On July 13, the Federal Trade Commission issued a Notice of Proposed Rulemaking regarding the Motor Vehicle Dealer Trade Regulation Rule. The Motor Vehicle Dealers Trade Regulation Rule is intended to combat certain unfair and deceptive trade practices by dealers and to promote price transparency. Comments on the proposed rule are expected no later than September 12, 2022.

The proposed rule:

  1. Prohibits dealers from making certain misrepresentations in the sales process, listed in proposed § 463.3. The list of prohibited misrepresentations includes misrepresentations regarding “costs or terms of purchasing, financing or leasing a vehicle” or “any cost, limitation, benefit or other material aspect of an add-on product or service “.
  • Includes new disclosure requirements regarding pricing, financing, and complementary products and services. Notably, the proposed rule would require dealers to disclose the offer price in many advertisements and consumer communications.
  • Prohibits charges for add-on products and services that confer no benefit to the consumer and prohibits charges for items without the consumer’s “express and informed consent” (which, among other things, as defined, excludes any “signed or initialed document, by himself ” ). The proposed rule outlines a specific process for presenting fees for add-on products and services to the consumer, which requires the dealer to disclose and offer to complete the transaction for the “cash price without optional add-ons” and obtain written confirmation that the consumer rejected this price.
  • Imposes additional record keeping requirements on the concessionaire to demonstrate compliance with the rule. Record keeping requirements apply for a period of 24 months from the date of creation of the applicable record.

The proposed regulations focus only on “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 unbundling the sales vehicle services and create new stand-alone offerings (see this recent article on subscription seat warmers). Under the proposed rule, to meet the definition of a “concessionaire”, a person or entity must be “principally engaged in sales and maintenance of motor vehicles, leasing and motor vehicle maintenance, or both(emphasis added).

Gesturing to some of the developments in auto sales models, Commissioner Christine Wilson dissented, expressing concern that despite “best intentions”, a complex regulatory regime could “stifle innovation”. She asked for comments on (among other things) “anticipated changes in the automotive market with regard to technology, marketing and sales, and whether it is possible to make the proposed rule permanent so that it avoids inhibiting beneficial changes in these areas”.