In December, the Federal Trade Commission finalized the “Combating Auto Retail Scams Rule” (the “CARS Rule”), which addresses the use of bait-and-switch tactics and hidden junk fees in connection with auto sales.  

The CARS Rule was scheduled to go into effect on July 30, 2023.  Last week, the FTC issued an order postponing the effective date due to a pending legal challenge to the rule. 

In early January, the National Automobile Dealers Association and the Texas Automobile Dealers Association filed a Petition for Review in the Fifth Circuit, challenging the rule on the grounds that it is “arbitrary, capricious, an abuse of discretion, without observance of procedure required by law, or otherwise not in accordance with law.”  

The FTC disputes these claims, saying that the challengers' arguments “rest on mischaracterizations of what the Rule requires of covered motor vehicle dealers, including inaccurate claims that it will require dealers to overhaul their practices and substantially increase compliance costs.”  The FTC asserted that, “the Rule does not impose substantial costs, if any, on dealers that presently comply with the law, and to the extent there are costs, those are outweighed by the benefits to consumers, to law-abiding dealers, and to fair competition – as honest dealers will not be at a competitive disadvantage relative to dishonest dealers.”