On appeal from the Superior Court, Appellate Division, whose opinion is reported at 193 N.J. Super. 613 (1984).
For affirmance -- Chief Justice Wilentz and Justices Handler, Pollock, O'Hern and Garibaldi. For reversal -- Justices Clifford and Stein. The opinion of the Court was delivered by Garibaldi, J. Clifford and Stein, JJ., dissenting.
This appeal concerns alleged violations by Arrow Pontiac, Inc. (Arrow) of the Consumer Fraud Act, N.J.S.A. 56:8-1 through -38, and in particular the implementing regulation, N.J.A.C. 13:45A-2.2(a)7iv, which makes unlawful
[t]he use in any advertisement of a comparison to the dealer's cost or inventory price.
The critical issue here is whether there is sufficient credible evidence for the Division of Consumer Affairs (Division) to find that Arrow's advertisement was misleading and deceptive to the consuming public. Two attendant questions are whether the advertisement is within the scope and intendment of the
regulation, and if so, whether the regulation unconstitutionally infringes on Arrow's First Amendment right to engage in commercial speech. Arrow also argues that the regulation is unconstitutionally vague and overbroad.
In November of 1980, Arrow, an automobile dealer that sells and services new Pontiac automobiles, mailed to certain of its New Jersey customers a letter "inviting" them to take advantage of "once-in-a-lifetime prices." Near the bottom of the letter was the following language:
You will be able to take your brand new Pontiac home with you TONIGHT!
Our sales managers will not authorize these Special Prices on any car not in stock (Many will actually be PRICED WELL BELOW DEALER INVOICE) (Emphasis in original).
In August of 1981, the Director of the Division of Consumer Affairs (Director) filed a complaint against Arrow claiming it had violated N.J.A.C. 13:45A-2.2(a)7iv.
For "many" motor vehicles respondent used a comparison to the dealer's cost or inventory price.
The Director sought an order that Arrow cease and desist the practice and pay a penalty of $1,600 and costs.*fn1 Arrow filed a motion to dismiss the complaint or, in the alternative, for summary judgment. In support of this motion, Arrow contended that the language of the advertisement violated neither the wording of the regulation nor the purpose and policy behind it. The Administrative Law Judge denied Arrow's motion.
Arrow then requested reconsideration of its motion, contending for the first time that the regulation is unconstitutional because it violates Arrow's First Amendment right to engage in commercial speech, and that it is vague and overbroad. Reconsideration was denied and a hearing was held.
After the hearing the Administrative Law Judge issued an "Initial Decision," holding in favor of the Division. The Director adopted the findings and conclusions of the Administrative Law Judge. Arrow filed an appeal of the Director's Order with the Appellate Division. The Appellate Division, 193 N.J. Super. 613, Judge Botter dissenting, affirmed the Director's Order. Arrow appeals as of right to this Court pursuant to Rule 2:2-1(a)(2). We affirm the judgment of the Appellate Division.
The initial inquiry here is whether the term "dealer invoice" used in the advertisement violates either the language or the spirit of N.J.A.C. 13:45A-2.2(a)7iv. Arrow asserts that the term "dealer invoice" is not synonymous with the terms "dealer's cost" or "inventory price," which are used in the regulation. Moreover, it argues that the term "dealer invoice," the point of comparison used in its ad, is a specific, identifiable dollar amount and therefore its use does not mislead the public. Consequently, Arrow reasons, its advertisement does not violate the language or the spirit of the regulation.
The Division disagrees, arguing that the terms "dealer's cost" and "inventory price" are meant to act as "guidelines to indicate those areas of comparison pricing which are to be outlawed," and that the term "dealer invoice" is synonymous with those terms. It alleges that the language in Arrow's advertisement was designed to circumvent the literal language of the regulation and as such does "not comport with [the] spirit or letter of the law." Further, the Division alleges the term "dealer invoice," like "dealer's cost" or "inventory price," is not a fixed uniform term, and its use, therefore, is as likely to mislead a consumer as is the use of the latter terms.
Both the Administrative Law Judge and the Appellate Division agreed with the Division. The Appellate Division, deferring to the expertise of the Division, held that the term "dealer
invoice" is not a fixed, uniform term, and that it is this difficulty in ascertaining the true cost of an automobile to the dealer that renders the comparison to a dealer's invoice price as potentially deceptive and misleading to a consumer, as is a comparison to the terms "dealer's cost" and "inventory price." Accordingly, it found the advertisement to be within the language and scope of the regulation.
At the hearing, the Division's only witness was Richard DeLorenzi, a retired investigator for the Office of Consumer Protection (OCP) and supervisor of the Automotive Section, who had been employed by the OCP for eight years. One of his duties at the OCP was to review motor vehicle advertisements and to determine whether they complied with the advertising regulations governing the sale of new automobiles.
DeLorenzi testified that he agreed with the Division's position, as set forth in answers to interrogatories, that the terms "dealer's cost," "inventory price," and "dealer invoice" are all synonymous. He further testified that in his experience the term "dealer's cost" has been used to signify the cost stated on the original invoice from the manufacturer to the dealer. However, he explained that this is not the final cost to the dealer of the vehicle.
There are such things as holdbacks*fn2 which the manufacturer after the dealer pays for the cost of the vehicle on the invoice, the manufacturer sets aside a certain amount of money and then returns it to the dealer and the dealer gains anywhere from two to three percent of the value that was on the original invoice. So the invoice and the costs that they refer to on their advertisements is not a true cost.
DeLorenzi testified that in his opinion the term "dealer invoice" was just as likely to deceive consumers as were the terms set forth in the regulation. According to DeLorenzi, the evil of an advertisement that compares the sales price of an automobile to the dealer's cost lies in
the fact that the cost that the dealer is using at the time is not the true cost of that automobile. The cost of the automobile is less than what he [the dealer] says the cost is. So therefore, the consumer public pays higher and ...