U.S. Appeals Court Strikes Down Biden’s Auto Dealer Regulations

By David Shepardson

WASHINGTON (Reuters) – A U.S. appeals court on Monday overturned consumer protection rules established by the Biden administration that aimed to ban bait-and-switch tactics and restrict auto dealers from imposing add-on costs that do not benefit new car buyers.

In a decision influenced by legal challenges from the National Automobile Dealers Association (NADA) and a Texas dealer group, the 5th Circuit Court of Appeals ruled 2-1 that the Federal Trade Commission (FTC) had breached procedural protocols by drafting the regulation without prior notice of the intended rules.

The regulation mandated up-front pricing in advertisements and sales discussions by dealers and required consumers to give informed consent before being charged for any additional item. Initially proposed in 2022, it was finalized in January 2024 but remained on hold due to legal contests.

The FTC argued that the new rules would eliminate junk fees, such as unnecessary service contracts for electric vehicle oil changes or redundant warranties, and predicted savings of over $3.4 billion and 72 million hours for consumers in vehicle shopping annually.

NADA President Mike Stanton celebrated the ruling as a “victory for the rule of law and a great outcome for consumers,” adding that the regulations would have significantly increased the time, complexity, paperwork, and costs associated with car buying for nearly all customers.

The FTC has pursued complaints against several auto dealers and secured a $20 million settlement in December from a group of 10 car dealerships that were accused of systematically deceiving customers looking to purchase vehicles.

Judge Stephen Higginson dissented from the majority opinion, arguing that Congress, in 2010, empowered the FTC to enforce regulations ensuring “price transparency and rules against deception, which would yield billions of dollars in economic benefits for U.S. consumers.”

He noted that the regulation emerged after a decade marked by roundtables, extensive comments, and over 100,000 consumer complaints, many resulting in federal and state enforcement actions against unfair and deceptive practices by motor vehicle dealers.