Advocacy

Breaking News: U.S. Appeals Court Invalidates CARS Rule--FTC Clarifies Rule Doesn't Limit Modifications

From the SEMA Washington, D.C., office

Window Tint

 

The 5th U.S. Circuit Court of Appeals ruled in favor of the National Automobile Dealers Association (NADA) and the Texas Automobile Dealers Association (TADA), throwing out the Federal Trade Commission's (FTC) Combating Auto Retail Scams Rulemaking (CARS Rule), which was designed to ensure that consumers are not subject to hidden junk fees and bait-and-switch tactics when purchasing new and used motor vehicles.

The appeals court's 2-to-1 ruling in favor of the auto dealers maintained that the CARS Rule violated procedural rules in writing the regulation without giving advance notice of the planned regulation. The FTC can appeal the ruling to the Supreme Court, although it is unclear if the commission will accept the ruling or fight to maintain the rule.  

While the FTC previously delayed implementing the 2024 CARS Rule as the agency awaited a ruling from the 5th circuit, some auto dealers have used the rule's presence as a justification to limit the customization options they offered before the first point of sale. The FTC recently sent a letter to U.S. Rep. Sanford Bishop (D-GA), co-chair of the Congressional Automotive Performance and Motorsports Caucus, which clarified that the CARS Rule "does not prohibit dealers from offering products and services that provide value to customers."

The FTC's January 14 letter also noted that the commission would look at whether a consumer would benefit from an add-on service, which involves "analyzing objective standards under the circumstances, such as whether the add-on provides benefits; whether the consumer is eligible to use the add-on; whether the add-on's coverage excludes the vehicle at issue; and whether the add-on is incompatible with the vehicle at issue." 

The FTC provided clarity on the CARS Rule in response to Rep. Bishop's October 31 letter, which requested that the FTC affirm that the rule does not prohibit dealerships from offering services that consumers demand, such as window tint, paint/underbody paint coating, replacing cloth with leather seat covers, paint-protection film that scientifically reduces clear coat damage from rock chips, truck lifts, wheel and tire replacements, truck accessories, window tint that reduces ultraviolet (UV) rays, tonneau covers, spray-in bed liners and remote starts. 

For additional information, contact Eric Snyder, SEMA's senior director of federal government affairs, at erics@sema.org

Photo courtesy of Shutterstock