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Nissan Motor Corporation in U.S.A.; Proposed Consent Agreement With Analysis To Aid Public Comment

American Government Special Collections Reference Desk

American Government Topics:  Nissan

Nissan Motor Corporation in U.S.A.; Proposed Consent Agreement With Analysis To Aid Public Comment

Donald S. Clark
Federal Trade Commission
March 21, 1994


[Federal Register Volume 59, Number 54 (Monday, March 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 94-6534]


[[Page Unknown]]

[Federal Register: March 21, 1994]


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FEDERAL TRADE COMMISSION
[File No. 902 3383]

 

Nissan Motor Corporation in U.S.A.; Proposed Consent Agreement 
With Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair acts and practices and unfair methods of competition, this 
consent agreement, accepted subject to final Commission approval, would 
require, among other things, a California-based corporation to disclose 
clearly and prominently in each advertisement either any significant 
restrictions that apply to obtaining a promotional benefit in 
connection with a test-drive offer, or that there are significant 
restrictions that apply to obtaining the benefit, and would prohibit 
the respondent from misrepresenting any conditions, restrictions or 
limitations on any promotional benefit it offers consumers in the 
future.

DATES: Comments must be received on or before May 20, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:
Phillip Broyles, Michael Milgrom or Melissa Sternlicht, FTC/Cleveland 
Regional Office, 668 Euclid Ave., suite 520-A, Cleveland, Ohio 44114. 
(216) 522-4210.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the 
Commission's Rules of Practice (16 CFR 2.34), notice is hereby given 
that the following consent agreement containing a consent order to 
cease and desist, having been filed with and accepted, subject to final 
approval, by the Commission, has been placed on the public record for a 
period of sixty (60) days. Public comment is invited. Such comments or 
views will be considered by the Commission and will be available for 
inspection and copying at its principal office in accordance with 
Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Agreement Containing Consent Order To Cease and Desist

    In the Matter of: Nissan Motor Corporation in U.S.A., a 
corporation.

    The Federal Trade Commission having initiated an investigation of 
certain acts and practices of Nissan Motor Corporation in U.S.A., a 
corporation (``proposed respondent''), and it now appearing that 
proposed respondent is willing to enter into an agreement containing an 
Order to Cease and Desist from the use of the acts or practices being 
investigated,
    It is hereby agreed by and between proposed respondent, by its duly 
authorized officer and its attorney and counsel for the Federal Trade 
Commission that:
    1. Proposed respondent is a corporation organized, existing and 
doing business under and by virtue of the laws of the State of 
California, with its office and principal place of business located at 
18501 South Figueroa Street, Carson, California 90248 (Mailing Address: 
Post Office Box 191, Gardena, California 90248-0191).
    2. Proposed respondent admits all the jurisdictional facts set 
forth in the draft Complaint here attached.
    3. Proposed respondent waives:
    (a) Any further procedural steps;
    (b) The requirement that the Commission's Decision contain a 
statement of findings of fact and conclusion of law;
    (c) All rights to seek judicial review or otherwise to challenge or 
contest the validity of the Order entered pursuant to this Agreement; 
and
    (d) All claims under the Equal Access to Justice Act.
    4. This Agreement shall not become part of the public record of the 
proceeding unless and until it is accepted by the Commission. If this 
Agreement is accepted by the Commission, it, together with the draft 
Complaint contemplated thereby, will be placed on the public record for 
a period of sixty (60) days and information with respect thereto 
publicly released. The Commission thereafter may either withdraw its 
acceptance of this Agreement and so notify proposed respondent, in 
which event it will take such action as it may consider appropriate, or 
issue and serve its Complaint (in such form as the circumstances may 
require) and Decision, in disposition of the proceeding.
    5. This Agreement is for settlement purposes only and does not 
constitute an admission by proposed respondent that the law has been 
violated as alleged in the attached draft Complaint, or that the facts 
alleged in the draft complaint, other than the jurisdictional facts, 
are true.
    6. This Agreement contemplates that, if it is accepted by the 
Commission, and if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of section 2.34 of the 
Commission's Rules, the Commission may, without further notice to 
proposed respondent, (1) issue its Complaint corresponding in form and 
substance with the draft Complaint and its Decision containing the 
following Order to Cease and Desist in disposition of the proceeding, 
and (2) make information public with respect thereto. When so entered, 
the Order to Cease and Desist shall have the same force and effect and 
may be altered, modified, or set aside in the same manner and within 
the same time provided by statute for other orders. The Order shall 
become final upon service. Delivery by the United States Postal Service 
of the Complaint and Decision containing the agreed-to Order to 
proposed respondent's address as stated in this Agreement shall 
constitute service. Proposed respondent waives any right it may have to 
any other manner of service. The Complaint attached hereto may be used 
in construing the terms of the Order. No agreement, understanding, 
representation, or interpretation not contained in the Order or the 
Agreement may be used to vary or contradict the terms of the Order.
    7. Proposed respondent has read the proposed Complaint and Order 
contemplated hereby. Proposed respondent understands that once the 
Order has been issued, it will be required to file one or more 
compliance reports showing that it has fully complied with the Order. 
Proposed respondent further understands that it may be liable for civil 
penalties in the amount provided by law for each violation of the Order 
after it becomes final.

Order

Definitions
    1. ``Promotional benefit'' as used herein shall mean any prize, 
award or consideration, including, but not limited to, money, favorable 
credit terms and optional equipment packages, having a bona fide retail 
value over $25.
    2. ``Clearly and prominently'' as used herein shall mean as 
follows:
    (a) In a television or videotape advertisement, the disclosure 
shall be presented simultaneously in both the audio and video portions 
of the advertisement. The audio disclosure shall be delivered in a 
volume and cadence and for a duration sufficient for an ordinary 
consumer to hear and comprehend it. The video disclosure shall be of a 
size and shade, and shall appear on the screen for a duration, 
sufficient for an ordinary consumer to read and comprehend it.
    (b) In a print advertisement, the disclosure shall be in close 
proximity to the representation that triggers the disclosure in at 
least (12) point type.
    (c) In a radio advertisement, the disclosure shall be delivered in 
a volume and cadence and for a duration sufficient for an ordinary 
consumer to hear and comprehend it.
I
    It is ordered that respondent Nissan Motor Corporation in U.S.A., a 
corporation, its successors and assigns, and its officers, agents, 
representatives and employees, directly or through any corporation, 
subsidiary, division or other device, in connection with the 
advertising, offering for sale, sale or distribution of any motor 
vehicle in or affecting commerce, as commerce is defined in the Federal 
Trade Commission Act, do forthwith cease and desist from representing, 
in any manner, directly or by implication, that persons who test drive 
a Nissan motor vehicle can readily obtain a promotional benefit when 
significant restrictions prevent consumers from readily obtaining that 
promotional benefit without disclosing clearly and prominently in each 
advertisement in which the representation is made either the 
significant restrictions or that there are significant restrictions 
that apply to obtaining the promotional benefit.
II
    It is further ordered that respondent Nissan Motor Corporation in 
U.S.A., a corporation, its successors and assigns, and its officers, 
agents, representatives and employees, directly or through any 
corporation, subsidiary, division or other device, in connection with 
the advertising, offering for sale, sale or distribution of any motor 
vehicle in or affecting commence, as commerce is defined in the Federal 
Trade Commission Act, do forthwith cease and desist from 
misrepresenting, in any manner, directly or by implication, the 
existence, nature or extent of any condition, restriction or limitation 
on any promotional benefit offered to consumers.
III
    It is further ordered that, for three (3) years from the date that 
the advertisements are last disseminated, respondent shall maintain 
and, upon request, make available to the Commission for inspection and 
copying:
    (A) Copies of all advertisements subject to Paragraph I or II of 
this Order;
    (B) Copies of all communications to affiliated dealers and all 
information and other materials supplied by respondent to the dealer in 
connection with any representation subject to Paragraphs I or II of 
this Order; and
    (C) All correspondence received from consumers, whether received by 
respondent or by an agent of respondent, related to any promotional 
benefit program advertised in a manner subject to Paragraphs I or II of 
this Order.
IV
    It is further ordered that respondent shall, within sixty (60) days 
of service of this Order, distribute a copy of this Order to each of 
its operating divisions and to each officer and other person 
responsible for the preparation or review of advertising material 
including outside advertising agencies, and to a representative of each 
of its affiliated dealers and shall secure from each such person a 
signed statement acknowledging receipt of a copy of this Order.
V
    It is further ordered that respondent shall notify the Commission 
at least thirty (30) days prior to the effective date of any proposed 
change in the corporation such as dissolution, assignment or sale 
resulting in the emergence of a successor corporation, the creation or 
dissolution of subsidiaries, or any other change in the corporation 
which may affect compliance obligations arising out of this Order.
VI
    It is further ordered that respondent shall, within sixty (60) days 
after service of this Order, file with the Commission a report, in 
writing, setting forth in detail the manner in which it has complied 
with this Order.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted an agreement to a 
proposed consent order from Nissan Motor Corporation in U.S.A., a 
marketer of new automobiles.
    The proposed consent order has been placed on the public record for 
sixty (60) days for the reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
agreement and will decide whether it should withdraw from the agreement 
or make final the agreement's proposed order.
    The Commission's complaint charges that the proposed respondents 
disseminated advertisements for the Nissan Stanza Challenge Program, a 
promotional program in which consumers were invited to drive the Nissan 
Stanza and receive $100 if, after driving the Stanza, they bought one 
of two competing cars--either a Toyota Camry or a Honda Accord.
    The complaint charges that Nissan represented that consumers could 
readily obtain the $100 when, in fact, in order to obtain it, the 
consumer could not purchase the competing vehicle on the same day as 
the test drive nor more than seven days thereafter, and had to 
purchase, take delivery and submit detailed proof of purchase to Nissan 
within the seven day time period. Therefore, the Commission charged 
that the representation that the $100 could be readily obtained was 
false and misleading.
    The Commission also charged that the existence of the restrictions 
mentioned above would have been material to consumers in deciding 
whether to test drive the Stanza or otherwise take part in the program. 
Therefore, failure to disclose that the program had significant 
restrictions was deceptive.
    The proposed consent order contains provisions designed to remedy 
the violations charged and to prevent the respondent from engaging in 
similar acts and practices in the future. Part I of the proposed order 
prohibits Nissan from representing that consumers who test drive a 
Nissan vehicle can readily obtain a promotional benefit, when 
significant restrictions prevent consumers from obtaining the 
promotional benefit, unless Nissan also discloses either (1) the 
restrictions that apply, or (2) that significant restrictions apply to 
obtaining the promotional benefit.\1\ Part II of the order prohibits 
Nissan from misrepresenting the existence, nature, or extent of any 
condition, restriction or limitation on any promotional benefit offered 
to consumers.
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    \1\The proposed order defines ``promotional benefit'' as any 
prize, award, or consideration, including but not limited to, money, 
favorable credit terms and optional equipment packages, having a 
bona fide retail value over $25.
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    The remainder of the proposed order consists of standard 
recordkeeping and compliance provisions.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and it is not intended to constitute an official 
interpretation of the agreement and proposed order, or to modify in any 
way their terms.
Donald S. Clark,
Secretary.

Joint Dissenting Statement of Chairman Janet D. Steiger and 
Commissioner Dennis A. Yao in Nissan Motor Corporation of USA, File No. 
902-3383

    We dissent from issuance of this proposed consent order with 
Nissan Motor Corp. Because the proposed order does not sufficiently 
remedy one of the alleged law violations, it may give implicit 
approval to the use of seemingly attractive promotional offers that 
many consumers simply cannot utilize because of limitations such as 
severe time restrictions or extremely difficult documentation 
requirements.
    Through advertisements for the Nissan Stanza ``Challenge 
Program'' Nissan ran a promotional program inviting consumers to 
come to a Nissan dealership, test drive the Nissan Stanza and 
receive $100 if, after driving the Stanza, they bought either a 
Toyota Camry or a Honda Accord. The advertising expressly stated 
that there was ``no catch'' to this offer. What consumers were not 
told was that, in order to obtain the $100, it was necessary to 
purchase and take delivery of the Camry or Accord and submit 
detailed proof of purchase (including documents not usually retained 
by consumers after purchase) to Nissan, all within seven days (but 
not on the same day as the test drive). The complaint alleges that 
the failure to disclose that the program had such significant 
restrictions was deceptive, and that Nissan's explicit advertising 
claim that the offer had ``no catch'' falsely represented that 
consumers could readily obtain the $100 payment.
    In our view, the proposed consent order may do little to remedy 
the failure to disclose allegation. Part I of the proposed order 
prohibits Nissan from representing, directly or by implication, that 
persons who test drive a Nissan can ``readily obtain'' a promotional 
benefit--when significant restrictions prevent consumers from 
readily obtaining that benefit--unless Nissan also discloses either 
those restrictions or that significant restrictions apply. Since 
paragraph 5 of the complaint uses the same term, ``readily obtain,'' 
to characterize the express ``no catch'' claim in Nissan's ad, and 
paragraph 4 of the complaint only references the advertisement with 
an express ``no catch'' claim, the order could be interpreted to 
require disclosure only when language similar to ``no catch'' or 
``no catches'' is used.
    To suggest otherwise--namely that the order requires disclosure 
any time Nissan offers a promotion and uses very general language 
such as ``Come on in and get a [benefit]''--would read out of the 
order the ``readily obtain'' limiting language. Consequently, 
although we understand that some would read the order differently, 
the proposed order might be interpreted as standing for the 
proposition that advertisements need not contain any disclosure of 
the nature or even existence of limiting conditions, no matter how 
onerous, unusual, or unexpected, unless the advertiser uses language 
similar to a ``no catches'' claim.
    Moreover, even when an affirmative expression such as ``no 
catches'' is used in making an offer, the order would allow an 
advertiser to disclose only that significant restrictions apply to 
the offer, not what those restrictions are or where the consumer can 
obtain additional information about them. Although reasonable minds 
can differ on whether a disclosure that ``significant restrictions'' 
apply would adequately inform consumers when ready availability is 
implied in an advertisement, such a disclosure for an express ``no 
catches'' claim is manifestly contradictory. This order would seem 
to allow advertisers to claim to consumers that there are no catches 
in connection with the offer, so long as the ad elsewhere discloses 
that there are significant restrictions. The use of such 
contradictory statements in the same advertisement conflicts with 
Commission precedent. See Commission Statement on Deception, 103 
F.T.C. 110, 180-81.
    Finally, the proposed order does not contain a point of sale 
disclosure requirement. Consequently, even if consumers understand 
the disclosure of ``significant restrictions'' as overriding the 
express ``no catches'' claim, there is no sure way of learning about 
the restrictions.
    We do not suggest advertisers must disclose every limitation on 
their offers in advertising. Consumers generally expect that offers 
have reasonable time limits and other conditions. This order may 
suggest, however, that even severe restrictions--i.e., those that 
make the offer impractical or impossible for many consumers to 
redeem--need not be disclosed in an adequate fashion. Such an 
approach is not without cost to consumers--especially in cases, such 
as this one, where consumers usually shop for the product by 
visiting sales locations and, consequently, where such offers could 
induce them to make a special visit.

Separate Statement of Commissioner Mary L. Azcuenaga, in Which 
Commissioners Deborah K. Owen and Roscoe B. Starek, III, Join, in 
Nissan Motor Corporation of USA File No. 902-3383

    I write to respond to the concerns expressed in my colleagues' 
joint dissenting statement about how the consent order in this 
matter might be interpreted and what it would seem to allow in 
connection with other promotional advertisements. Like other consent 
orders, this order was negotiated in response to particular facts 
and circumstances. Although the order identifies conduct the 
Commission will not allow, no legal inference properly can be drawn 
that conduct not mentioned in the complaint and order has been 
approved. The legal standards by which promotional advertisements 
are measured are well established in sources having precedential 
value. As always, advertisers would be well-advised to consult these 
sources to determine the legal standards to which they must conform.

[FR Doc. 94-6534 Filed 3-18-94; 8:45 am]
BILLING CODE 6750-01-M



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