9523098
B231251

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION

In The Matter of

TOYOTA MOTOR SALES, U.S.A., INC., a corporation.

DOCKET NO. C-3776

COMPLAINT

The Federal Trade Commission, having reason to believe that Toyota Motor Sales, U.S.A., Inc., a corporation ("respondent" or "Toyota"), has violated the provisions of the Federal Trade Commission Act, 15 U.S.C. 45-58, as amended, and the Consumer Leasing Act, 15 U.S.C.  1667-1667e, as amended, and its implementing Regulation M, 12 C.F.R.  213, as amended, and it appearing to the Commission that this proceeding is in the public interest, alleges:

1. Respondent Toyota Motor Sales, U.S.A., Inc. is a California corporation with its principal office or place of business at 19001 South Western Avenue, Torrance, California 90509. Respondent manufactures and distributes vehicles and offers such vehicles for sale or lease to consumers.

2. Respondent has disseminated advertisements to the public that promote consumer leases, as the terms "advertisement" and "consumer lease" are defined in Section 213.2 of Regulation M, 12 C.F.R.  213.2, as amended.

3. The acts and practices of respondent alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C.  44.

4. Respondent has disseminated or has caused to be disseminated consumer lease advertisements ("lease advertisements") for Toyota vehicles, including but not necessarily limited to the attached Toyota Exhibits A - C. Toyota Exhibits A and B are television lease advertisements (attached hereto in video and storyboard format). Toyota Exhibit C is a direct mail advertisement. These advertisements contain the following statements:

A. [Audio:] "... And the car that's become the gold standard can now be leased for as little as $229 a month, which includes automatic transmission, air conditioning, power windows and door locks and more. The new 1995 Toyota Camry lease, starting at just $229 a month. So low for a car that aims so high."
 
[Video:] "Camry Leases Start At $229/A MO.
 
First Month's Payment And $275 Refundable Security Deposit Also Due At Signing."
[The advertisement contains the following lease disclosure at the bottom of the screen in light-colored fine print superimposed on a background of similar shade and accompanied by background sounds and images:]
 
"95 CAMRY DX, 4-SPD. AT. CLOSED-END LEASE. $2,354 DUE AT SIGNING. $16,003 CAPITALIZED COST BASED ON $1850 DOWN AND DEALER PARTICIPATION...
 
TAXES, LICENSE, TITLE, INSURANCE, OPTIONAL AND REGIONALLY REQUIRED EQUIP. AND DEALER CHARGES EXTRA. LESSEE PAYS MAINTENANCE, EXCESS WEAR & TEAR, 10c MI. OVER 15,000 YR. LEASE-END PURCHASE OPTION $11,097. DISPOSITION FEE, NOT TO EXCEED $150, MAY BE DUE AT LEASE END...
 
...95 CAMRY LE V6 SHOWN WITH OPTIONAL ALLOW WHEELS AT ADDITIONAL COST."

[The fine print is displayed in blocks on three screens of at least three lines, and each block appearing for approximately three seconds.]

(Toyota Exhibit A).

B. [Audio:] [Street Noise. Ballroom Dance Music.]

"You're invited to the 16th Annual Toyotathon featuring Camry starting at $16,418. And special $239 lease program on the newly restyled and refined Camry Sedan or Camry Coupe."
 
[Video:] "$239/MO."

[The advertisement contains the following lease disclosure in light-colored print superimposed on a light-colored, moving background and accompanied by background sound and other moving images. The information is displayed on two screens, each containing a block of two lines, and each block appearing for approximately four seconds:]

"36-mo. Lease. $1850 down plus first month's payment and refundable $275 security deposit due at signing."

[The advertisement contains the following lease disclosure at the bottom of the screen in light-colored fine print superimposed on a background of similar shade and accompanied by background sounds and images:]

"... CAMRY LE V6 WITH OPTIONAL ALLOY WHEELS SHOWN... CLOSED-END LEASE ON '95 CAMRY DX SEDAN 4-CYL. OR '95 CAMRY LE COUPE. 4-CYL. $2,364 DUE AT SIGNING... MONTHLY PAYMENTS TOTAL $8,604...LESSEE PAYS MAINTENANCE, EXCESS WEAR & TEAR AND $0.10/MI. OVER 15,000/YR. LEASE-END PURCHASE OPTION $11,097, $11,013 (COUPE). DISPOSITION FEE, NOT TO EXCEED $150, MAY BE DUE AT LEASE END..."

[The fine print is displayed on three screens, each containing a block of at least three lines, and each block appearing for approximately three seconds.]

(Toyota Exhibit B).

C.

"GREAT TOYOTA TOUCH LEASE VALUES!

Factory discounted lease rates for 36 months are available on selected Toyota models during this sale!!! Just look at the special values:

'94 Tercel       '94 4x2 Truck  '94 Corolla
$149/mo.1 $149/mo.6 $179/mo.2
$500 down/36mo. $1,000 down/36mo. $500 down/36mo.
 
'94 Camry     '94 Celica      '94 4Runner
$249/mo.4   $259/mo.3     $319/mo.5
$1,500 down/36mo. $1,000 down/36mo. $2,000 down/36mo."
 
[The advertisement contains a lease disclosure that appears at the bottom of the advertisement in fine print.]

(Toyota Exhibit C).

FEDERAL TRADE COMMISSION ACT VIOLATIONS

Count I: Misrepresentation of Inception Fees

5. In lease advertisements, including but not necessarily limited to Exhibits A and C, respondent has represented, expressly or by implication, that consumers can lease the advertised vehicles at the terms prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount, amount "down," and/or other amounts due at lease inception.

6. In truth and in fact, consumers cannot lease the advertised vehicles at the terms prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount, amount "down," and/or other amounts due at lease inception. Consumers must also pay additional fees beyond the prominently stated terms, such as the capitalized cost reduction, first month's payment, and/or security deposit, to lease the advertised vehicles. Therefore, respondent's representation as alleged in Paragraph 5 was, and is, false and misleading.

7. Respondent's practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C.  45(a).

COUNT II: Failure to Disclose Adequately in Lease Advertising

8. In lease advertisements, including but not necessarily limited to Exhibits A - C, respondent has represented, expressly or by implication, that consumers can lease the advertised vehicles at the terms prominently stated in the advertisements, including but not necessarily limited to the monthly payment amount. These advertisements do not adequately disclose additional terms pertaining to the lease offer, such as the total amount of any payments due at lease inception. The existence of these additional terms would be material to consumers in deciding whether to lease a Toyota vehicle. The failure to disclose adequately these additional terms, in light of the representation made, was, and is, a deceptive practice.

9. Respondent's practices constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C.  45(a).

COUNT III: Consumer Leasing Act and Regulation M Violations

10. Respondent's lease advertisements, including but not necessarily limited to Toyota Exhibits A - C, state a monthly payment amount but fail to disclose clearly and conspicuously certain additional terms required by the Consumer Leasing Act and Regulation M, including one or more of the following terms: that the transaction advertised is a lease; the total amount of any payments such as a capitalized cost reduction required at lease inception; that a security deposit is required; and the number, amount, and timing of scheduled payments.

11. The lease disclosures in respondent's television lease advertisements, including but not necessarily limited to Toyota Exhibits A and B, are not clear and conspicuous because they appear on the screen in small type, for a very short duration, against a background of distracting sounds and images. The lease disclosures in respondent's direct mail advertisements, including but not necessarily limited to Toyota Exhibit C, are not clear and conspicuous because they appear in small type.

12. Respondent's practices violate Section 184 of the Consumer Leasing Act, 15 U.S.C.  1667c, as amended, Section 213.5 of Regulation M, 12 C.F.R.  213.5, and Section 213.7(d) of revised Regulation M, 61 Fed. Reg. at 52,246, 52,261 (October 7, 1996)(to be codified at 12 C.F.R.  213.7(d)), as amended.

THEREFORE, the Federal Trade Commission this fifth day of January, 1998, has issued this complaint against respondent.

By the Commission, Commissioner Thompson and Commissioner Swindle not participating.

Donald S. Clark
Secretary

SEAL

[Exhibits A-C are attached to paper copies of the complaint, but are not available in electronic form]