The U.S. House Committee on Oversight and Accountability is investigating the Federal Trade Commission’s (FTC) proposed Motor Vehicle Trade Regulation Rule. Last summer, the FTC noticed a 126-page proposed rule, known as the “Motor Vehicle Dealers Trade Regulation Rule,” which, if approved, would significantly change the process for consumers to purchase, trade in and finance new and used cars and trucks. The proposed rule would re-regulate all aspects of automotive retailing and was noticed without an Advanced Notice of Proposed Rulemaking (ANPRM) – the process for the public to provide comment – and instead included 49 open-ended questions.

Committee Chairman James Comer wrote, “The proposed rule would prohibit or burden automobile dealer practices in the sale, leasing and financing of new vehicles and add-on products. “Promulgated under the guise of protecting consumers, the proposed rule threatens harm to consumers and small businesses by making car purchases more difficult and inhibiting innovation in the industry. The proposed rule appears to rest on thin analysis and unreliable data and suffers from several procedural flaws, including violations of FTC regulations requiring advanced notice of proposed rulemaking.”

The committee seeks documents and information to enable oversight of the FTC’s actions related to the proposed rule. “The Small Business Administration’s Office of Advocacy—the federal government’s top watchdog against threats to small businesses—urged the FTC to pursue targeted actions against the small percentage of bad actors in the industry instead of punishing all automobile dealers through this proposed rule.2,” Comer wrote.

“The Office of Advocacy noted that the FTC lacks evidence to suggest deception is a pervasive problem in the industry, especially when less than one percent of consumers have complained about the conduct the FTC proposes to address with the rule 3. The Office of Advocacy raised concerns that the FTC may have violated the Regulatory Flexibility Act by failing to adequately assess the proposed rule’s costs and by failing to consider less harmful alternatives to small businesses.4 Finally, the Office of Advocacy noted that the proposed rule would make car purchases more cumbersome, stifle industry innovation, and sweep in non-automobile dealers.

The National Automobile Dealers Association (NADA) stressed that the proposed rule “will inject massive costs into the auto retailing process, greatly extend transaction times, greatly confuse consumers, and impede efficiencies aided by technological innovations that have significantly improved—and continue to improve—the customer experience.”

The committee questioned whether the FTC needed to make any changes at this time. “The FTC may also have violated its own procedures by failing to issue an advanced notice of proposed rulemaking,” Comer wrote.  Further, the FTC failed to list its proposed rule in the Biden Administration’s Unified Agenda of Regulatory and Deregulatory Actions, in violation of the Regulatory Flexibility Act and Executive Order 12866. As a result, stakeholders and consumers were blind-sided when the proposed rule was published and harmfully constrained when the FTC allowed only sixty days for comment on the NPRM’s forty-nine separate, detailed questions.” The committee gave the FTC until Nov. 30 to provide numerous documents in response to the committee’s concerns.

Other lawmakers criticized the FTC earlier this year regarding the proposed rule. U.S. Senators Jerry Moran (R-Kan.) and Joe Manchin (D-W.V.) introduced legislation on Oct. 4

to require the FTC to reinstate the process that allows the public the opportunity to provide feedback, comment and analysis before the commission finalizes a regulation change specific to automotive retailing. “The FTC’s rule would create more paperwork when buying a car at the dealership and lead to more bureaucracy and red tape for small businesses,” said Moran. “If the FTC plans to overhaul the way Americans purchase vehicles, they should be required to ask for and receive input from the public at the very least. This legislation will make certain FTC regulators can’t finalize the rule without first receiving feedback from industry leaders and the general public.”

Manchin also hammered the FTC over the issue. The FTC’s proposed Vehicle Shopping Rule is yet another example of unnecessary and burdensome federal overreach,” said Sen. Manchin. “I’m proud to lead this bipartisan effort with Senator Moran to prohibit the FTC from finalizing and implementing the rule without conducting sufficient consumer testing and cost-benefit analyses. I encourage my colleagues on both sides of the aisle to support this commonsense step to protect our automotive dealers and consumers in West Virginia and across the country from this rushed federal regulation.”

Members of the National Independent Automobile Dealers Association spent last month lobbying over 100 lawmakers on Capitol Hill about this same issue and are supporting the Manchin/Moran legislation.