Appeals Court Strikes Down Biden FTC’s Car-Buying Rules: A Win for Dealers, a Setback for Consumers

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the 5th Circuit Court of Appeals has issued a significant ruling that invalidated the Federal Trade Commission’s (FTC) Vehicle Shopping Rule, commonly referred to as the CARS Rule.

This decision emerged from a legal challenge spearheaded by the National Automobile Dealers Association (NADA) and the Texas Automobile Dealers Association (TADA), who argued that the FTC had failed to adhere to necessary procedural protocols when drafting the regulations.

The CARS Rule aimed to enhance consumer protections in the auto industry by prohibiting deceptive practices such as bait-and-switch tactics and imposing hidden fees on car buyers.

It mandated that dealerships provide transparent pricing in advertisements and required consumers to give informed consent before any additional charges were applied.

The FTC estimated that these regulations could save consumers approximately $3.4 billion annually and reduce car shopping time by about 72 million hours.

However, in a split decision of 2-1, the court found that the FTC had not provided adequate advance notice before implementing these rules, violating procedural requirements outlined in the FTC Act.

The majority opinion emphasized that such oversight undermined the rule-making process, while dissenting Judge Stephen Higginson pointed out the necessity of these regulations in addressing widespread consumer complaints about deceptive practices in car sales.

NADA President Mike Stanton hailed the ruling as a victory for both dealers and consumers, asserting that the CARS Rule would have complicated the car-buying process and increased costs.

He stated, “Thanks to the success of this legal challenge, dealers can get back to what they do best, which is creating the best-possible customer experience.

“The ruling is seen as a setback for consumer protection advocates who argue that transparency in car sales is crucial for preventing exploitation.

The FTC had previously taken action against several dealerships for deceptive practices, highlighting ongoing issues within the industry.

As discussions continue regarding consumer rights and dealer practices, this ruling underscores a broader debate about regulatory oversight and market transparency in automotive sales.

The implications of this decision will likely resonate throughout the industry as stakeholders assess their next steps in light of the court’s findings.

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