The Federal Trade Commission yesterday imposed its largest civil penalty ever against Mazda Motor of America Inc. for allegedly failing to clearly disclose important leasing terms in its television ads.
Mazda agreed to pay $4.05 million to the FTC, which said the ads violated a previous agreement Mazda made with the government to clearly and conspicuously disclose all important leasing terms in its ads. Mazda, without admitting the violations, also agreed to pay $1.2 million in fines and costs to 24 states that had similar agreements with Mazda.
These fines came the same day Mazda also reached a $900,000 agreement with the Justice Department and the Environmental Protection Agency to settle claims that the company failed to promptly report a defect in an emission-control device in its MPV minivans.
The earlier agreements with the FTC and states were signed in 1997 and barred Mazda from highlighting only the most attractive lease terms in its ads, such as low monthly payments. But the FTC said Mazda continued to play down key lease terms, such as the amount of money due at the time the lease is signed--a sum that can range from a few hundred dollars to several thousand.
The size of the penalty "shows the resolve by the commission that companies must comply with its orders," said David Medine, associate director for financial practices in the FTC's bureau of consumer protection.
In the past two years, the FTC had also entered into agreements with other car manufacturers, including General Motors, Chrysler (now DaimlerChrysler), Mitsubishi, Toyota, Honda, Isuzu and Volkswagen. "For the most part manufacturers have cleaned up their ads, but there are still problems at the dealer level," said Medine, who said the FTC will be bringing more cases against dealers.
Cars are "the second-largest purchase consumers make," Medine said. "It's critical they get important information to enable them to shop around."
In one ad cited by the FTC, Mazda promoted a lease with its $299 monthly payment. In the fine print, along with lots of other information, it was noted that an added $2,374 was due when the lease was signed.
In a statement issued in response to yesterday's agreement with the FTC and states, Mazda said the company "at all times has sought to comply with the lease disclosure requirements."
"Consumers who leased a Mazda vehicle during that period benefited from the favorable leasing terms in effect at the time. They also received full disclosure of all required information prior to entering into any lease agreements," the statement said.