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2018 Dodge Challenger SRT Demon False Advertising

The Fiat Chrysler Automobiles (“FCA”) 2018 Dodge Challenger SRT Demon (“Demon”) has been the subject of much discussion since FCA's 2017 New York Auto Show Demon introduction. Not long after its introduction, in June 2017 FCA announced the car would be a limited production run, “one and done”, of 3,300 cars. Demand for the 3,300 Demons outpaced the limited production and created a healthy aftermarket even before production ended in June 2018.

The FCA Dodge Demon production has now ended but Ebay.com and Auto marketplaces like Autotrader.com still have new and used Demons for sale. Auction houses are getting upwards of $190k for Demons that MSRP’d from $83k-98K. And FCA was able to again leverage their long lived Challenger platform and create a lot of brand "buzz".

However, all the attention the Demon has produced may also result in the Demon being the subject of nationwide dealer advertising misrepresentations.

In 2015, FCA created the Challenger SRT Hellcat and had issues with distribution, customers waiting months for cars, and dealer mark ups. FCA learned much from what occurred, and FCA designed the distribution of the 2018 Demon accordingly.

"We learned a lot when we launched the wildly popular SRT Hellcats,” said Tim Kuniskis, Head of Passenger Car Brands, Dodge, SRT, Chrysler and Fiat — FCA North America. “We’ve taken that information and created an allocation plan that is clear and concise, builds on Demon’s position as the Dodge/SRT halo and makes it easy for our customers to understand how they can put a Demon into their garage and, ultimately, out on the drag strip.” (http://moparconnectionmagazine.com/fcas-allocation-system-for-2018-dodge-demon-that-takes-aim-at-markups/)

Prior to June 21, 2017 when FCA opened Demon ordering, FCA planned Demon distribution by allotting cars to some Dodge dealers based on prior performance. Some dealers received 0 Demons, some received 1-4, and few large volume dealers received more allocations.

FCA also required any dealer who was issued an allocation for a Demon to place a customer order to claim the allocation. So the allocation went to the dealer but only if there was verified and contracted pre-sale to a consumer.

Furthermore, in an attempt to dissuade dealers from marking the Demon up over MSRP, FCA created a production queue whereby Demons ordered and sold to customers at MSRP or less would be produced first, and cars with dealer markups above MSRP produced later.

Additionally, FCA required buyers to supply notarized documents including an indemnity waiver to protect FCA from misuse of the car. In summary, FCA was attempting to control the Demon's distribution and pricing to a greater extent. And as they had done with the Hellcat previously, stated that they were staying close and monitoring the Demon’s distribution.

"When a dealership has an allocation and wants to order a Demon for a customer, it must go through the concierge program. The team there will first make sure it’s a verified sold order and then an acknowledgement document must be completed and signed by the customer and the dealer. After that, it must be notarized. This document includes some safety considerations, the Demon’s technical specifications, the options that are being ordered and the contract price of the vehicle." (http://moparconnectionmagazine.com/fcas-allocation-system-for-2018-dodge-demon-that-takes-aim-at-markups/)

All Demons had to be pre-sold to a customer for the dealer to claim the allocation and place an order. That sale required a notarized agreement by the buyer and dealer and monitored through the Demon concierge Dept. As a result, there should not have been many available Demon cars for sale at dealerships unless a buyer backed out post order, or if a dealer placed their allotment order for a "close friend" or party which resulted in the car in the showroom.

But if a buyer shopped online or monitored the Dodge Demon's availability, they would have come across many Demon ads on website marketplaces like Autotrader, Car Guru’s, and others. New and used Demons are and were available pretty much from the beginning of Demon deliveries in November 2017. At any one time, there were 150-200 new Demons available for sale, nationwide, from dealers, as advertised on Autotrader.com, for MSRP price or less. So how could there be such a supply of cars available for a pre-sold car where demand had surpassed production?

Most dealers utilize bulk uploading programs to link inventories onto the internet marketplaces like Autotrader, Car Guru’s, etc.. Dealers use bulk uploading because at any one time, a dealer might have 200-500 cars available in their constantly changing inventory. And Dealers want just about every car advertised so that buyers can see them. So why would a dealer upload and represent a car for sale on marketplaces like Autotrader if not available for sale and/or with the wrong price?

Part two of this involves FCA's internal processes which seemingly upload dealer orders into the dealers computerized inventory system when the cars leave the factory and are en-route to the dealership. This allows FCA to track and account for all the cars that leave their plants, and maybe thereafter as well.

So FCA is populating a dealer inventory with all Demons leaving the plant (estimated November 2017-June 2018) for Demons on pre-sold orders (estimated sold dates in June thru September 2017), and the dealers are linking their inventory to auto marketplaces like Autotrader. So how many of the Demons en route to dealers over the 8 month delivery time spectrum (Nov 2017-June 2018) are being input into Autotrader and advertised for sale when they were already sold 3-8 months prior to the advertising dates?

The pre-sale of the Demon was retrofitted into existing FCA delivery and inventory uploading processes. It appears nobody at FCA and the dealerships were watching this transpire, or they were watching it and did not correct it. Either way, as a result, many hundreds or more Demons not available for sale were being advertised for sale on Autotrader and the like, months after being pre-sold, and many at the incorrect prices. And potentially hundreds of respondents answering each of the dealer advertisements.

"Over the past few weeks, we have seen dozens of dealership website postings advertising 2018 Dodge Challenger SRT Demons available for sale. In most cases, if you call the dealership and ask about the Demon on their website, you will learn that the vehicle has been ordered by a customer who hasn’t picked it up yet. Basically, those dealerships are using a customer’s car to draw traffic to their website, and it is working." ( https://www.allpar.com/news/2018/01/why-you-can-still-buy-a-demon-39226)

In addition, dealerships have some editing control to change their ads after the upload syncing of their inventory into Autotrader. Control meaning ability to adjust the price, info details, availability, even areas where custom verbiage can be added to the advertisement, or even completely delete the ad.

If a buyer frequented Auto trader over the last 6-8 months or so, they would have seen hundreds of "available" cars priced at MSRP or less, with some cars advertised as "sold", some cars with "market adjusted prices", and just about everything in between. But for the volume of advertisements representing MSRP or less priced Demons available for sale, most dealers didn’t adjust what needed to be changed in the ad which is drove this entire problem. Those dealers allowed the ads to run or were unaware of the false ads running with the existing information regardless of the car not being available. Or in the case where the car was at the dealership for sale, let the ad run with the wrong price. Moreover, if they were unaware of the issue and the ad, they were made aware when the first e-mail or phone call came in from an ad respondent.

So at any one time, there were hundreds of cars unavailable for sale, being advertised nationwide as available, albeit, worldwide, with the additional problem of most of them misrepresented in price.

What does this all add up to?

In most states, advertising issues like what is referenced above are addressed by consumer protection laws and advertising guidelines. Differing by state, laws exist that are very specific to advertising and advertising claims. And as many consumer protection laws were created specifically with car dealership advertising in mind, what is pointed out above could be a major problem for FCA and dealers that did not properly manage their advertising.

What about the most obvious excuse being “FCA and the dealers made a mistake, an oversight, were unaware, etc”. Would that deflect liability? The answer is maybe or no, it might not (depending on a particular state’s laws). In many states, consumer protection and advertising laws do not recognize “mistakes”, etc. If it did allow for mistakes, then that excuse would always be abused to justify bad behavior and those bad behaviors would repeat. The mitigating or aggravating factors of the “mistakes” vs. “purposeful intent behaviors” are typically looked at within the punitive damages framework of litigation. The black and white of the violation itself carries with it that particular state’s calculation of damages and multiples of those damages if present within the law before anything punitive is considered.

So how could someone who never got to purchase a car have been damaged?

The Demon's aftermarket value has been fluctuating between $120k-199k for a car with a max loaded MSRP of $98k. If a buyer tried to buy a falsely advertised Demon at $90k MSRP and were told, the car is sold (as in 6 months ago when the dealer per ordered it for a buyer), or sorry, the car is not for sale at $90k, it’s for sale at $160k, the potential damages are the market value of the car ($199k and going up), or the actual dealer sale price ($160k), minus the price they advertised the car for ($90k) for a damage total of $109k or $70k respectively. It’s called “benefit of the bargain” and if denied it through a violation, damages may be sustained. Laws and calculation of damages differ state to state. If a buyer could not buy a Demon, yet they answered some of these false ads, the dealer may have broken that state's consumer protection laws.

The additional potential problem for FCA and dealers is that some states award multiples of the actual damages, plus attorney fees to be paid by the defendants. And the window is open as well for punitive damages depending the seriousness of the violation and intent. Remember, laws are meant to punish and dissuade violators from repeating. So a dealer who falsely advertised a $90k car and sold it for $130, now worth $200k, could be looking at several hundred thousand dollars in damages/fees to each person that answered the false advertisement for that same car. And FCA being the head of this particular “mistake” could be looking at millions if a class action develops. False Advertising cases tend to be very black and white fact driven. What occurred is in writing/print and not easily disputed.

In the past where a dealer falsely advertises something at a price and a shopper demands by law to be able to purchase it as advertised, a dealer simply has to go get the buyer "another one", and transact at the advertised conditions to remedy the issue. Then, problem solved, the buyer has the benefit of the bargain. Perhaps this is why the FCA inventory upload and Autotrader ad link has never been a problem before. If a problem arose, a dealer would simply find the buyer another of the same car or order it.

But how does a dealer remedy a Demon when most of the available cars have already been sold, a dealer cannot order anymore, and the benefit of the bargain keeps growing in value in the aftermarket? FCA is not making any more Demons. This is what was meant by FCA retrofitted the Demon into existing distribution processes without seeing the end result. The pre selling of the car required additional adjustments to the distribution process in order to avoid all these problems.

Every passing day a potentially larger damage calculation exists because of Demon rising values. Even if the value levels off, the argument for loss of benefit using the highest auction prices realized is valid and already stands at $190k+. For any single dealer, a mere handful of respondents who answered their advertisement could be a major issue.

FCA and Dodge dealers either failed to see the differences with the Demon and adjust their advertising norms and inventory process, or is it possible they knew full well about the advertising results and preferred the benefits?

“We know some dealers may be tempted to sell to the highest bidder, but we are encouraging them to leverage the Demon as a halo for both the brand and their dealership, to bring customers into their showrooms and see everything we have to offer” said Tim Kuniskis, head of passenger car brands for Fiat Chrysler North America. (http://moparconnectionmagazine.com/fcas-allocation-system-for-2018-dodge-demon-that-takes-aim-at-markups/)

So FCA by its own words stated that the car is to be used to bring people into the dealerships. Does that mean FCA permitted, or turned a blind eye to the advertisements? Will FCA claim they didn’t know what was going on for months? How can the car be used to bring people into the dealership if the cars were all pre sold and only have to be delivered to the buyer upon arrival to the dealership?

"A source inside Fiat Chrysler said the automaker is "monitoring" dealer actions in selling Demons, but there is little the factory can do beyond encouraging dealers to sell their Demons at sticker price."( https://autoweek.com/article/supercars/dealing-devil-dealers-are-auctioning-srt-demon-allocations)

Is it possible for FCA to not be aware of hundreds of new Demons up for sale at any one time? Is it possible that no single consumer called FCA customer service to complain? Did FCA not see all the articles citing the false advertisements, or the postings in car forums? And both FCA and each dealer appear to have benefitted through these false advertisements. They benefit through attaining more sales leads and traffic, they benefit through the brand being highlighted in the press, through other car sales, etc.

Tim Kuniskis states:

“We haven’t built the first one yet, but people have been talking about this car since January,” he said. “So the hype has been building and selling other Challengers. Our Challenger sales are through the roof. We’re having an all-time record year to date.”

(https://www.detroitnews.com/story/business/autos/chrysler/2017/09/17/dodge-sees-payoff-demon-hype/105745768/)

So did FCA know about it from the beginning, and or through its own inaction permit the false advertising for benefit? As it looks right now, this could easily be a Class Action against FCA since so many persons have likely been affected and the violation and damages are consistent. How many inquiries were made via these false advertisements, and moreover how many other Challengers or Dodge products were sold by virtue of disappointed Demon buyers settling for another trim level? These questions and more surround these occurrences and time will tell to what extent the dealers and/or FCA may be held accountable.

We continue to monitor this complex issue and welcome any feedback or submissions of individual experiences regarding this subject.

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SRT Demon

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Watch the 2018 Dodge Demon track tested at Hennessey Performance Center before John and the team have done any work to it.

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