He said the rule came "after a decade of roundtables, comments, and over 100,000 consumer complaints, many leading to federal and state law enforcement actions against unfair and deceptive motor vehicle dealer practices."A U.S. appeals court on Monday threw out consumer protection rules adopted by the Biden administration to ban bait-and-switch tactics and prohibit auto dealers charging for add-on costs that do not benefit new car buyers.
In response to legal challenges brought by the National Automobile Dealers Association (NADA) and a Texas dealer group, the 5th Circuit Court of Appeals said in a 2-1 decision that the Federal Trade Commission (FTC) had violated procedural rules in writing the regulation without giving advance notice of the planned regulation.
The rule required up-front pricing in dealers' advertising and sales discussions and informed consent from consumers before charging for any item. It was proposed in 2022 and finalised in January 2024 but put on hold pending the legal challenge.
The FTC had said the new rules would bar junk fees like a service contract for an oil change for an electric vehicle or a duplicative warranty and estimated it would save consumers more than USD 3.4 billion and 72 million hours annually shopping for vehicles.
NADA President Mike Stanton called the decision a "victory for the rule of law and a great outcome for consumers."
He added the rule "would have added massive amounts of time, complexity, paperwork and cost to the car-buying and car-shopping experience for virtually every customer."
The FTC has brought complaints against a number of auto dealers. It won a USD 20 million settlement in December from a group of 10 car dealerships that it accused of systematically defrauding consumers looking to buy vehicles.
Judge Stephen Higginson dissented from the ruling, saying Congress in 2010 gave the FTC authority to issue regulations that would require "price transparency and rules against deception, which would spur billions of dollars in economic benefit for U.S. consumers."
He said the rule came "after a decade of roundtables, comments, and over 100,000 consumer complaints, many leading to federal and state law enforcement actions against unfair and deceptive motor vehicle dealer practices."
