On July 13, the Federal Trade Commission published a notice of proposed rulemaking regarding the Motor Vehicle Dealers Trade Regulation Rule. The Motor Vehicle Dealers Trade Regulation Rule is aimed at combating certain unfair and deceptive trade practices by dealers and promoting pricing transparency. Comments to the proposed rule are due on or before September 12, 2022.
The proposed rule:
- Prohibits dealers from making certain misrepresentations in the sales process, enumerated in proposed § 463.3. The list of prohibited misrepresentations includes misrepresentations regarding the “costs or terms of purchasing, financing, or leasing a vehicle” or “any costs, limitation, benefit, or any other Material aspect of an Add-on Product or Service.”
- Includes new disclosure requirements regarding pricing, financing and add-on products and services. Notably, the proposed rule would obligate dealers to disclose the offering price in many advertisements and communications with consumers.
- Prohibits charges for add-on products and services that confer no benefit to the consumer and prohibits charges for items without “Express, Informed Consent” from the consumer (which, notably, as defined, excludes any “signed or initialed document, by itself”). The proposed rule outlines a specific process for presenting charges for add-on products and services to the consumer, which obligates the dealer to disclose and offer to close the transaction for the “Cash Price without Optional Add-Ons” and obtain confirmation in writing that the consumer has rejected that price.
- Imposes additional record-keeping requirements on the dealer, in order to demonstrate compliance with the rule. The record-keeping requirements apply for a period of 24 months from the date the applicable record is created.
The proposed rulemaking focuses only upon “Dealers”, at a time when Tesla is now selling direct-to-consumer, Ford has announced its own designs to launch an e-commerce platform, and companies such as BMW have begun to unbundle services from vehicle sales and create new standalone offerings (see this recent article on subscription seat warmers). Under the proposed rule, to meet the definition of a “Dealer”, a person/entity must be “predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both” (emphasis added).
Gesturing at some of the developments in automotive sales models, Commissioner Christine Wilson dissented, expressing her concern that despite the “best of intentions”, a complex regulatory scheme could “stifle innovation”. She requested comment on (among other items) “Anticipated changes in the automobile marketplace with respect to technology, marketing, and sales, and whether it is possible to future-proof the proposed Rule so that it avoids inhibiting beneficial changes in these areas.”