Auto dealers challenge new US FTC car-buyer consumer protection rules

By David Shepardson

WASHINGTON (Reuters) -Two groups representing auto dealers said on Friday they had filed a legal challenge to the Federal Trade Commission's new sweeping consumer protection regulations finalized last month.

The FTC said the new rules will ban bait-and-switch advertising tactics, prohibit charging for add-on costs that do not benefit consumers and require dealers to make key disclosures to consumers, including accurate pricing disclosures in advertising and sales communications.

The rules were first proposed in 2022 and will take effect on July 30. They also require dealers to keep records of certain advertisements and customer transactions.

The National Automobile Dealers Association (NADA) and Texas Automobile Dealers Association late Thursday asked the Fifth Circuit Court of Appeals to block the new rules that "comprehensively regulates the advertising, sales, and financing of vehicles by auto dealers" saying they are "arbitrary, capricious (and) an abuse of discretion."

The FTC declined to comment.

The NADA said previously the FTC proposal would "upend the sales process for tens of millions of consumers annually and thousands of small businesses."

The FTC said the new rules would bar junk fees like a service contract for an oil change for an electric vehicle said it is expected to save consumers more than $3.4 billion and an estimated 72 million hours annually shopping for vehicles.

Dealers will also be required to obtain consent for any charges they add to a vehicle's price and barred from charging for add-ons that are useless to the buyer, such as selling nitrogen-filled tires that contain no more nitrogen than normal air.

The Alliance for Automotive Innovation, representing General Motors (NYSE:GM), Toyota Motor (NYSE:TM), Volkswagen (ETR:VOWG_p) and other major automakers, previously raised concerns about the FTC plan, warning of "excessive regulation and micromanagement of the sales experience."

In November, a U.S. House committee said it was investigating the FTC's consumer protection rules, arguing the regulation "threatens harm to consumers and small businesses by making car purchases more difficult and inhibiting innovation in the industry."

A group of 17 Democratic lawmakers in June urged the FTC to "adopt strong regulatory protections for car buyers," arguing that "unfair and deceptive practices involving motor vehicle dealers have widespread consequences."

Auto dealers challenge new US FTC car-buyer consumer protection rules 1

Auto dealers challenge new US FTC car-buyer consumer protection rules

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