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FTC investigates GM's certified pre-owned sales

Published Jul. 24, 2015

DETROIT — The Federal Trade Commission is investigating whether General Motors dealers promoted used vehicles as "certified pre-owned" despite failing to make repairs required under publicly announced recalls, the company disclosed Thursday.

"On June 3, 2015, we received notice of an investigation by the Federal Trade Commission concerning certified pre-owned vehicle advertising where dealers had certified vehicles allegedly needing recall repairs," GM stated in a filing with the Securities and Exchange Commission detailing its second-quarter financial performance.

"We continue to investigate these matters and believe we are cooperating fully with all requests for information in ongoing investigations," the disclosure stated.

Such investigations could result in significant fines, civil consent orders and criminal penalties, the company said, but it could not offer an estimate of the potential impact. It's unclear if dealers also are targeted by the FTC inquiry.

Federal law bans the sale of new cars with unfixed recalls, but dealers can legally sell used cars that haven't been fixed.

It's unclear what law may have been broken, but the agency often investigates allegations of misleading advertising. An FTC spokesman wouldn't comment.

GM spokesman Alan Adler said the company has started to withhold discount money it pays to dealers if they try to sell new cars with open recalls. Adler said the company also sends updates to dealerships four times a week on vehicles that need recall repairs.

"We do a lot to tell them not to move vehicles that have open recalls," he said. "We're very serious about it."

Dealers are independent businesses with franchises that are granted by the company. GM and its dealers inspect, repair and certify used cars if they meet certain mileage and condition requirements. Certified vehicles usually sell for higher prices than regular used cars.

This is the latest in a series of investigations arising from GM's recall of nearly 30 million vehicles worldwide last year. The most damaging of those recalls involved defective ignition switches that have been linked to 124 deaths. GM has set aside $625 million for the cost of an independently administered compensation fund.

Information from the Detroit Free Press and the Associated Press was used in this report.

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