OPINION:
Last year, the FTC unveiled a rule that was designed to prohibit unfair and deceptive acts by automobile dealers, but a look under the hood shows that the rule’s rushed process may be a deceptive and unfair act of its own.
Because of their far-reaching implications, every FTC rule requires significant research, testing and cost-benefit analysis. With over 15 million new cars sold in 2023 and over 90% of Americans owning a car, any change to the car-buying process needs to be carefully designed, thoroughly vetted and tested.
The new FTC Vehicle Shopping Rule does not meet these requirements and is a deeply flawed set of prescriptions and procedures that will make the car-buying experience worse, not better.
Based on flawed evidence, the FTC claims that the rule would save more than $12.3 billion over 10 years and save an estimated 2 hours per transaction when shopping for vehicles. Still, an independent study found that the rule will actually increase costs by $24.1 billion over a 10-year period, which consumers will ultimately absorb.
Moreover, the rule would also make the car-buying process take longer, creating unnecessary paperwork and adding between 60—80 minutes to the average car-buying experience, costing consumers at least $1.3 billion in lost time yearly.
The FTC’s consumer complaint data, which the agency leans heavily on to justify this rule, are also inflated and flawed. The “more than 100,000” consumer complaints the FTC often cites are unverified and misleading, as thousands of these complaints were made against entities completely unrelated to auto sales and outside the scope of the rule, including auto rentals, auto parts sales, auto service and even gas stations. Complaints also come from outside the U.S., further muddying the data. In fact, the FTC’s data sets include numerous complaints from Canada, Mexico and even Australia.
This rule is also duplicative, as every bad behavior it attempts to address is already illegal, with enforcement power resting with both the FTC and the states. In some cases, the rule also conflicts with extensive federal and state laws already in place to protect consumers.
Beyond the above issues, the FTC failed to follow its own process to issue an Advanced Notice of Proposed Rulemaking, leaving the public unable to provide proper comments, context and answers to the many questions the FTC asked when proposing the rule. Given that this rule would significantly impact millions of Americans, all of this input is critical.
The Vehicle Shopping Rule is costly to consumers and unnecessarily burdensome to small business owners nationwide, but Congress has the authority to stop it.
A provision in the recently passed House Financial Services and General Government appropriations bill would temporarily block enforcement of this rule without diminishing consumer protection. In addition, a bipartisan House bill – the FTC REDO Act – would scrap the current Vehicle Shopping Rule and require the FTC to adhere to basic regulatory safeguards, including advanced notice of proposed rulemaking and true cost-benefit analysis, if it decided to propose another rule of this nature.
So much is at stake with consumers’ valuable time and hard-earned money, and for many Americans, buying a vehicle isn’t an option — it’s a necessity. Congress needs to send this rule back to the shop for an overhaul.
• Mike Stanton is the President and CEO of the National Automobile Dealers Association.
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