Two U.S. senators introduced a bipartisan bill last week that would force the Federal Trade Commission to go back to the drawing board on its proposed rule for dealerships.
The FTC last year proposed its Motor Vehicle Dealers Trade Regulation Rule — or Vehicle Shopping Rule — that critics including the National Automobile Dealers Association argue would add unnecessary costs, paperwork and complexity to the car-buying process.
A new bill from Sens. Jerry Moran, R-Kan., and Joe Manchin, D-W.Va., would direct the FTC to “redo” the proposal by requiring the agency to issue an advanced notice of proposed rulemaking for public comment — a regulatory step the lawmakers say was instead replaced with 49 open-ended questions about the proposal.
The senators’ bill — known as the FTC REDO Act — would require the FTC to also conduct studies on auto retailing and consumer product testing and publish a cost-benefit analysis driven by data.
“The FTC’s rule would create more paperwork when buying a car at the dealership and lead to more bureaucracy and red tape for small businesses,” Moran said in a statement.
“If the FTC plans to overhaul the way Americans purchase vehicles, they should be required to ask for and receive input from the public at the very least,” he continued. “This legislation will make certain FTC regulators can’t finalize the rule without first receiving feedback from industry leaders and the general public.”
The bill is supported by NADA, which is urging more members of Congress to co-sponsor the legislation.
In a statement Wednesday, NADA praised the bill’s introduction and urged Congress to pass it “as quickly as possible.”
“NADA applauds Sens. Moran and Manchin for introducing the ‘FTC Redo Act,’ which sets the process for the agency to redo its unworkable and untested ‘Vehicle Shopping Rule’ that would otherwise make car buying worse and not better,” said NADA CEO Mike Stanton. “The FTC REDO Act simply directs the FTC to follow basic and essential regulatory safeguards that the agency did not follow or did incorrectly before proposing its rule.”
The bill is also supported by the Kansas Automobile Dealers Association.
“The FTC got it wrong for Kansas consumers when it came out with a rule that adds hours to buying a car and makes it more expensive for car buyers,” Don McNeely, president of the Kansas Automobile Dealers Association, said in a statement.
An FTC spokesperson did not immediately respond to a request for comment.
FTC proposal
The FTC’s proposal, if finalized, would require expanded disclosure and consent on finance-and-insurance products and physical accessories “not provided to the consumer or installed on the vehicle by the motor vehicle manufacturer.”
The agency also is considering cracking down on dealerships’ statements related to the cost or financing of the vehicle itself, seeking to curtail bait-and-switch pricing and lower monthly payments that mask higher overall cost to a consumer.
The agency has not taken further action on its plan following the close of a public comment period last year.
The FTC has estimated its rules would save consumers three hours of the total time spent researching and visiting dealerships to buy a vehicle. However, a May analysis from the Center for Automotive Research found the average consumer would spend two more hours on a vehicle transaction.
The automotive retail industry also would incur between $18.69 billion and $22.34 billion in additional compliance costs over the course of a decade because of the FTC rule — more than 10 times the $1.36 billion to $1.57 billion predicted by the agency.
An individual dealership location would spend a median $46,950 in upfront costs and $50,958 in recurring expenses every year to comply with the regulation, according to the analysis, which was based upon polling more than 60 dealerships.
The Center for Automotive Research had undertaken the analysis at the request of NADA, which helped identify possible survey candidates among its members.
