The Federal Trade Commission’s proposed dealership compliance rule may be well intended, but the development of the guidance has been rushed and uninformed. It’s time for the commission to get auto industry stakeholders involved — and listen to them.
The proposed regulation would prevent dealers from selling customers products that provide no value, ban them from running misleading pricing advertisements, and require them to offer additional pricing disclosures and a list of add-on products with prices online. It also puts confusing and likely onerous limits on how dealerships communicate with shoppers and adds bureaucratic burdens for consumers who choose to negotiate or purchase voluntary protection products.
The FTC estimates that compliance will cost dealers $1.4 billion to $1.6 billion over 10 years. The National Automobile Dealers Association and the National Independent Automobile Dealers Association say the rule is likely to increase consumers’ already rising vehicle costs and make the car-buying process longer and more complicated.
The FTC said it received more than 100,000 “auto related” complaints in each of the past three years. Many were related to vehicle sales, leasing, financing and service — but also matters completely out of dealers’ hands, such as warranties, auto parts, rentals and even gasoline.
The numbers sound large, but even if every complaint in the auto category were about dealers, it would only be three per dealership per year, or about 1 in 300 new and used cars sold.
Dealers and automakers have worked for years to streamline vehicle transactions by moving much of the process online. In 2020, when the pandemic boosted online transactions, customer satisfaction with the dealership experience reached a record high, according to Cox Automotive’s Car Buyer Journey Study.
Parts of the FTC’s rule, such as listing finance and insurance product prices online, could make car-buying more transparent and streamlined, but some of the additional disclosures and restrictions could muddy a process that is finally on its way to becoming simple.
During the 60-day public comment period that started last week, it’s imperative that dealers and their allies explain to regulators how the industry works, how it’s evolving and how it can help consumers without confusing them.