NADA challenges FTC dealer rules as unwarranted and sloppy

Execution of the FTC’s proposal was botched, according to Metrey. He said agencies don’t typically jump straight to a rulemaking notice like the FTC did in this case.

The industry has also received no notice of the FTC’s biannual regulatory agenda, which outlines actions the agency plans to take in the near future, according to Metrey.

“It was so rushed they didn’t even list it,” he said. The topic was also not discussed at a NADA-FTC meeting in March, Metrey said.

NADA plans to examine the costs the regulations would impose on dealers, a figure the FTC has estimated industry-wide at $1.36 billion to $1.57 billion over a decade.

Andrew Koblenz, NADA’s executive vice president of legal and regulatory affairs, last week criticized the FTC’s estimate of the corresponding benefits to the company during this period.

The agency predicts gains of $31.08 billion to $36.34 billion for consumers needing three fewer hours to purchase a vehicle, with one hour valued at $22.20.

How did the agency determine that the client would save three hours? asked Koblenz. “It’s a word,” he said. The FTC “assumes,” he said, quoting the proposal.

The FTC cites the 2020 Cox Automotive Car Buyer Journey study’s determination that customers spend 15 hours researching, shopping and buying a car. But Koblenz said Friday, July 15, the agency did not cite Cox as a source for its three-hour showing. All he wrote was that “3 hours is 20% of an average consumer’s time spent on such activities” – an arbitrary figure, Koblenz suggested.

Additionally, the FTC’s questions for public comment suggest a misunderstanding of the problem it’s trying to regulate, Metrey said.

Metrey said the FTC has not studied the effectiveness of the proposed solutions. He cited previous examples of such research by the Federal Reserve Board and the FTC, which found that the disclosures confused the consumers the agencies sought to help.

The rules also fail to cover the entire industry, according to Metrey. They apply only to franchised and independent dealerships over which the FTC has jurisdiction, and not to other independent dealerships regulated by the Consumer Financial Protection Bureau, he said. The FTC acted unilaterally instead of proceeding with joint rulemaking with the CFPB, he said.

“So you have some market players covered and some not,” he said.

The FTC said law enforcement and research support its proposal.

“The FTC’s proposal cites law enforcement, studies and research, and other documents that point to deceptive and unfair practices by unscrupulous marketers – the bait and switch tactics and unwanted charges,” FTC spokesman Jay Mayfield said Friday, July 15, in a statement. respond to NADA’s criticisms. “We invite the public to comment on how to curb these practices in order to protect consumers and promote a level playing field for law-abiding dealers. We look forward to feedback from all interested parties.”

NADA will request an extension to the public comment window on the rule, which opened on Wednesday, July 13, with a September 12 deadline. The FTC came up with something it couldn’t defend, Stanton said, which “effectively got us to work.” to prove him wrong.

“Regulators need to take the right approach to this – a data-driven approach,” he said. “It’s a sledgehammer of an approach, in our view.”

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