False Advertising? Complaint Against General Motors Filed With FTC

FTC asked to check GM ad claiming GM repaid its government loans.

May 4, 2010, 3:34 PM

May 4, 2010 — -- When General Motors two weeks ago released a new commercial bragging that it had "repaid its government loan in full," it's a safe bet the automaker believed the ad would boost consumer confidence in the company.

It may have done that, but it has also generated a serious backlash in Washington.

A libertarian think tank today filed a formal complaint with the Federal Trade Commission, urging the agency to investigate the automaker's "deceptive advertising."

In the complaint, the Competitive Enterprise Institute argued that the ad, which ended its run last week, "gives the false impression that GM has used its own funds to pay back all the bailout money that it received from the federal government. In fact, GM has only repaid a fraction of those funds -- barely 10 percent. Moreover, GM apparently repaid its own loan by using other federal funds."

Last week, a General Motors spokesman responded to earlier criticism of the ad, saying, ""It's hard to understand how giving money back to the government could be considered a bad thing."

GM spokesman Greg Martin said that the intent of the commercial "was to let people know that we are grateful for the second chance and we're making the most of it."

"We're going to build and sell the best cars and trucks that we know how to, and, if we keep our focus on that, America is going to recoup [its] investment, and that was the message we wanted to convey," he said.

Nonetheless, the anger of Capitol Hill lawmakers -- who have criticized the commercial since its release -- is growing.

On Monday, Darrell Issa, the ranking Republican on the House Oversight Committee, received a letter from the Treasury Department that he said supported his claims that the automaker and the administration had not been honest about the GM repayment.

In the letter, Treasury bailout official Herb Allison said the agency "has never suggested that the loan repayment represented a full return of all government assistance."

But that statement is not entirely true.

Treasury's own press release on GM's repayment was titled "GM Repays Treasury Loan In Full."

Still, the last line of the April 21 press release did state, "After this repayment, the remaining Treasury stake in GM consists of $2.1 billion in preferred stock and 60.8 percent of the common equity."

Issa responded to Allison's letter by claiming that Treasury had "backed" GM's "deceptive ad campaign."

"How GM and Treasury can claim to repay a loan when all they did was take borrowed money from one pot and repay it with borrowed money from another defies second-grade math," Issa said.

Ad Comes Close to 'Fraud'?

The California lawmaker's criticisms are just the latest indication of the outrage that the commercial has sparked in Washington.

Last week Issa said the ad came "dangerously close to committing fraud," denouncing it as "a lie to the American people." Another Republican, Sen. Susan Collins, said the ad was "very misleading."

Treasury Secretary Tim Geithner even acknowledged that some of his agency's staffers were concerned about the ad.

At a hearing on Tuesday -- for the second time in the past six days -- Geithner was questioned by lawmakers on Capitol Hill concerned about the controversial commercial.

Sen. Chuck Grassley, the ranking Republican on the Finance Committee, who was the first lawmaker to voice concerns about GM's TARP repayment, asked Geithner, "Have you seen this ad since your testimony last week? And isn't it a misleading ad to the average citizen?"

"I have not seen that ad. I did not see it in advance," replied Geithner. "We've been very careful to meet our commitment to make sure these companies are running themselves, and we are not in a position of deciding how they run their companies."

"I want to emphasize that we were very careful to make it clear, as we have done all this time, to lay out for the American people the full scope of our investments in these companies," he continued. "And I want to emphasize again, as I did last week, that we still retain a substantial share of equity in these companies, which we hope to reduce and will reduce very quickly over time, but those investments carry some significant risk of loss."

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