NADA MANAGEMENT SERIES. A DEALER GUIDE TO Fuel Economy Advertising THIRSTY FOR ADVENTURE. NOT GAS. New Hybrid Hillclimber

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1 Driven NADA MANAGEMENT SERIES L14 A DEALER GUIDE TO Fuel Economy Advertising THIRSTY FOR ADVENTURE. NOT GAS. New Hybrid Hillclimber EPA ESTIMATE 30 MPG HIGHWAY 28 MPG CITY

2 NADA has prepared this Driven guide to help its members comply with the FTC s fuel economy advertising guidelines. This guide is offered for informational purposes. It does not contain, and is not intended as, legal advice. NADA Regulatory Affairs is available to answer questions regarding the fuel economy advertising guidelines; however, dealers seeking legal advice should discuss these provisions (and other federal and state laws) with their legal advisors. The presentation of this information is not intended to encourage concerted action among competitors or any other action on the part of dealers that would in any manner fix or stabilize the price or any element of the price of any good or service. L14 2 NADA Management Series: Driven A Dealer Guide to Stepping Up Foot Traffic

3 Driven a dealer guide to Fuel Economy Advertising TABLE OF CONTENTS Executive Summary Purpose and Background Qualifications and Disclosures... 2 Key Definitions General Fuel Economy Claims General Driving Range Claims Matching EPA Estimates to Claims Fuel Economy and Driving Range Estimates... 5 Disclosing EPA as the Information Source Unless Non-EPA Estimates are Provided Driving Modes for Fuel Economy Estimates... 6 Within Vehicle Class Comparisons Comparing Different Model Types Up To Claims Claims for Flexible-Fueled Vehicles NADA Management Series: Driven A Dealer Guide to Fuel Economy Advertising

4 a dealer guide to Fuel Economy Advertising Executive Summary To assist dealers and manufacturers in avoiding deceptive advertising practices relating to fuel economy and driving range, the Federal Trade Commission (FTC) has updated its Guide Concerning Fuel Economy Advertising for New Automobiles. The FTC's updated Guide reflects revisions in Environmental Protection Agency (EPA) fuel economy labeling and incorporates alternative fuel advertising guidance. The revised Guide states that it is deceptive to misrepresent, directly or by implication, the fuel economy or driving range of an automobile and makes suggestions as to how to advertise fuel economy without being deceptive. This Driven guide reviews the FTC s recommended disclosures for ads making fuel economy and driving range claims, and presents examples of deceptive ads. Discussed are the necessity to stress that EPA estimates are not guarantees, to match EPA estimates given in ads to the relevant driving mode (city, highway or combined), and to disclose the source of fuel economy and range information, whether EPA (preferred) or otherwise. Advertisements should also make only apples-to apples comparisons, avoid up to claims, and clearly identify the fuel type used for claims involving flexible-fueled vehicles. 31 MPG CITY PER EPA ESTIMATE 1 NADA Management Series: Driven A A Dealer Guide to to Fuel Warranty Economy Administration Advertising

5 Purpose and Background Since the mid-1980s, the FTC Guide Concerning Fuel Economy Advertising for New Automobiles (the Guide) (16 CFR Part 259) has provided administrative interpretations on how the unfair and deceptive restrictions in Section 5 of the FTC Act (15 USC 45) apply to the use of fuel economy information in new automobile advertising. The Guide applies to new automobiles and to all media, but it does not purport to cover every possible use of fuel economy in advertising. In September 2017, the FTC revised its Guide to comport with the EPA/NHTSA Motor Vehicle Fuel Economy Label mandates (as revised in 2011), and the FTC Labeling Requirements For Alternative Fuels And Alternative Fueled Vehicles (as revised in 2013). The revised Guide makes it clear that it is deceptive to misrepresent, directly or by implication, the fuel economy or driving range of an automobile. In 2011, the fuel economy labels required for certain automobiles were revised to enhance the ability of consumers to make fuel economy and emissions comparisons between vehicles with both similar and different fuels and powertrain technologies. Automakers almost always include this fuel economy and emissions information on the vehicle Monroney (pricing) labels attached to automobiles prior to shipment. The Monroney law requires that dealers see that those labels stay attached until automobiles are delivered to first purchasers. For more information on the EPA/NHTSA fuel economy labels, click here. Qualifications and Disclosures To prevent deception, qualifications and disclosures made in fuel economy ads should be clear, prominent, and understandable. They should be in plain language and in sufficiently large type, and should be placed near and in the same format as the claims they pertain to. Avoid inconsistent statements and distracting elements that could undercut or contradict disclosures. For example, if in a television ad a fuel economy claim appears in the video, the disclosure should appear in the video, but if a claim is made in the audio, the disclosure should be in the audio. Monroney labels should not be removed from vehicles before they are delivered to first purchasers. 2 NADA Management Series: Driven A Dealer Guide to Fuel Economy Advertising

6 Key Definitions The terms below are found in the FTC s Guide. Automobile Any new passenger automobile, medium-duty passenger vehicle, or light truck for which a fuel economy label is required, the equitable or legal title to which has never been transferred by a manufacturer, distributor, or dealer to an ultimate purchaser or lessee. Vehicle and car have the same meaning as automobile. EPA driving range estimate The EPA estimate of the miles a vehicle will travel between refueling. Fuel Gasoline and diesel fuel for gasoline- or diesel-powered automobiles; electricity for electrically-powered automobiles; alcohol for alcoholpowered automobiles; natural gas for natural gas-powered automobiles; or any other fuel type used in a vehicle required to have a fuel economy label. Dealer A person located in the United States or any territory thereof engaged in the sale or distribution of new automobiles to ultimate purchasers. EPA fuel economy estimate The average number of miles traveled by an automobile per volume of fuel consumed (i.e., miles-per-gallon or mpg rating). Manufacturer A person engaged in the manufacturing or assembling of new automobiles, including a person importing new automobiles for resale, and a person who acts for, and is under the control of, such manufacturer, assembler, or importer in connection with the distribution of new automobiles. EPA city fuel economy estimate The city fuel economy determined by EPA s city test procedure. EPA highway fuel economy estimate The highway fuel economy determined in accordance with EPA s highway test procedures. Model type A unique combination of car line, basic engine, and transmission class. EPA combined fuel economy estimate. The EPA fuel economy value determined for a vehicle by harmonically averaging the city and highway fuel economy values, weighted 0.55 and 0.45 respectively. Flexible-fueled vehicle A motor vehicle or engine engineered and designed to be operated on any mixture of two or more different fuels. Ultimate purchaser or lessee The first person, other than a dealer purchasing in its capacity as a dealer, who in good faith purchases a new automobile for purposes other than resale or leases such vehicle for personal use. 3 NADA Management Series: Driven A Dealer Guide to Fuel Economy Advertising

7 General Fuel Economy Claims General fuel economy claims that do not reference specific fuel economy estimates may convey a wide range of meanings about an automobile s fuel economy relative to other automobiles. They can mislead consumers about the vehicle class involved, and the extent to which an advertised automobile s fuel economy differs from other models. General fuel economy claims should disclose the automobile s estimated fuel economy using EPA mpg ratings. General Driving Range Claims Driving range claims that do not reference a specific estimate are hard to interpret and can convey a wide range of meanings about a vehicle s range relative to other vehicles. Such claims can mislead consumers about the vehicle class involved and the extent to which a vehicle s driving range differs from other model types. To avoid deception, such ads should disclose the vehicle s EPA driving range estimate. 1 An ad states, This vehicle gets great mileage. This claim likely conveys that the vehicle has a better mpg rating than most or all other new vehicles. If its EPA fuel economy estimates are only slightly better than the average new vehicle, its ratings are not better than most or all new vehicles and the advertisement is deceptive. To avoid deception, the ad should disclose the vehicle s EPA fuel economy estimate (e.g., EPA-estimated 27 combined mpg ). 2 An ad states, This car gets great gas mileage compared to other compact cars. The claim likely conveys that the car gets better gas mileage than most or all other compact cars, even if its EPA fuel economy estimates are only slightly better than average compared to other new models in its class. Since its ratings are not better than most or all other compact cars, the advertisement is deceptive. To avoid deception, the ad should disclose the car s EPA fuel economy estimate. An ad states, This electric car has a great driving range. This claim likely conveys a variety of meanings, including that the car has a better driving range than most or all other electric cars. If the EPA driving range estimate for the car is only slightly better than roughly half of all other new electric cars, the ad is deceptive. To avoid deception, the ad should disclose the car s EPA driving range estimate (e.g., EPA-estimated range of 70 miles per charge ). Matching EPA Estimates to Claims EPA fuel economy estimates should match the driving mode claimed to avoid any confusion between the stated fuel economy estimate and the type of driving. Thus, ads with city or highway fuel economy claims should disclose EPA city or highway fuel economy estimates, and ads with both city and highway fuel economy claims should disclose both EPA city and highway fuel economy ratings. Ads making general fuel economy claims that do not reference city or highway driving should either disclose EPA combined fuel economy estimates, or disclose both EPA city and highway fuel economy estimates. 4 NADA Management Series: Driven A Dealer Guide to Fuel Economy Advertising

8 1 An ad states that Model XYZ gets great gas mileage in town. It does not disclose the EPA city fuel economy estimate, but rather the higher EPA highway fuel economy estimate. This claim likely conveys that the highway estimate applies to city driving and thus is deceptive. To avoid deception, it should disclose the EPA city fuel economy estimate (e.g., 32 mpg in the city per the EPA estimate ). 2 An ad states, Model XZA gives you great gas mileage but lists only the EPA highway fuel economy estimate. Since this is a general fuel economy claim that does not refer to a specific driving type, it is inconsistent with the disclosed EPA highway estimate, and the ad is deceptive. To avoid deception, it should disclose the EPA combined estimate (e.g., 37 mpg for combined driving per the EPA estimate ), or both EPA city and highway fuel economy estimates. 3 An ad states, Based on EPA estimates, new cars in this class are rated at between 20 and 32 mpg, while the EPA estimate for this car is an impressive 35 mpg highway. Since the claim likely implies that the 20 to 32 mpg range and 35 mpg estimate are comparable, when in fact the 20 and 32 mpg range reflects EPA city estimates, the ad is deceptive. Ads should make only apples-to-apples comparisons using either the EPA highway range for the class, or the city estimate for the vehicle. Fuel Economy and Driving Range Estimates Ads citing EPA fuel economy or driving range should stress that they are estimates. Otherwise, consumers may incorrectly assume that they will achieve the mileage or range stated in the ad. Of course, the actual mileage or range achieved will vary based on driving conditions, driving habits, vehicle maintenance, etc. To avoid deception, ads should state that the values are EPA estimates, or use similar language to indicate that drivers may not achieve the stated mpg rating or driving range in realworld conditions. A website states simply that, This car gets 40 mpg on the highway. The claim likely conveys to many consumers that they will achieve 40 mpg when driving the car on the highway. The claim in the ad is based on EPA s highway estimate, but fails to note that it is for comparison purposes, and does not necessarily reflect real-world driving results. Thus, the claim is deceptive. Also, use of the term gets may lead consumers to believe that they will consistently achieve the stated mileage. To avoid deception, such ads should note that EPA s mpg estimates are for comparison purposes only. Disclosing EPA as the Information Source Unless Non-EPA Estimates are Provided Since EPA s fuel economy estimates have been around for decades, advertising non-epa fuel economy and driving range estimates can lead to deception. Accordingly, it is best to advertise only EPA fuel economy or driving range estimates. By citing EPA as the source of fuel economy or driving range estimates, ads encourage consumers to make comparisons to the EPA estimates for the other models they are considering. Doing so also helps prevent deception by ensuring that consumers do not associate EPA estimates with those of other fuel economy information sources. The FTC suggests that ads making claims based on non-epa estimates state that they are based on non- EPA tests, should indicate the source of those tests, should give comparable EPA estimates, and should note all driving conditions and vehicle configurations that differ from those used in comparable EPA tests (e.g., road vs. dynamometer testing, average speed, speed range, hot or cold start, temperature, design or equipment). In television ads, EPA estimates should be twice as large and should remain on screen for at least as long as non-epa estimates. Audio ads should give equal prominence to EPA estimates. For example, EPA-estimated city and/or highway mpg should be stated before or after each non-epa estimate in a manner that is at least as audible. In print, Internet, and television ads, EPA estimates should be in clearly legible type that is at least twice as large as that for non-epa estimates, and should appear against a solid, contrasting background. Do not place EPA estimates in a footnote unless all estimates are in the footnote. 5 NADA Management Series: Driven A Dealer Guide to Fuel Economy Advertising

9 1 A radio ad states that a car is rated at an estimated 28 mpg in the city but fails to cite EPA as the source. To avoid deception, the ad should state whether the mpg estimate is from EPA or a non-epa source. An ad states that a vehicle is rated at 25 miles-pergallon per the EPA estimate but fails to note if it is a highway, city or combined estimate. Since the claim likely conveys that the 25 mpg estimate is for combined city and highway driving, not the highway rating it represents, it is deceptive. 2 An Internet ad states that Independent driving experts took the QXT car for a weekend spin and managed to get 55 miles-per-gallon under a variety of driving conditions. It does not disclose EPA fuel economy estimates, but suggests that the 55 mpg figure is the same or comparable to an EPA estimate. It is deceptive because it fails to disclose whether the estimate is based on a non-epa test, the test source, the QXT s EPA fuel economy estimates, and all driving conditions or vehicle configurations simulated by the non-epa test that differ from those used by EPA. 3 An ad states, The XZY electric car has a driving range of 110 miles per charge in summer conditions per our expert s test. Since it provides no additional driving range information, it likely conveys that the 110-mile driving range figure is an EPA driving range estimate. It is deceptive since it fails to clearly state that the test is not EPA s, to provide the EPA-estimated driving range, and to explain how conditions referred to in the ad differed from those in EPA tests. Thus, consumers are likely to confuse the claim with EPA range estimates. Within Vehicle Class Comparisons An ad that compares the fuel economy of an automobile to a group or class and not to all automobiles should identify the group or class used in the comparison. Otherwise, consumers could assume that the new automobile is being compared to all new automobiles. An ad claims that a sports car outpaces other cars gas mileage. The claim likely conveys that the sports car has a higher mpg rating than most or all new cars. If the car s mpg rating compares favorably to other sports cars, but is only better than half of all new cars, the claim is deceptive. Comparing Different Model Types EPA assigns fuel economy estimates to specific model types (i.e., unique combinations of car line, basic engine, and transmission class). Thus, ads citing mpg ratings for certain model types should ensure that those ratings apply to the model type depicted. It is deceptive to state or imply that an estimate applies to a vehicle featured in an ad if the estimate does not apply to that model type. Driving Modes for Fuel Economy Estimates Ads citing an EPA fuel economy estimate should identify the associated driving type (i.e., city, highway or combined mpg) so as not to potentially deceive consumers who may incorrectly assume that the claim applies to a different driving type. An ad states that the PDQ gets great gas mileage but depicts the mpg numbers for the Econo-PDQ. The ad likely conveys that the claimed mpg rating applies to all PDQ model types, but since the Econo-PDQ has a better fuel economy rating than other PDQs, the ad is deceptive. 6 NADA Management Series: Driven A Dealer Guide to Fuel Economy Advertising

10 Up To Claims Ads should avoid using up to without indicating that certain versions of an automobile (i.e., model types) are rated at a stated fuel economy estimate. Up to claims likely suggest that the stated mpg can be achieved if a vehicle is driven under certain conditions. To avoid deception, up to claims should be qualified by a clear and prominent disclosure that the mpg applies to a specific model type. An ad states that a VXR will achieve up to 40 mpg on the highway. The claim is based on an efficient type of VXR with specific options. Other VXR model types have lower EPA mpg estimates. Since the up to claim likely can be interpreted as applying to all VXR model types, the ad is deceptive. To avoid deception, the ad should clearly and prominently disclose that the 40-mpg rating does not apply to all VXR model types, or use language other than up to to better state the claim. Claims for Flexible-Fueled Vehicles Ads for flexible-fueled vehicles (other than plug-in hybrid electrics) that note flexible-fuel capability and make a fuel economy claim should clearly and prominently identify the fuel type used. Otherwise, consumers could assume that the stated fuel economy estimate applies to both fuels. An ad states, This flex-fuel powerhouse has a 30-mpg highway rating per the EPA estimate. The ad likely implies that the 30-mpg rating applies to the vehicle s operation on both gasoline and ethanol, when in fact the EPA highway estimate when operating on ethanol is 25 mpg. Thus, the ad is deceptive. To avoid deception, the ad should clearly and prominently qualify the claim, or state the mpg ratings for both fuels. Questions on the FTC s Fuel Economy Advertising Guide may be directed to regulatoryaffairs@nada.org or NADA Management Series: Driven A Dealer Guide to Fuel Economy Advertising

11 Acknowledgments This guide was prepared for NADA by: Douglas Greenhaus NADA Chief Regulatory Counsel, Environment, Health and Safety

12 National Automobile Dealers Association 8400 Westpark Drive Tysons, VA nada.org NADA All rights reserved.