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On Monday, A U.S. appeals court disposed of rules that were initially taken up by the Biden administration.
These rules were aimed at banning bait-and-switch tactics as well as prohibiting dealers from charging additional fees and add-on costs that do not provide any benefits to new car buyers, Automotive News said.
The Federal Trade Commission had violated procedural rules while writing the regulation without an advanced notice of the planned regulation, The 5th U.S. Circuit Court of Appeals in response to a legal challenge by the National Automobile Dealers Association and a Texas dealer group said.
This rule was finalized in January 2024, although it was put on hold due to the legal challenge, it required up-front pricing in advertising and sales discussions and received consent from consumers prior to charging them for anything, Reuters said.
New rules would prohibit junk fees such as a service contract for an oil change for an electric vehicle, with an estimated 72 million hours saved annually shopping for vehicles, the FTC said.
The FTC has filed complaints against several auto dealers, winning a $20 million settlement in December from a group of 10 car dealerships accused of systematically defrauding consumers seeking to purchase vehicles, Automotive News said.
NADA President Mike Stanton described the decision as a “victory for the rule of law and a great outcome for consumers.”
The rule would have brought upon a lot of time, complexity, paperwork as well as cost to the experience for virtually every customer, Stanton said.
Disagreeing with the ruling, Judge Stephen Higginson said that Congress provided the FTC authority to provide regulations in 2010 that would necessitate “price transparency and rules against deception, which would spur billions of dollars in economic benefit for U.S. consumers.”
“Congress authorized the FTC to regulate unfair and deceptive motor vehicle dealer practices, which inflict immense, proven harm on U.S. consumers,” Higginson said.
He stated that the rule was established after ten years of discussions, feedback, and over 100,000 consumer complaints, many of which led to federal and state law enforcement actions against unfair and deceptive practices by motor vehicle dealers, according to Automotive News.