The Federal Trade Commission (FTC) is facing a congressional investigation into its proposed rule that would impose new regulations on motor vehicle dealers. The rule, which was announced in July 2022, aims to protect consumers from unfair and deceptive practices by dealers, such as charging hidden fees, misrepresenting financing terms, and selling add-on products and services without informed consent. The rule would also require dealers to disclose the offering price of vehicles in advertisements and communications with consumers, and to keep records of their compliance for 24 months.
However, the rule has been met with opposition from some industry groups and lawmakers, who argue that it is unnecessary, burdensome, and harmful to competition and innovation. The National Automobile Dealers Association (NADA), which represents more than 16,000 franchised dealers, has asked the FTC to withdraw the rule, claiming that it is “ill-conceived, ill-supported, ill-coordinated, untested and unlawful”. NADA contends that the rule would interfere with the dealer-assisted financing model, which benefits consumers by providing them with more choices and lower interest rates. NADA also asserts that the rule would conflict with existing federal and state laws, and that the FTC has failed to follow its own procedures and provide adequate evidence for issuing the rule.
In response to these concerns, Representative James Comer, the ranking member of the House Committee on Oversight and Reform, has launched a probe into the FTC’s rulemaking process. In a letter dated October 18, 2022, Comer requested that the FTC provide the committee with various documents and information related to the rule, such as the data and analysis used to justify the rule, the communications and coordination with other federal and state agencies, and the public comments received during the comment period. Comer also questioned the FTC’s authority and rationale for issuing the rule, and expressed his worry that the rule would harm consumers and small businesses, especially in the wake of the COVID-19 pandemic.
The FTC has not yet responded to Comer’s letter, but it is expected to face more scrutiny and challenges as it moves forward with finalizing the rule. The rule could have significant implications for the motor vehicle industry, which is undergoing rapid changes due to technological advancements and new business models. The FTC will have to balance its mandate to protect consumers from unfair and deceptive practices with its recognition of the benefits of competition and innovation in the market.
