Pub. 2 2022 Issue 2

NADA URGES FTC to Withdraw Proposed Sweeping New Rule Affecting Motor Vehicle Dealers The Federal Trade Commission (FTC) is the primary federal regulatory agency that oversees automotive retail – from the sale of new and used cars and trucks, to financing of vehicles, voluntary protection products (VPPs) like service contracts and GAP Waiver that protect their purchases, automotive service and repairs, as well as advertising and other aspects of the retail automotive business. On June 23, 2022, the FTC released a proposed rule with the goal of curbing unfair and deceptive acts and practices by motor vehicle dealers. The requirements proposed by the new rule would create massive new documentation and retention requirements and a far more complex and expensive purchasing process for consumers. Many of the new proposed requirements on dealers are unwarranted, unnecessary and redundant, and will cause great harm to consumers in the form of higher prices, longer transaction times, and a much more complex and inefficient customer experience. For example, the proposed rule would add four additional disclosures to the motor vehicle transaction, some of which are duplicative of preexisting disclosures. Before proposing these disclosures, the FTC did not due their due diligence by reviewing applicable federal and state law requirements or performing consumer testing. In the past ten years, American automotive retailers have sold more than 450 mil lion new and used cars and trucks, completed more than three bil lion service and repair orders, and interacted with customers and potential customers tens of bil lions of times. Unfair and deceptive acts or practices in any part of the vehicle advertising, sales or financing process are reprehensible and should continue to be policed by federal regulators, including the FTC. Like any industry, cases of unfair practices by bad actors do occur, but in the case of automotive retail no evidence suggests they are widespread and cannot be addressed in a more targeted manner. On Sept. 12, 2022, NADA filed extensive and comprehensive formal comments in response to the FTC’s proposed rule. NADA’s comments explained that the proposed rule is based on (i) flawed assumptions, (ii) inadequate research, (iii) the lack of input from key stakeholders, (iv) no apparent coordination with federal and state agencies that impose similar mandates, (v) the absence of any consumer testing of the proposed mandates, and (vi) no attempt to conduct a meaningful analysis of the likely costs and benefits of the proposed rule to consumers and small business automobile dealers. NADA further explained that the rule violates both federal law and the FTC’s own procedures for issuing UDAP rules. Most significantly, NADA explained that the FTC’s initiative would dramatically and negatively transform and complicate the process for consumers to purchase and finance new and used cars and trucks, and similarly complicate the process of purchasing and financing voluntary protection products like extended service contracts and GAP Waivers. With over 26,000 comments on the proposed rule, the FTC has their homework cut out for them – it is unclear at this time what their next steps will be and when they will happen. In the meantime, NADA is actively educating policy makers in Washington, D.C., and industry stakeholders about the potential impacts of this rulemaking on our industry. Dealers can find more information about the FTC’s proposed rule and NADA’s engagement on this critical issue at Questions can be directed to By The National Auto Dealers Association 30