Court Sides with Auto Dealers in FTC Regulation Battle

A U.S. appeals court overturned consumer protection rules by the Biden administration, which aimed to prevent bait-and-switch tactics by auto dealers. The court found FTC procedural violations in the rule-making process. Originally proposed in 2022, the rule intended to save consumers billions and streamline vehicle purchases.

In a significant legal development, a U.S. appeals court nullified consumer protection regulations introduced by the Biden administration. These rules were meant to curb deceptive sales practices by auto dealers, including the imposition of unnecessary add-on costs. The 5th Circuit Court of Appeals ruled that the Federal Trade Commission (FTC) failed to follow procedural requirements, having not provided prior notice of the regulations.

The contested rule, which was formalized in January 2024 after being proposed two years earlier, called for transparent pricing in advertising and required informed consumer consent for additional charges. FTC projected these changes could save consumers $3.4 billion and countless hours spent shopping for cars annually. However, the implementation was paused due to legal challenges.

NADA President Mike Stanton hailed the court's decision as a triumph for legality and consumer interests, arguing the rules would have overcomplicated vehicle sales. Despite prior victories, such as a $20 million settlement against misleading dealerships, Judge Stephen Higginson dissented, emphasizing Congress's 2010 mandate empowering the FTC to enforce transparency and prohibitions on deceptive practices, crucial for the economic benefit of consumers.

(With inputs from agencies.)