The U.S. Court of Appeals for the Fifth Circuit in New Orleans Monday ordered the FTC to vacate the CARS rule, finding the agency did not issue proper notice of the rule change.
“The FTC violated section 706(2) of the APA when it elected to issue an ANPRM before publishing the final CARS Rule, a requirement of its own regulations and an error that was not harmless. We GRANT the petition for review and VACATE the CARS Rule,” the court stated.
The order to vacate came after the court heard oral arguments in October on the case filed by the National Automobile Dealers Association and the Texas Automobile Dealers Association against the FTC.
NIADA and the Texas IADA joined the efforts to stop the Federal Trade Commission from enforcing the vehicle shopping rule. NIADA and TIADA filed an amicus brief in support of NADA/TADA, asking for the rule to be vacated. The amicus brief pointed to the rule’s negative impacts on the car buying process and significant cost to independent dealerships, explained how the FTC did not consider the burden on consumers and independent dealers’ business operations, and how the FTC failed to comply with its requirement to provide a small business impact analysis.
“On behalf of our more than 13,000 members, we applaud the decision of the court to vacate the onerous CARS rule for the lack of prior notice. NIADA joined Texas IADA in filing an amicus brief to the NADA and Texas ADA case against the Federal Trade Commission because we believed the rule would have caused irreparable harm to dealers and consumers, with added expenses and extended times to complete purchases. “We support transparency and fairness in vehicle sales, which are already heavily regulated without the additional requirements of the CARS rule. We look forward to continuing conversations with the FTC on issues related to our industry. NIADA will continue to advocate on behalf of its members and keep you abreast of issues as they arise.”
NIADA statement on the court decision
The court did not address other arguments filed by the NADA in the case. In October’s oral arguments, NADA’s attorney Jeffrey Harris argued the FTC had failed to show how the added disclosures required by the rule would improve car purchases.
“The rules at issue in this case will inject FTC-mandated disclosures into hundreds of millions of interactions between car dealerships and their customers. Even the FTCs flawed analysis acknowledges that this will be a billion-dollar rule,” Harris said.
The CARS rule was finalized in December 2023 by the FTC and it was set to go into effect July 30, 2024. The FTC issued a stay of the regulation, which remains in place, shortly after the NADA and TADA filed their lawsuit.
The rule would have required dealers to provide consumers with an offering price, disclose all optional add-ons and give information about total payment when discussing the monthly payment. There are additional disclosures and recordkeeping of communications with customers that would be required.
No announcement has been made on if the FTC will appeal the decision.
The National Independent Automobile Dealers Association (NIADA) is among the nation’s largest trade associations, representing the used motor vehicle industry comprised of some 40,000 licensed used car dealers. Since 1946, NIADA has represented the voice and interests of used car dealers at the federal level in Washington D.C. Coupled with its state association network across the country, NIADA’s grass-roots framework provides a dual layer of advocacy unmatched in the used motor vehicle industry.
For 75 years, NIADA has engineered programs and leveraged technology to fulfill its mission to advance, educate and promote the independent used car dealer. NIADA members subscribe to a strict Code of Ethics of duty, honor and integrity, and believe in the advancement of small business in support of the free-market system. More information about NIADA, visit www.niada.com.
