03-0006

Advertisement Violation

Signed 3/26/03

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

PETITIONER, ) ORDER

)

Petitioner, ) Appeal No. 03-0006

)

v. )

) Tax Type: Advertisement Violation

MOTOR VEHICLE ENFORCEMENT )

DIVISION OF THE UTAH STATE TAX )

COMMISSION, ) Tax Year: 2002

)

Respondent. ) Judge: Davis

_____________________________________

Presiding:

G. Blaine Davis, Administrative Law Judge

Appearances:

For Petitioner: PETITIONER REP 1

PETITIONER REP 2

For Respondent: Mr. Gale Francis, Assistant Attorney General

Mr. Kent Jorgensen, Division Director, Motor Vehicle Enforcement Div.

Mr. Kip Ingersol, 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 March 3, 2003.

On or about September 30, 2002, Respondent sent to Petitioner a letter indicating that, "your advertisement brochure circulated on the weekend of September 28, 2002 has been found in violation of Utah State Tax Code Ann., including but not exclusive to 41-3-210 and/or R877-23V-7." The specific section of alleged violation is R877-23V-7(13) underselling claims.

The letter further stated:

"The advertisement brochure makes such statements as: "We guarantee the lowest price!", and "Guaranteed Lowest Payments", and "Guaranteed payoff of your trade regardless of balance".

Respondent stated that it was a level 2 violation and was their first offense in the past 12 months, and therefore a fine of $100 was imposed. Petitioner has timely appealed the determination of the Division.

The advertising brochure did contain the following statements: "GUARANTEED Lowest Payments!*", "GUARANTEED Lowest Price!*", "GUARANTEED Payoff of Your Trade Regardless of Balance!*"

*All prices and payments plus tax, license and fees OAC Dealer retains rebates Civic: 30% down, 12k miles per year, 36 month lease Accord: 60 month lease, $3,000 down, 12k miles per year. OAC. Vehicles subject to prior sale Price protection valid for 72 hours from purchase on advertised prices from Utah dealers only PETITIONER will meet or beat any payment from Utah dealer OAC with same year and terms. Lowest rate guarantee based on credit worthiness. Zero percent financing for 36 months OAC on select vehicles. †Plus dealer added equipment

APPLICABLE LAW

Utah Code Ann. §41-3-210(1) provides in relevant part 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;

Utah Administrative Code Rule R877-23V-7 provides in relevant part as follows:

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

. . . .

13. Underselling Claims. Unsupported underselling claims may not be used. Underselling claims include the following: “our prices are guaranteed lower than elsewhere”, “money refunded if you can duplicate our values”, “we guarantee to sell for less”, “we sell for less”, “we purchase vehicles for less so we can sell them for less”, “highest trade-in allowance”, “we give $300 more in trade than any other dealers”. Evidence of supported underselling claims must be contained in the advertisement.

. . . .

17. Guaranteed. When words such as “guarantee”, “warranty”, or other terms implying protection are used in advertising, an explanation of the time and coverage of the guarantee or warranty shall be given in clear and concise language. The purchaser shall be provided with a written document stating the specific terms and coverage.

. . . .

26. Price Equaling. An advertisement that expresses a policy of matching or bettering competitor’s prices shall fully disclose any conditions that apply and specify the evidence a consumer must present to take advantage of the offer. The evidence requirement may not place an unreasonable burden on the consumer by, for example requiring the consumer to produce a signed contract from another dealer or to find a vehicle with the identical features.

. . . .

29. Layout and Type Size. The layout, headlines, illustrations, or type size of a printed advertisement and the broadcast words or pictures of radio or television advertisements may not convey or permit an erroneous or misleading impression as to which vehicle or vehicles are offered at featured prices.

(a) When an advertisement contains a picture of a vehicle along with a quoted price, the vehicle pictured must be the exact model with identical options and accessories as the vehicle advertised.

(b) No advertised offer, expression, or display of price, terms, down payment, trade-in allowances, cash difference, savings, or other material terms may be misleading and any necessary qualifications shall be clearly, conspicuously, and accurately set forth to prevent misunderstanding.

(1) in bold print and in type of a size that is capable of being read without unreasonable extra effort;

(2) in terms that are understandable to the buying public; and

(3) in close proximity to the qualified representation and not separated or buried by asterisk in some other part of the advertisement.

DISCUSSION

It is the position of Respondent that Petitioner has violated subparagraph 13 of Rule R877-23V-7 (herein referred to as Rule 7) by stating "GUARANTEED Lowest Price!" and "GUARANTEED Lowest Payments". The advertising brochure does leave the impression that Petitioner does undersell everyone, and there is no evidence supporting those underselling claims in the advertisement.

On the other hand, Petitioner maintains that its advertisement was lawful because of the provisions of sub-paragraph 26 of Rule 7, which specifically states, "An advertisement that expresses a policy of matching or bettering competitor's prices shall fully disclose any conditions that apply and specify the evidence a consumer must present to take advantage of the offer. The evidence requirement may not place an unreasonable burden on the consumer by, for example, requiring the consumer to produce a signed contract from another dealer or to find a vehicle with the identical features." Sub-paragraph 26 does specifically allow advertising which represents that a dealer can match or better a competitor's price if it fully discloses any conditions that apply and specifies the evidence a consumer must present to take advantage of the offer.

The advertisement at issue does use the terms, "GUARANTEED, Lowest Payments, " and "GUARANTEED, Lowest Price". The ad notifies potential purchasers that the guarantee is only good on advertised prices from Utah dealers where the advertising occurs within 72 hours from the time of purchase of the vehicle. At the hearing, Petitioner represented that if anyone presents an ad from another dealer showing a lower price, which would have been good within 72 hours from a purchase from Petitioner, then Petitioner will refund the difference to the purchaser. However, the ad does not give the full details of that guarantee, and omits the information regarding the guarantee that was given by verbal testimony at the hearing. In addition, the ad does not comply with the layout and type size requirements of subparagraph 29 of Rule 7. The terms "GUARANTEED Lowest Payments", and "GUARANTEED Lowest Price" are not "clearly, conspicuously, and accurantely set forth" "in terms that are understandable to the buying public" or "in close proximity to the qualified representation and not separated by asterisk in some other part of the advertisement. "

There was no evidence presented that requiring a copy of a competing ad showing a lower price within 72 hours places an unreasonable burden on the consumer, but Petitioner did not provide adequate disclosure of the layout and type size requirements of sub-paragraph 29 of Rule 7.

Regarding the argument of Petitioner that sub-paragraph 26 of Rule 7 allows the type of ad at issue in this proceeding, there was no evidence that the requirement to provide an ad from another dealer showing a lower price within 72 hours places "an unreasonable burden on the consumer, " but the ad did not "fully disclose any conditions that apply".

Accordingly, the Commission determines the advertising brochure circulated on the weekend of September 28, 2002 was misleading and inaccurate because it did not comply with the full disclosure requirements of Utah Administrative Code, Rule R877-23V-7. The Rule provides that the evidence requirement may not place an unreasonable burden on the consumer, but no evidence has been presented that requiring a copy of an ad, which would provide a lower price within 72 hours, places an unreasonable burden on the consumer.

DECISION AND ORDER

Based upon the foregoing, the Commission determines that the advertisement published by Petitioner was misleading and inaccurate, and that it was not in compliance with Rule R877-23V-7.A.26 and 29. Therefore, the determination that the advertisement was a violation of the statute and rule, together with the $100 fine imposed by Respondent are hereby sustained. 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 26^th day of March , 2003.

______________________________

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 26^th day of March , 2003.

Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner

Palmer DePaulis Marc B. Johnson

Commissioner Commissioner