FTC will drive carmakers to keep autonomy claims in check

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Originally published on Law360, New York (August 3, 2016, 11:28 AM ET)

TV commercials for the 2017 Mercedes E-­class brag that the car’s advanced, adaptive cruise control and automated steering allow it to follow traffic and maintain lane at speeds of up to 130 mph.

In the commercials, the car’s occupants face each other and interact while the car drives itself. One commercial starts with the car driving itself to the operator. Print ads refer to the E­-Class as a “self-­driving car.”

“It’s a semi­-autonomous vehicle that can help do the stressful work for you,” offers one commercial that highlights the car’s "Drive Pilot" feature. “Sit back, relax and enjoy the day.”

The claims prompted three consumer advocacy groups last week to urge the Federal Trade Commission to investigate whether Mercedes Benz’s marketing of its 2017 E­-class sedan misleads consumers by overstating the car’s autonomous capabilities.

The consumer groups claim such advertising is likely to cause consumers to believe the car is self­-driving when it is not, and creates a false sense of security. The letter cites to the National Highway Traffic Safety Administration’s classification of vehicles with autonomous features, “[s]elf driving vehicles are those in which operation of the vehicle occurs without direct driver input to control the steering, acceleration and braking and are designed so that the driver is not expected to constantly monitor the roadway while operating in self-­driving mode.”

The controversy is another example of how autonomous vehicle proponents and manufacturers, who can’t wait for AV tech to finish evolving, can sometimes clash with government agencies and cautious consumer groups who want to keep the movement under the speed limit until all the bugs are worked out.

Unlike the new privacy and data security legal issues presented by autonomous vehicles and connected car technology, the advertising of advanced automotive product technology is currently held to basic and longstanding advertising rules—including the rule that requires product claims to be truthful (demonstrations, tests, experiments must be substantiated).

This means if an advertisement claims a product will perform in a certain way, the ad must be a truthful representation of what the product can actually do. However, recent advertisements on the attributes of advanced product technology have left the door open for challenges by consumer advocacy groups and scrutiny by the FTC.

In response to the recent complaints, Mercedes Benz immediately pulled the advertising campaigns, which is not surprising given the FTC’s ongoing efforts banning the use of deceptive demonstrations which date back to a 1961 decision upheld by the U.S. Supreme Court involving razor product claims.

In 1996, the FTC’s focus was on Ford’s advertising of its MicronAir filters claiming the filter “removes virtually all dust, pollen and other impurities from the interior,” when the filtration systems actually did not remove nearly all pollutants likely to be encountered by a driver. The FTC charged Ford with, among other things, false and misleading advertising in violation of Section 5(a) of the FTC Act.

And as recent as 2014, the FTC charged Nissan and its ad agency (TBWA Worldwide) for violation of the same section of the Federal Trade Commission Act. The 30­second TV ad for the Nissan Frontier pickup truck depicted an unaltered truck pushing a stranded dune buggy up a steep sand dune—a feat the Nissan Frontier truck is actually incapable of performing.

The truck and dune buggy were towed up the hill using cables and the camera phone type of YouTube filming added to the realistic nature of the commercial. The fleeting small print disclaimer stating, “Fictionalization. Do not attempt,” was insufficient to meet the FTC’s “clear and conspicuous” standard and undo the damage caused by the deceptively altered demonstration of the Nissan Frontier.

The history of the FTC’s efforts to protect consumers from deceptive advertising draws a firm line in the sand—advertisers are prohibited from misrepresenting key attributes in product demonstrations, tests or experiments. When a visual ad conveys it’s an actual demonstration of what the product can do (particularly an objective product attribute), companies must consider their obligations to substantiate product claims.

Driverless cars and connected cars are in various stages of testing and have not hit the market but already face escalated scrutiny, public fear and anxiety, federal and state regulation, and infrastructure challenges not yet ready to accept the introduction of such advanced technology.

Proposed government legislation seeks to expand the authority of the FTC by protecting consumers from what many perceive as a “rush” to roll out autonomous vehicles and connected cars by car manufacturers. Therefore, as mass production of these vehicles become a reality, it is logical to expect additional government regulation will be proposed to cover industry­wide advertising practices and definitions that would work across various vehicle makers and technologies.

The FTC’s commitment to protecting consumers in the marketplace is reflected in a long history of administrative actions against car manufacturers and dealerships for improper advertising practices. In 2014, the FTC announced "Operation Steer Clear"—a nationwide sweep cracking down on the improper sale, financing and leasing of motor vehicles by dealerships.

In 2015, automakers set a record of 51.26 million recalled vehicles in the United States, continuing an unprecedented government crackdown on safety lapses. As a result of historic recall numbers, the FTC took a closer look at used car advertising. The investigation resulted in charges against GM, Jim Koons Management Company and Lithia Motors Inc. over allegations that each claimed that the vehicles for sale had been rigorously inspected (including “certified preowned vehicles”), that they were safe, and that they would be sold with a guarantee, warranty or certification—when in fact some of the used cars were subject to unrepaired and open safety recalls, which the ads failed to disclose.

The noteworthy trend is the FTC will continue to subject auto industry advertisers to existing advertising rules and apply them to advanced automotive technology.

The “rule of thumb” is: stick to the truth. Even if special guidelines or regulations for advanced automotive technology are eventually implemented, these exceptions are unlikely to deviate from existing advertising rules. The entire automotive industry must remember that an advertisement misleading a significant minority of reasonable consumers constitutes a deceptive practice under the FTC Act.

Therefore, when looking at advertising such as Mercedes-­Benz’s marketing of its 2017 E­-class, if consumers could reasonably interpret the advertised vehicle as capable of performing the depicted feat (when the vehicle is unable to perform such a feat), the advertisement will be considered misleading, false and deceptive.