The Ongoing Legal Battle Over the FTC’s CARS Rule
At Mosaic Compliance Services, we are closely following a significant legal case that could shape the future of automotive retail compliance. CEO Jim Ganther and General Counsel Scott Clay recently shared their insights on the ongoing litigation over the Federal Trade Commission's (FTC) CARS rule, currently being heard in the Fifth Circuit Court of Appeals. This case, brought by the National Automobile Dealers Association (NADA) and the Texas Automobile Dealers Association (TADA), challenges the FTC’s rulemaking process and its potential impact on dealerships across the country.
The Case: NADA & TADA vs. FTC
The core issue in this case revolves around whether the FTC followed proper procedures in issuing the CARS Rule, which imposes new requirements on auto dealers regarding price disclosures and customer consent. NADA and TADA argue that the FTC overstepped its authority by not issuing an advance notice of proposed rulemaking, a critical step required by law. The rule has also been criticized for vague terminology and for failing to account for the costs of compliance, which could significantly impact dealerships.
During the oral arguments, both sides were questioned extensively by the panel of three judges. According to Ganther and Clay, while the judges showed no hostility, they were thorough in their questioning of both NADA's attorney, Jeff Harris, and the FTC's representative, Ben Aiken. The court seemed particularly focused on two issues: the FTC’s failure to provide an advance notice and the legitimacy of its cost-benefit analysis.
Reading the Judges
One key moment came when one of the judges referenced a previous case, Wages and White Lion Investments v. FDA, which involved similar issues of arbitrary and capricious rulemaking. In that case, the Fifth Circuit ruled against the FDA, a decision that could provide a precedent for NADA and TADA in this litigation.
What’s Next?
Ganther and Clay believe the court is likely to remand the case back to the FTC, giving the agency a chance to fill in gaps in the record and reconsider certain aspects of the rule. This would give both sides an opportunity to negotiate and possibly reach a compromise that addresses the dealers’ concerns while allowing the FTC to enforce its rule.
For auto dealers, this case could have far-reaching implications. If the court rules in favor of NADA and TADA, it could lead to changes or even the withdrawal of the CARS rule. On the other hand, if the FTC prevails, dealers may need to brace for more stringent compliance requirements.
The Compliance Perspective
At Mosaic Compliance Services, we understand the challenges that dealerships face in navigating these complex regulatory environments. As both Ganther and Clay pointed out, compliance costs are not insignificant, and we are committed to helping our clients stay ahead of these changes. Whether through training or advisory services, our goal is to provide dealerships with the tools they need to remain compliant while minimizing disruptions to their business.
As the case progresses, we will continue to monitor developments and provide updates. In the meantime, it’s important for dealerships to stay informed and be prepared for potential changes to the regulatory landscape.
Stay tuned for more insights from Mosaic Compliance Services, and as always, when we know more, you’ll know more.
