Federal Trade Commission Responds to Plaintiff’s Brief in CARS Rule Challenge

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On May 14, 2024, the Federal Trade Commission filed a brief responding to attacks on the legality of its controversial Combating Auto Retail Scams (CARS)/ Vehicle Shopping Rule. The rule, which would impose penalties on auto dealers found to be deceiving and abusing consumers, was immediately criticized after its publication on December 12, 2023. The National Automobile Dealers Association and the Texas Automobile Dealers Association filed a challenge to the rule on January 4, 2024. They submitted their brief in mid-March.

The plaintiffs’ brief contained three main arguments:

  1. The agency did not properly provide notice for the rule under the rulemaking provisions of the Federal Trade Commission Act, thereby diminishing stakeholder participation and overall quality of the rule.
  2. The FTC failed to satisfactorily explain how the data the agency collected warrants the creation of additional and, in some cases, duplicative prohibitions and requirements.
  3. The FTC improperly weighed the costs and benefits of the CARS rule, providing no proof that more regulation would cut costs for consumers while undervaluing dealers’ compliance costs.

On these grounds, the petitioners have asked the court remand, or return, the rule to the agency, where it might “be reconsidered in its entirety or modified to lower compliance burdens.”

The Federal Trade Commission’s Response

In their response, the FTC argued that the FTC Act rulemaking provisions do not apply to the CARS rule and that the failure to provide advance notice was “harmless.” Moreover, the FTC argued that the FTC is not required to “find widespread misconduct and a regulatory gap as a precondition of rulemaking,” and that the court has no jurisdiction to review the FTC’s cost-benefit analysis. For these reasons, the FTC believes the rule should not be remanded.

The NADA’s reply brief is due July 13. The court will schedule oral arguments thereafter.

We continue to monitor developments. Please do not hesitate to contact us if you have any questions about the CARS rule and its potential impact on your F&I product compliance operations and processes.

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