Washington: A U.S. appeals court ruled on Monday to overturn the Biden administration’s consumer protection rules aimed at safeguarding car buyers from deceptive practices, such as bait-and-switch tactics and unauthorized add-on charges. The decision came after legal challenges by the National Automobile Dealers Association (NADA) and a Texas dealer group, with the 5th Circuit Court of Appeals concluding that the Federal Trade Commission (FTC) had failed to comply with procedural requirements by not providing prior notice of the proposed regulation.
The rule, initially proposed in 2022 and finalized in January 2024, was designed to ensure up-front pricing during car dealership transactions and required that consumers give informed consent before being charged for any additional items. However, its implementation was put on hold pending the outcome of legal challenges.
The FTC had argued that the rule would eliminate unfair charges like unnecessary service contracts for electric vehicle oil changes or duplicate warranties. The agency claimed the regulation would save consumers more than $3.4 billion annually and reduce the time spent shopping for cars by 72 million hours.
NADA President Mike Stanton celebrated the court’s decision, calling it a “victory for the rule of law” and asserting that the rule would have created excessive complexity and costs for car buyers. He argued that the rule would have resulted in a cumbersome and more expensive car-shopping process for nearly all customers.
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The FTC had already taken action against several car dealerships, winning a $20 million settlement in December from 10 dealerships accused of defrauding consumers.
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In a dissenting opinion, Judge Stephen Higginson argued that the FTC had been granted authority by Congress in 2010 to implement regulations aimed at ensuring price transparency and protecting consumers from deceptive practices. He emphasized that the rule followed years of research, including over 100,000 consumer complaints, many of which led to federal and state law enforcement actions against misleading practices in the automotive industry.
