A U.S. appeals court invalidated consumer protection rules adopted by the Biden administration that aimed to ban bait-and-switch tactics and prevent auto dealers from charging for add-ons that do not benefit new car buyers.
The 5th Circuit Court of Appeals ruled 2-1 that the Federal Trade Commission (FTC) violated procedural rules by not providing advance notice of the planned regulation.
The rules, proposed in 2022 and finalized in January 2024, required up-front pricing in advertising and sales discussions and informed consent before charging for additional items. The FTC estimated the regulations would save consumers over $3.4 billion annually and reduce car-shopping time by 72 million hours.
The National Automobile Dealers Association (NADA) and a Texas dealer group challenged the rules, arguing they would add time, complexity, and cost to the car-buying process. NADA President Mike Stanton called the decision a win for consumers and the rule of law.
The FTC has pursued legal actions against auto dealers for deceptive practices, including a $20 million settlement in December with 10 dealerships accused of defrauding consumers. Judge Stephen Higginson dissented, stating that Congress gave the FTC authority in 2010 to create rules promoting price transparency and curbing deceptive practices, which he said could yield significant economic benefits.
The overturned rule had been on hold pending the legal challenge.
