Rubin Postaer and Associates, Inc

Text (OCR of the scan at left; may contain errors)

J; THE MA TTER OF RUBIN POSTAER Ati ASSOCIATES , INe.

CONSENT ORDER, ETe., IN REGARD TO ALLEGED VIOLATION OF THE CONSUMER LEASING ACT, REGULATION M AND SEe. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3794. Complaint, April 1998--Decision, April, 1998 This consent order prohibits, among other things, the California-based advertising agency of American Honda Motor Co. tram misrepresenting in any motor vehicle lease advertisement the total amount due at lease signing or delivery, the amount down, and/or the down payment, capitalized cost, reduction, or other amounts that reduce the capitalized cost of the vehicle (or that no such amount is required).

Appearances For the Commission: Rolando Berrelez, Sally Pitofsky and David Medine.

For the respondent: Stephen P. Durschlag, Winston Strawn Chicago, IL.

COMPLAINT The Federal Trade Commission, having reason to believe that Rubin Postaer and Associates, Inc. , a corporation ("respondent" or Rubin Postaer ), has violated the provisions of the Federal Trade Commission Act, 15 U.se. 45- , as amended, and the Consumer Leasing Act, 15 US.e. I667- 1667e, as amended, and its implementing Regulation M, 12 CFR 213 , as amended, and it appearing to the Commission that this proceeding is in the public interest, alleges:

1. Respondent Rubin Postaer and Associates, Inc. is a California corporation with its principal office or place of business at 1333 Second Street, Santa Monica, California.

2. Respondent, at an times relevant to this complaint, was an advertising agency of American Honda Motor Co., Inc. ("Honda and prepared and disseminated advertisements to promote consumer leases of Honda vehicles, as the tenns "advertisement" and "consumer lease" are defined in Section 213.2 of Regulation M, 12 CFR 213.2 as amended.

3. The acts and practices of respondent alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 US. e. 44. . .

RUBIN POSTAER AND ASSOCIATES, INC. 573 S72 Complaint 4. Respondent has prepared and disseminated or has caused to be disseminated consumer lease advertisements ("lease advertisements for Honda vehicles, including but not necessarily limited to the attached Rubin Postaer Exhibits A through e. Rubin Postaer Exhibits A and B are television lease advertisements (attached hereto in vidco and storyboard fonnat), Rubin Postaer Exhibit C is a print lease advertisement. These advertisements contain the following statements:

A. (Audio:) "Here s what you might put down on a typical car lease ($1750). At Honda, however, we had a different idea. We took our fuBy equipped 1995 Accord LX and lowered the down payment to some rather nice round numbers. (pause) The zero down, short-term lease from your Honda dealer. Zero down and $289 a month for 30 months.

(Video:) (View of an odometer set on $1750 that robs down to $0000) "The $0 Down Lease. The Accord LX $0 Down $289/30 months (The advertisement contains the following lease disclosure in white print superimposed on a black background and accompanied by background sound: " . . Advertised rate based on 3D-mo. closed-end lease for 1995 Honda Accord Door LX wlAutomatic Trans.(Model CD583S). MSRP $18 880 (includes destination) with dealer cap. cost reduction of $620.50. DEALER PARTICIPATION MAY AFFECT ACTUALPA YMENT. Taxes, title, lic. &reg. ins., opt. equip. & services not included. Due at lease signing are 1st mo, s lease payment, refundable security dep. equal to 1 mo. 's payment rounded to the next highest $25 increment & applicable title, lic., reg. fee & tax. Total monthly payments $8 670 + applicable tax. Opt. to purchase at leasc end for $12 548.50 + tax + official fees, except in NY & SD where no purchase opt. avail. If not purchased at lease end, customer returns vehicle & pays a disp. fee of no more than $400. Lessee pays maint. , ins. , repairs, service, all related taxes, reg. renewals excessive wear and use. Mi. charge of $. 15 (cents)/rn. over 12 000 rn.lyear. MSRP, dealer cap. cost reduction & opt. to purchase differ slightly in CA. . . . " The fine print is displayed on two screens, each containing a block of ten lines, each block appearing for approximately three seconds.) (Rubin Postaer Exhibit A). B. (Audio:) "Now we ve made the process of driving your own Accordjust as streamlined. Lease an Accord LX for just $239 a month. (Video:) "$239 a Month, 36 Months, $1500 Down. (The advertisement contains the following lease disclosure at the top of the screen in white print superimposed on a black background and accompanied by background sound: ro Advertised rate based on 36- month closed-end lease for the 1994 Accord LX Sedan with MSRP of $18,330.00 with a dealer capitalized cost reduction of $795.35 ($965.35 in IL, IN, KS , ME, NY, OK, and UT where no security deposit is required); condition of dealer participation may affect actual rate. Taxes, title, license, and registration, insurance and optional equipment, and services not included. Due at lease signing arc $1 500.00 down- payment, first lease payment, refundable deposit equal to one payment rounded to the next highest $25.00 increment where applicable, title, license and registration fee, and tax as applicable. Total monthly payment is $8 604.00 (plus tax, as applicable). . . . . . . .

Complaint 125 FTC. Option to purchase at end of lease for $10 061.50 plus tax and official fees, except in MS, NY, and SD where no option available. Lessee pays maintenance insurance, repairs, service, any and all related taxes, registration renewals, and excessive wear and usc. Mileage charge of $. IS/mile over 15 000 miles per year. A disposition fee up to $400.00 is due if vehicle not purchased at end of lease term " The fine print is displayed on three screens, each containing a hlock of eight lines, each block appearing for approximately three seconds.) (Rubin Postaer Exhibit B).

C. "INTRODUCING ZIP, ZERO, NADA. Civic LX $229 pcr month130 months Accord LX $289 per month/30 months Passport 4WDLX $389 per month130 months The $0 down lease Now, for a limited time, you can get an affordable, short-term lease on a fully equipped Honda for zero (as in zip, as in nada) dollars down. . . .

(The advertisement contains the following lcase disclosure at the bottom of the page in small print: Taxes, title, lie. & reg. , ins., opt. equip. & services not included. Due at lease signing are 1st mo. 's Jease payment, refundable security dep. equal to I mo.'s payment rounded to the next highest $25 increment (except where no sccurity dep. is collectcd) & applicable title, lic., reg. fee & tax. Total monthly payments $6 870 for the Civic LX Sedan, $8 670 for the Accord LX Sedan and $11 670 for the Passport 4WD LX + applicable tax. Opt. to purchase at lease end for $9 681.50 for the Civic LX Sedan, S12 649.60 for the Accord LX Sedan and $15,879.50 for the Passport4WD LX + tax + offcial fees, except in MS , NY & SD where no purchase opt. avail. If not purchased at lease end, customer returns vehicle & pays a disp. fee of no more than $400. Lessee pays maint. , ins. , repairs service, all related taxes, reg. renewals, excessive wear & use. Mi. Charge of 15lcentsJ/mi. over 12 000 mi/yr. . . . ) (Rubin Postacr Exhibit C). FEDERAL TRADE COMMISSION ACT VIOLATIONS COUNT I: MISREPRESE:-T A TION IN LEASE ADVERTISING 5. Through the means described in paragraph four, respondent has represented, expressly or by implication, that the amount stated as down " in respondent s lease advertisements, including but not necessarily limited to "$0 down " is the total amount consumers must pay at lease inception to lease the advertised vehicles. 6. In truth and in fact, the amount stated as "down " in respondent s lease advertisements is not the total amount consumers must pay at lease inception to lease the advertised vehicles. Consumers must also pay additional fees beyond the amount stated as "down " such as the first month' s payment and security deposit, at lease inception. Therefore, respondent's representation as alleged in paragraph five was, and is, false or misleading. 7. Respondent knew or should have known that the representation set forth in paragraph five was, and is, false and misleading. RUBIN POST AER AND ASSOCIATES, INC. 575 572 Complaint 8. Respondent s practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commssion Act, 15 U. e. 45(a).

COUNT 11: FAILURE TO DISCLOSE ADEQUA TEL Y IN LEASE ADVERTISING 9. In its lease advertisements, respondent has represented expressly or by implication, 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 andjor the amount stated as "down." These advertisements do not adequately disclose additional tenns pertaining to the lease offer including but not necessarily limited to a required security deposit and first month's payment due at lease inception. The existence of these additional tenns would be material to consumers in deciding whether to lease a Honda vehicle. The failure to disclose adequately these additional terms, in light of the representation made, was, and , a deceptive practice.

10. Respondent knew or should have known that the failure to disclose adequately material terms set forth in paragraph nine was and is. deceptive.

11. Respondent s practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commssion Act, 15 U. e. 45(a).

COUNT II: CONSUMER LEASING ACT AND REGULATION M VIOLA Tlons 12. Respondent s lease advertisements, including but not necessarily limited to Rubin Postaer Exhibits A through C, state a monthly payment amount, the number of required payments, and/or an amount "down. " The lease disclosures in these advertisements contain one or more of the following terms required by Regulation M: that the transaction advertised is a lease; the total amount of any payment such as a security deposit or capitalized cost reduction required at the consummation of the lease or that no such payments are required; the total of periodic payments due under the lease; a statement of whether or not the lessee has the option to purchase the leased property and at what price and time or the method of determining the purchase-option price; and a statement of the amount or method of determining the amount of any liabilities the lease imposes upon the lessee at the end of the tenn. 13. The lease disclosures in respondent s television lease advertisements, including but not necessarily limited to Rubin Postaer Exhibits A and B , are not clear and conspicuous because they appear on the screen in small type for a very short duration. The lease Complaint 125 FTC. disclosures in respondent s print lease advertisements, including but not necessarily limited to Rubin Postaer Exhibit C, are not clear and conspicuous because they appear in small type. 14. Respondent s practices violate Section 184 of the Consumer Leasing Act, 15 U. e. 1667c, as amended, and Section 213.5(c) of Regulation M, 12 CFR 213.5(c), as amended. Commissioner Thompson and Conussioner Swindle not participating.

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RUBIN POSTAER AND ASSOCIATES, INe. 577 572 Complaint EXHIBIT A Rubin Post""r !!A.ibit VIDEO AUDIO (Cpe with view of Qdome:2 :3ackgrc' u5ic t ughoutl d Accord LX Seda (eeemeter reads $1,501 Eere ' S hat you might put down cn a ca: ca:: lease.

(Engine star:,. rer1.:::g) (Gdome:e.: starts to scrc: dc' At Honda, hc eve e had a d ::e::en:: icea We took Ou fully equi;:pec. :995 (Super) , Accord LX a d lcwe::ed the The $0 Down Lease, dc"..payme!l:: to some rache:: nice Frem yo r Honda dealer. rct.d numte::s. (Cdemeter reads $OOOO! he zero down shc::t-te::m ':ease :::om your Hanea dealer.

(Sl.per) :

The "'.:cord LX S8 dcwn and $289 a month for 30 mo ch5. $0 Down $2B3/30 months (View Disclos reYI eadership Leasing y;Firs: screenj SUBJ"EC:' TO L: \i::::J AVA:;=.:L:;TY Avail :::1"".1 .j..._l.ary S , 1 at partic ati::g Honea dealers to approved lessees by Amer:can cnda Finance Corp Ad ertised rate ased en 30- mo c c5ed- end ease :0:: 1395 Her:da Accord 4- Scor :'X ',./;"c;tcmat::c Trans (Mode! C:J583S. ? 518 880 (i".0:' ..C25 destination! ",,:;::'1 dealer cap cost redl.ction of $620 SO ER PARTIC:PATICN MAY AFFECT Acr":AL PAYMENT. Ta:-ces, title ;. ::eg . HIS. cpt. equ ? ;. se::'llces ot inc':uded ue a:: :ease s:gn a::e l5:: mc 51"as" payr.e::c.

::e:unda le 5ecu:: cy dep. =c;al ::;:

""e, ::e h:3 e5:: 5: 5 :-:::-ec,e:::: .: ;:;:l: adl reo as, it L83se End fQ r #L2, i 8, o . Complaint 125 FTC. EXHIBIT A & official fees, except in NY & SD where no purchase opt. avail.

If not purchased at lease end, customer returns vehicle & pays a disp. fee of no more than $400.

Lessee pays maint., ins., repairs service, all related taxes reg. renewals, excessi ve wea and use.

Mi. charge of $. 15 (centsJ /mi. over 12, 000 mi. /year. MSRP, dealer cap.

cost reduction & cpt. to purchase differ slightly in CA.

This offer may not be available in conj function wi th any other advertised of:er. See your participating Honda dealer for details.

;; :;; . : :; .: :;::.., . :; :;: : ;: ;:. :(: .. RUBIN POST AER AND ASSOCIATES , INC. 579 572 Complaint EXHIBITB Rubin Postaar Exhibit B V1PEO .:rm (Cpe h view af whit:e s::reac! (3ac gl'vurd us:c c l'c:ughout) and view 0: Acco d LX) oto Trer.d calls it e mas: fuelefficient, the bes!: pel'foITir.g, S'.lie::..st, :::'1e strc:Jges::. a:1d ::" e safes:: Accord ..e ve eve:; b ilt named us Moter 7rend: t Car of ::

"f",ar (S'. ;:e:d :

$239 a Mont):, 36 Mor.tha, Now we ve rr,ade t.he process of 01':.,1:1g $1500 Down. r cwr. Accord j st as streamlined (Vie''' Disclcsure Lease an Accerd :x fe jus: $239 a mor.c eadership easing f cm Henda ;;e ';lcn. You Win. A Car Ahead. ';e ,,'cn. You Win. . (?irs:: screen) :

.'vailable thr::ugh /2B/94, a:;

par:icipatins anda dealers to alified lessees approved by American Henda Fin Carp Subject tc availabi:ity Advertised ra:e based an 36- on:h closed-end lease fo the 1994 Accord LX Sedan wic SRP af $l8, 330 00 with a dealer pitalized cost reduc:ion of 5795. 35 1$965 35 in :1., I . KS.

ME. NY. CK, and DC where nc security depcsit is requiredl;

condition of dealer participation may affect actual rate. Taxes, title, lice-pse a:1c.

(SiOcand screen) :

S15trat an. insurance and opt cna:

eq""lpment, and se:;' s "'.0:: :lcl' ,,c. a: lease s:. ir. a:; S:. S0C :c CC: -:- pay"., :':;5C l ase ?aym.. =dab e :: T;C:S:C e""..al cc c:",, ::"ci ::: c::e ::

es:; :::; JJ :;-.c:-ec:"" e"'O 'i:;;; 'C a.ppJ.kilb.!e-. fotal. "'c:I\thj.y Complaint 125 F.T. EXHIBIT B payment is $8, 604. 00 (plus tax as appl icable). Option to purchase at end of lease for $10, 061. 50 plus tax and official fees I except in MS, NY, and (Third screen) :

SD where no option available. Lessee pays maintenance, insurance, repairs, service, any and all related taxes registration renewals I and excessive wear and use. Mileage charge 15/mile over 15, 000 miles per year. A disposition fee up to $400. 00 is due if vehicle not purchased at end of lease term.

SRP , dealer capital cost reduction, and option- to-purchase price differ in AK, CA and HI.

See participating Honda dealers for details.

, ,.; .., : ! , ., ( ..,,p. ,.... .;,.,,,, RUBIN POSTAER AND ASSOCIATES, INC. 581 572 Complaint EXHIBIT C Ifutrod ch1g Zip, da.

Cv'LX 5229pemcmh/.1D mcnrn A=lX 5289 per mcmhl. monrh -"ffr.

s3S9 pamcn jji monms b-,:"'=0m"p=",:. CZb... _'f-...."",, """";n, dl1-"( ""="",".iu.. rn.b l.u.Th""Ia., _l.\:_..ar "- L.b ..,.,,_..,,,,,,1- d"" -I:':=-'''b.1" """",,,_""l' ,,,,b="" -""td =nr.D", \ni"' n_=..""mc '"-d", ru..../' . "'""'''1r!"""" r:" '-"""""""",d.._..., .. Lwcershlp Lw'iiri ur Honda dealer. (T AI E(' s.? ----O--' Decision and Order 125 FTC. DECISION AND ORDER The Federal Trade Commssion having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy of a draft of complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commssion, would charge the respondent with violation of the Federal Trade Commission Act; and The respondent, its attorneys, and counsel for the Commssion having thereafter executed an agreement containing a consent order an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated as alleged in such complaint, or that the facts as alleged in such complaint, other than jurisdictional facts, are true and waivers and other provisions as required by the Commssion s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent has violated the said Act, and that a complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commssion hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent Rubin Postaer and Associates, Inc. is a California corporation with its principal office or place of business located at 1333 Second Street, Santa Monica, California. 2. The Federal Trade Commssion has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER DEFlNJTONS 1. "Clearly and conspicuously as used herein shall mean: 1) video or written disclosures must be made in a manner that is readable and understandable to a reasonable consumer and 2) audio or oral disclosures must be made in a manner that is audible and understandable to a reasonable consumer.

RUBIN POSTAER AND ASSOCIATES, INC. 583 572 Decision and Order 2. "Total amount due at lease signing or delivery as used herein shah mean the total amount of any initial payments required to be paid by the lessee on or before consummation of the lease or delivery of the vehicle, whichever is later. The total amount due at lease signing or delivery may I) exclude third-party fees, such as taxes licenses, and registration fees, and disclose that fact or 2) provide a total that includes third-party fees based on a particular state or locality as long as that fact and the fact that fees may vary by state or locality are disclosed.

3. Unless otherwise specified respondent as used herein shah mean Rubin Postaer and Associates, Inc. , its successors and assigns and its officers, agents, representatives, and employees. 4. Commerce as used herein shah mean as defined in Section 4 of the Federal Trade Commission Act ("FTC Act ), 15 U. e. 44. It is ordered That respondent, directly or through any corporation, subsidiary, division, or any other device, in connection with any advertisement to aid, promote, or assist, directly or indirectly, any consumer lease involving motor vehicles in or affecting commerce, as "advertisement" and "consumer lease " are defined in Section 213.2 of revised Regulation M, 61 Fed. Reg. 246, 52 258 (Oct. 7 , 1996) and 62 Fed. Reg. 15 364 (April I 1997)(to be codified at 12 CFR 213.2) ("revised Regulation M"), as amended, shah not, in any manner, expressly or by implication: A. Misrepresent the total amount due at lease signing or delivery, the amount down, and/or the downpayment, capitalized cost reduction, or other amount that reduces the capitalized cost of the vehicle (or that no such amount is required). B. Make any reference to any charge that is part of the total amount due at lease signing or delivery or that no such charge is required, not including a statement of the periodic payment, more prominently than the disclosure of the total amount due at lease signing or delivery.

e. State the amount of any payment or that any or no initial payment is required at lease signing or delivery unless aH of the fonowing items are disclosed clearly and conspicuously, as applicable:

I. That the transaction advertised is a lease; 2. The total amount due at lease signing or delivery; 3. Whether or not a security deposit is required; 4. The number, amount, and timing of scheduled payments; and Decision and Order 125 FT. 5. That an extra charge may be imposed at the end of the lease tenn in a lease in which the liability of the consumer at the end of the lease tenn is based on the anticipated residual value of the vehicle. II.

It is further ordered That an advertisement that complies with subparagraph I.C shall be deemed to satisfy the requirements of Section 184(a) of the Consumer Leasing Act, 15 U. e. 1667c(a), as amended by Title II, Section 2605 of the Omnibus Consolidated Appropriations Act for Fiscal Year 1997, Pub. L. No. 104-208, 110 Stat. 3009, 3009-473 (Sept. 30, 1996) ("revised CLA"), as amended and Section 213.7(d)(2) of revised Regulation M, 61 Fed. Reg. at 261 and 62 Fed. Reg. at 15 368 (to be codified at 12 CFR 213.7(d)(2)), as amended.

It is further ordered That if the revised CLA, as amended, or revised Regulation M, as amended, are amended in the future to alter definition 2 of this order ("total amount due at lease signing or delivery ) or to require or permit advertising disclosures that are different from those set forth in subparagraphs I.B or I.C of this order, then the change or changes shall be incorporated in subparagraph I.B , subparagraph I.C, and/or definition 2 for the purpose of complying with subparagraphs I.B and I.C only, as appropriate; provided however, that all other requirements of this order, including definition I ("clearly and conspicuously ), will survive any such revisions.

IV.

It is further ordered That respondent Rubin Postaer and Associates, Inc., and its successors and assigns, shall, for five (5) years after the date of service of this order, maintain and upon request make available to the Commssion for inspection and copying all records that will demonstrate compliance with the requirements of this order.

It is further ordered, That respondent Rubin Postaer and Associates, Inc., and its successors and assigns, shall: A. Within thirty (30) days after the date of service of this order distribute a copy of this order to an current principals, officers RUBIN POSTAER AND ASSOCIATES, INe. 585 572 Decision and Order directors, managers, employees, agents, and representatives having responsibilities involving motor vehicle lease advertising; and B. For a period of ten (10) years from the date of service of this order, distribute a copy of this order to all future principals, officers directors, managers, employees, agents, and representatives having responsibilities involving motor vehicle lease advertising, within thirty (30) days after the person or entity assumes such position or responsibilities.

VI.

It is further ordered That respondent Rubin Postaer and Associates, Inc. , and its successors and assigns, shall notify the Commssion at least thirty (30) days prior to any change in the corporation that may affect compliance obligations arising under this order, including but not necessarily limited to dissolution assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this order; the proposed filing of a bankruptcy petition; or a change in the corporate name or address. Provided, however, that with respect to any proposed change in the corporation about which respondent learns less than thirty (30) days prior to the date such action is to take place, respondent shall notify the Commission as soon as is practicable after obtaining such knowledge. All notices required by this Part shan be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection Federal Trade Commission, Washington, D.

VII.

It is further ordered That respondent Rubin Postaer and Associates, Inc. , and its successors and assigns, shall within one hundred and twenty (120) days after the date of service of this order and at such other times as the Federal Trade Commssion may require, file with the Commssion a report, in writing, setting forth in detail the manner and form in which they have complied with this order.

VII This order will tennnate on April 6, 2018 , or twenty (20) years from the most recent date that the United States or the Federal Trade Commssion files a complaint (with or without an accompanying consent decree) in federal court alleging any violation of the order Decision and Order 125 FTC. whichever comes later; provided, however, that the filing of such a complaint wi1 not affect the duration of: A. Any Part in this order that temlnates in Jess than twenty (20) years;

B. This order s application to any respondent that is not named as a defendant in such complaint; and e. This order if such complaint is filed after the order has terminated pursuant to this Part.

Provided further, that if such complaint is dismissed or a federal court rules that the respondent did not violate any provision of the order and the dismissal or ruling is either not appealed or upheld on appeal then the order wi1 terminate according to this Part as though the complaint had never been filed, except that the order will not terminate between the date such complaint is filed and the later deadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal.

Commssioner Thompson and Commssioner Swindle not participating.

SENSORMATIC ELECTRONICS CORPORATION 587 587 Complaint