The National Automobile Dealers Association on Monday called on the Federal Trade Commission to withdraw its proposed regulations on auto dealerships, calling the agency’s plan “severely flawed both as a matter of law and public policy.”
The trade group’s 139-page response (and 225 pages of appendices) came on the final day for public comment on the proposal to curtail bait-and-switch dealership price advertising, misleading finance and insurance office practices, and F&I products with no actual value. NADA and other auto dealership trade groups had unsuccessfully sought an additional 120 days to respond to the June draft of the rules.
The agency said Tuesday it had received nearly 26,400 comments related to the draft rules.
“The Commission’s notice of proposed rulemaking (NPRM) is ill-conceived, ill-supported, ill-coordinated, untested and unlawful. It also is unnecessary as each harm it seeks to address is already regulated under existing law,” Paul Metrey, NADA’s regulatory affairs vice president, wrote to the FTC on Monday. “If finalized as proposed, the NPRM will inject massive costs into the auto retailing process, greatly extend transaction times, greatly confuse consumers, and impede efficiencies aided by technological innovations that have significantly improved — and continue to improve — the customer experience.”
He said the plan “lacks any semblance of a responsible rulemaking that is the product of due diligence. It lacks critical stakeholder input, essential consumer testing and needed coordination with other federal agencies and state governments.”
The FTC’s 4-1 decision in favor of the proposal said customer confusion with “add-ons,” such as aftermarket accessories or F&I coverage, demonstrated the need for the rule. Chairwoman Lina Khan and Commissioners Noah Phillips, Rebecca Slaughter and Alvaro Bedoya said the agency also needed the rule to obtain penalties or consumer reimbursement, something made more difficult by the Supreme Court’s decision in AMG Capital Management v. FTC. The unanimous court held the commission couldn’t request monetary relief alongside an injunction request; instead, the FTC needed to follow administrative procedures and then seek the civil penalty.
“Although it has engaged in law enforcement, the Commission’s relatively small size and limited resources make it challenging to investigate and act upon the tens of thousands of complaints regarding dealerships,” the FTC wrote in its proposal. “Many of the problems observed in the motor vehicle marketplace persist in the face of repeated federal and state enforcement actions, suggesting the need for additional measures to deter deceptive and unfair practices. In addition, a rule prohibiting unfair or deceptive acts or practices in the motor vehicle marketplace would allow the FTC to seek redress for harmed consumers and obtain other forms of monetary relief in cases involving FTC Act violations.”
