The U.S. Court of Appeals for the Fifth Circuit recently vacated the Federal Trade Commission’s (FTC) Combating Auto Retail Scams (CARS) Rule, offering temporary relief to auto dealers who had raised concerns over its burdensome compliance requirements. The court ruled that the FTC failed to follow its own procedural regulations, specifically by not issuing an Advance Notice of Proposed Rulemaking (ANPRM), rendering the rule invalid. While this decision removes the immediate threat of new regulatory mandates, dealers should not assume the FTC’s efforts to regulate the industry have ended.
The CARS Rule sought to address deceptive practices in the auto sales industry, such as hidden fees, misleading advertising, and a lack of transparency in pricing and financing. By vacating the rule, the court eliminated explicit guidelines that would have mandated compliance in these areas. However, this does not mean that the FTC has abandoned its oversight of the auto industry. Dealers remain subject to the FTC Act’s broad prohibition against unfair or deceptive practices, which allows the agency to continue enforcement actions.
In fact, the FTC demonstrated its willingness to act aggressively even before the CARS Rule was finalized. For instance, in December 2024, the FTC took enforcement action against several dealers for alleged deceptive practices, relying on its existing authority under the FTC Act. This shows that while the rule itself has been vacated, the agency can still investigate and sue dealers on a case-by-case basis. The lack of formalized regulations may actually give the FTC more latitude to act without being constrained by specific rule language.
With the Trump administration now in office, the regulatory landscape is likely to become more business-friendly. Historically, this administration has prioritized reducing regulatory burdens across industries, including automotive. However, dealers should not mistake this deregulatory stance as a guarantee of immunity. Consumer complaints and advocacy groups continue to pressure regulators to crack down on unfair practices, and the FTC is unlikely to ignore widespread violations.
For dealers, this ruling provides a temporary reprieve, but it also serves as a reminder of the importance of maintaining ethical sales practices. Proactively reviewing advertising, pricing, and financing disclosures can help avoid scrutiny from regulators. While the vacatur delays the implementation of stricter rules, it is still essential to prepare for potential future regulations, as the FTC may attempt to reintroduce the CARS Rule in compliance with procedural requirements.
The court’s decision also underscores the importance of procedural rigor in rulemaking. By vacating the rule on procedural grounds rather than substantive ones, the ruling leaves open the possibility for the FTC to restart the process. Dealers should stay informed about any new developments and prepare for another round of rulemaking, should the FTC choose to pursue it.
In conclusion, the court’s ruling offers a reprieve from the immediate compliance challenges of the CARS Rule, but it does not shield dealers from the FTC’s enforcement powers. Dealers must remain vigilant, not only to ensure compliance with existing laws but also to stay ahead of potential regulatory changes. By adopting transparent and ethical practices now, dealers can safeguard their businesses while building trust with their customers and regulators alike.
