann. §41-3-702, provides as follows:

(1) The following are civil violations under this chapter and are in addition to criminal violations under this chapter:

. . . .

(b) Level II:

. . . .

(ii) advertising violation;

. . . .

(2)(a) The schedule of civil penalties for violations of Subsection (1) is

(i) Level I: $25 for the first offense, $100 for the second offense, and $250 for the third and subsequent offenses;

(ii) Level II: $100 for the first offense, $250 for the second offense, and $1,000 for the third and subsequent offenses;

(iii) Level III: $250 for the first offense, $1,000 for the second offense, and $5,000 for the third and subsequent offenses.

(b) When determining under this section if an offense is a second or subsequent offense, only prior offenses committed within the 12 months prior to the commission of the current offense may be considered.

. . . .

(5) A civil action may be maintained by a purchaser or by the administrator.

DECISION AND ORDER

Based upon the foregoing, it is hereby determined that such an advertising violation did occur, but that the fine therefore should be reduced to an amount of $$$$$. It is so ordered.

This decision does not limit a party's right to a Formal Hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further appeal rights in this matter.

DATED this 10^th day of September , 2002.

____________________________________

G. Blaine Davis

Administrative Law Judge

BY ORDER OF THE UTAH STATE TAX COMMISSION.

The Commission has reviewed this case and the undersigned concur in this decision.

DATED this 10^th day of September , 2002.

Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner

Palmer DePaulis Marc B. Johnson

Commissioner Commissioner