In July of 2022, the Federal Trade Commission (FTC) issued a Notice of Proposed Rulemaking (NPRM) and solicited public comment on a Rule regarding unfair and deceptive acts or practices under its authority in regard to auto dealers. The Rule would prohibit auto dealers from making misrepresentations during the car buying journey, including selling, leasing or arranging financing for motor vehicles. It would require accurate pricing disclosures in sales discussions and advertising and would require dealers to obtain a consumer’s express, informed consent for all charges. It would also prohibit the sale of add-on products or services that give no benefit to the consumer. Additionally, dealers are required to keep records of advertisements and customer transactions. The public comment period closed on Sept. 12, 2022.

According to the National Automobile Dealer Association (NADA), auto retailing generates 17% of the nation’s retail sales, and this Rule would affect nearly 42 million consumer transactions each year, thus injecting large amounts of time, cost and unnecessary complexity into the vehicle sales process.

And, according to a recent study by the Center for Automotive Research (CAR), the untested mandates in this Rule will cost consumers both time and money. This Rule, in essence, undermines industry efforts to streamline and improve customer experiences. Additionally, the Alliance for Automotive Innovation, which represents General Motors, Toyota Motor, Volkswagen and other major automakers, voiced concerns about the Rule and warned that “excessive regulation and micromanagement of the sales experience can do more harm than good for both consumers and the industry.”

NADA has urged the FTC to scrap the proposed rule, go back to the drawing board and propose a rule that would go through a responsible regulatory process that involves all stakeholders.

On Oct. 3, 2023, S. 3014, the FTC REDO Act, a bipartisan bill from Senator Jerry Moran (R-KS) and Senator Joe Manchin (D-WV), was introduced. The bill directs the FTC to redo the proposed FTC Vehicle Shopping Rule by:

1. Issuing an advance notice of proposed rulemaking
2. Conducting a quantitative study on auto retailing
3. Conducting consumer testing
4. Publishing a cost-benefit analysis based on actual data

The FTC failed to perform any of these essential steps before proposing the Vehicle Shopping Rule.

In an October press release, NADA shared the following key points:

• The FTC has not followed a fair and transparent process in issuing this proposed rule, which would add more time and costs to the car buying process. Despite adding more paper to the sales process, the FTC counterintuitively (and without any analysis or support) assumes that this new rule would save consumers three hours per transaction and, in turn, save consumers $29.7 billion. The CAR report, with clear supporting evidence, shows that consumers would spend an additional two hours per transaction, with an overall cost of $38.1 billion.
• This rule increases the complexity of the car-buying process, adding more paperwork for consumers while also creating inconsistent and unnecessary rules and burdens for small businesses. Vehicle sales are already extensively regulated with a document-intensive process. Under the rule, every time a consumer asks about a specific vehicle or monthly payments, there would be new written (and untested) disclosures involved.
• Congress must stop the FTC’s rushed and flawed rule since adding additional regulatory burdens must be the result of an informed process. All the behaviors the FTC’s rule is aimed at addressing are already against the law, and the agency presently has sufficient enforcement authority to police any alleged wrongdoing. The FTC should work collaboratively with the auto industry, as it has in the past, to promote compliance without unnecessarily adding costs, lengthening transaction times and harming consumers.

As of now, the FTC has not disclosed a timeframe for when the final rule will be released. NADA is urging members of Congress to join the conversation and cosponsor the FTC REDO Act in an effort to stop the misguided Vehicle Shopping Rule.