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On January 24, 2025, the Fifth Circuit Court of Appeals struck down an FTC rule aimed at curbing deceptive advertising and sales practices in the auto industry. The rule, which sought to prohibit certain "junk fees" and misleading pricing tactics, was challenged by industry groups who argued that the FTC had exceeded its authority.
The FTC's Combating Auto Retail Scams (CARS) rule (previously discussed here) required auto dealers to provide consumers with a clear and conspicuous "Offering Price" that included all required charges, with limited exceptions. It also would have prohibited several practices, including:
- Bait-and-switch Advertising. Advertising a vehicle at a certain price and then not having that vehicle available when a consumer attempts to purchase it.
- Failing to Disclose Key Terms in Advertisements. Key terms for which the rule required a disclosure included the total price of the vehicle, including the enumeration of all additional all fees and charges.
- Charging Consumers for Add-on Products without Consent. Such add-on products included items like extended warranties, gap insurance, and paint protection.
The Fifth Circuit sided with the industry groups, vacating the FTC's rule. The court determined that the FTC failed to issue advanced notice of the proposed rulemaking, violating procedure rules under the Administrative Procedures Act.
Putting It Into Practice: Given the change administration, it is likely that this is the end of the CARS rule. However, we will keep monitoring the case for new developments.
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