What is considered an “Advertisement” in Colorado?
Colorado statutes broadly define an advertisement as “any commercial message in any newspaper, magazine, leaflet, flyers, or catalog, on radio, television, or a public address system, in direct mail literature, or other printed material, on any interior or exterior sign or display, in any window display, on a computer, display, or in any point-of-transaction literature or price tag that is delivered or made available to a customer or prospective customer in any manner; except that the term does not include materials required to be displayed by federal or state law.”
As you can see from the length and complexity of the definition, the state has gone out of its way to be all-inclusive in what constitutes an advertisement. Therefore, virtually all marketing activity is subject to the state level regulation on advertising. The only thing excluded by this definition are state or federally mandated forms, like the FTC’s Buyers Guide, which must be displayed on the window of all used cars for sale on your lot.
This definition was recently revised to account for all forms of electronic communication, be it your website, a 3rd party website, or electronic broadcast, like Facebook advertisements all the way down to mentions on podcasts. If your products are on the air or the internet, you will ultimately be responsible for that content (does not include 3rd party reviews, like Yelp!).
If a message meets this broad definition of “advertising”, it must comply with all state and federal regulations. While this guide summarizes state requirements, dealers should be aware that federal laws and regulations also apply to advertisements. Dealers are encouraged to review proposed advertisements with counsel before publishing, particularly advertisements that will have a wide circulation.
Colorado’s Statutory Requirements
While the vast majority of advertising compliance issues fall under the regulation 44-20-121(3)(i), there are some individual sections of the Colorado Revised Statutes that apply independently. Some requirements apply to all advertisements, while others only apply when an advertisement makes specific representations:
Dealer may not create the impression that the vehicle is for sale through a private party. To prevent that false or misleading impression, advertisements should include the name of the dealer, or use of the word “dealer”, if the dealer’s name is in the offer but does not specify that that name is a dealer’s. [C.R.S. 44-20-134]
It is a misdemeanor for any dealer to state or imply that a dealership will absorb the taxes on the vehicle sold or imply that they will not add taxes onto the selling price of the vehicle. [C.R.S. § 39-26-108]
It is also a misdemeanor for a dealer to engage in ‘bait advertising,’ if a product is advertised with the intent or purpose not to sell that product at all or knowing that there is insufficient quantity to meet the reasonable demand generated by the advertisement. [C.R.S. 18-5-303; see also Rule 19 below]
C.R.S. 44-20-121(3)(i) makes it unlawful for a dealer to “intentionally publish or circulate and advertisement that is misleading or inaccurate in any material particular or that misrepresents any of the products sold or furnished by a licensed dealer.”
Colorado’s Regulatory Requirements
In addition to what is required by statute, the Motor Vehicle Dealer Board has passed nineteen rules to highlight specific circumstances when an advertisement would be misleading or inaccurate in violation of the statute. They are included as an Attachment after this section. However, beyond the 19 listed rules, there are other things a dealer may do that could be considered misleading or inaccurate. That statutory standard, not the regulatory definition, is what is punishable by the state. The regulation is meant only to explain.
Since this regulation is a consumer protection regulation, the dealer should consider, “Could this be considered misleading to a typical consumer?”, before publishing. To address the question, we will walk through the rules one by one:
A dealer may not advertise a vehicle that is not in operable condition. A consumer must be able to drive it off the lot, regardless of whether they actually do or not.
You may not advertise that you are going out of business (i.e. going out of business sale), if you are not, in fact, going out of business.
If you advertise a specific motor vehicle with price or terms quoted, you must identify the vehicle by year, make, model, and stock number. The default rule is that this stock number must then be sold at the advertised price for five (5) days from the date of the advertisement, unless the advertisement specifies a shorter period (i.e. holiday weekend). Further, if you are to advertise a certain number of vehicles at a certain price, the entirety of those advertised vehicles must have been invoiced to the dealer at the time of the advertisement. a. Failing to list the stock number of an identified vehicle is one of the more common advertising mistakes. Please check your prospective ads for this! b. It is not a violation to offer a specific vehicle at a certain price, and not have it available because it sold prior to the advertised (or default) period of time.
If you use a photograph of a vehicle in an advertisement, a vehicle of the same make, model, year, and equipment must be offered at the advertised price.
A dealer may not make a claim in an advertisement that is contradicted or materially changed by subscripted information denoted by an asterisk or other symbol. a. Along with Rule 13, Rule 5 is probably the single biggest issue in advertisements. Asterisks may clarify information from an advertisement, but they may not do anything that would cause the larger advertisement to become misleading or inaccurate. Remember, misleading means in the mind of the consumer!
A dealer may not advertise any used vehicle as new or create an impression in the consumer’s mind (via words or picture) that it is a new vehicle.
If any advertised vehicle is known to be a) salvaged, b) rebuilt from salvage, or c) a flooded vehicle, the must be identified as such in the advertisement.
An advertisement cannot falsely imply that beneficial terms exist, nor may it imply that the existing loan on a vehicle has benefits that will be transferred to the new owner when those benefits do not exist.
Dealers may not make untrue statements or create the impression that a dealer will determine the price, terms, or conditions of a sale. Included in these prohibited terms are “write your own deal,” “name your own price,” “no reasonable offer refused,” and “we will not be undersold.” a. Further, a dealer cannot advertise any item as “free” when it is contingent upon a negotiated sale. (i.e. free floor mats, free tires, etc.)
If a dealer is to advertise a specific discount, they must ‘clearly and accurately’ state the basis for this discount. a. Guidance from the regulatory agency on this has indicated that any book values must have reference to the relevant publication (NADA, Kelly, etc.) – and include the month and year b. A prior, advertised price by itself is not deemed to be an allowable “basis.
Dealer may not make any reference to "dealer cost" or "invoice." The advertisement may not use the word "wholesale" in connection with retail sale of motor vehicles.
If an ad lists a specific trade-in amount, the ad must also disclose the MSRP, sale price, or capitalized cost of the vehicle from which the trade-in will be deducted.
Any advertisement including price must include all costs to purchaser at delivery, with the exception of sales tax, finance charge, emissions testing, and other governmental fees. It may also exclude costs incurred after the sale, like delivery fees. a. Along with Rule 5, this is the most common violation in advertising. One main point to remember is that D&H fees, or doc fees, must be disclosed in advertisements. b. Dealer Board public discussions have indicated that if a price is negotiated below the advertised price, D&H can only be added if the final price does not exceed the advertised price.
If advertising a discount or rebate, the advertisement must conspicuously state the MSRP. Additionally, dealers may not combine offers or give the consumer the impression that advertised rebates are obtainable. a. This issue tends to arise with rebates based on credit scores.
Any qualifying statement or disclosure (such as those under an asterisk from Rule 5), must be clear, conspicuous, and readable, in at least 8-point type. a. Watch out here for the color of the type and contrast of the background. The reasonable customer must be able to see, read, and understand the qualifications. b. Dealers must be careful here with ambiguous terms like ‘customer loyalty’ or ‘first time buyer.’
If employing a contest for gifts or prizes for prospective customers, the advertisement for such contest must include the words ‘no purchase or payment of any kind is necessary to enter or win this contest.’ These words must appear in bold and at least in 10-point type. a. Note: this also prohibits giveaways to all those who purchase a vehicle within a certain timeframe. (Be wary of gift cards here)
If any advertisement features a vehicle for lease, instead of purchase, the advertisement must clearly state that it is for a lease. There are no point or style requirements here but ensure that the consumer can read and understand the claim.
This rule prohibits the use of certain misleading terms regarding consumer finance. “Everybody financed,” “No Credit Rejected,” and “We Finance Anyone,” are specifically prohibited as misleading or inaccurate under the statutory guideline.
Prohibits bait advertising, as defined in C.R.S. 18-5-303.
Question & Answer / Example
QUESTION: Is an advertisement that includes the customer down-payment, “your cash”, or “your trade” in a sample calculation to reach a bottom-line price (“Buy for as low as”, “Your price”, “Total price”, etc.) allowable in Colorado?
Your discount* $ 2,000
Factory rebate $ 2,000
Your cash or trade $ 3,000
Buy for as low as $13,000*
*Must qualify: military, rebate, loyalty, etc.
ANSWER: CADA ran this type of advertisement past the Auto Industry Division (AID) for a general opinion. While neither the Division, nor CADA can give legal advice, they can provide advice on what types of ads they would consider potentially of concern and a violation in their enforcement duties. The Division saw “major” problems with this type of ad, and that in particular it may violate state Advertising Rules 5 and 9. Dealerships are reminded that any advertisement above all is subject to state statutes that require an
ad not be “misleading”. What is “misleading” is certainly a gray area, but dealerships are advised to take into considerations the risks of a consumer complaint and/or lawsuit in
Out of State Advertising
• If you are near a state border and advertise in another state’s media market, you may be
subject to that state’s regulations. In particular, the New Mexico Automobile Dealers Association (NMADA) and CADA attempt to address any cross-state advertising issues proactively. Dealers contemplating advertisements into New Mexico should review New Mexico requirements, available at: http://www.nmada.org/advertising-pre-review.html
• Cross-state sales over the Internet create a looming question about multiple state laws.
This will be a developing area of law, but generally at present, simply posting cars on
the Internet that may end up being purchased by a consumer in another state is most likely not enough to subject a dealership to the other states’ laws and licensing requirements.
[Dealerships going beyond that to target another state should seek legal advice before doing so].
Dealers should include disclosures in all Internet advertisements / postings that the vehicle is being offered for sale in Colorado and by a Colorado licensed motor vehicle dealer.
Summary of Applicable Colorado Revised Statutes (C.R.S.) and Regulations:
§44-20-102 “Advertisement” definition
§44-20-121(3)(k) Licenses - grounds for denial, suspension, or revocation (Dealers), Misleading advertising
§44-20-121(3)(i) Regulation, Dealer board advertising rules (1 CCR 205-1)
§44-20-121(6) Licenses - grounds for denial, suspension, or revocation (Salesperson), Misleading advertising
§39-26-108 Tax cannot be absorbed
Fraud in effecting sales
§18-5-303 Bait Advertising
1. CCR 205-1