The Federal Trade Commission (FTC) is the primary federal regulatory agency that oversees automotive retail. And the FTC has been VERY busy in recent months. Their activity is keeping dealers on their toes, which is why it is critical that dealers ensure they remain compliant. Below is a rundown of a few FTC-related issues and their potential impact on dealers:

Motor Vehicle Dealers Trade Regulation Rule

In June 2022, the FTC introduced the Motor Vehicle Dealers Trade Regulation Rule. If adopted, this Rule would dramatically transform (and unnecessarily complicate) the process for consumers to purchase, trade in, and finance new and used vehicles. It would also impact consumers’ ability to take advantage of valuable optional products like extended service contracts and GAP Waivers. The proposed rule would massively expand the liability exposure for dealers related to advertising and vehicle sales and expose dealers to large monetary fines from the FTC.

NJ CAR joined with NADA and scores of other dealer advocacy groups in submitting detailed comments to the FTC defending the highly competitive and pro-consumer benefits of the optional, dealer-assisted financing model. The bottom line of our collective comments is that the FTC’s proposal would likely negatively affect consumers, rather than protect them.

Among other things, the Dealers Trade Rule would:

• 1. Prohibit misrepresentations related to the advertising and sales process;
  2. Require dealerships to calculate the loan-to-value ratio before offering GAP agreements;
  3. Prohibit sales of add-on products or services that provide no benefit to the consumer;
  4. Require dealers to keep a variety of records for 24 months; and
  5. Require dealerships to provide a variety of very specific disclosures.

By December 2022, a bipartisan group of nearly 50 members of the U.S. Senate and House of Representatives had publicly called on the FTC to withdraw the controversial Motor Vehicle Dealers Trade Regulation Rule. As of now, the FTC has not finalized the proposed rule. In fact, the FTC must review over 70,000 comments before issuing a final rule.

Proposed Rule on Non-Compete Clauses

The FTC has also announced a Notice of Proposed Rulemaking that would ban post-termination, non-compete clauses and require employers (including dealerships) to rescind existing non-compete clauses within 180 days of the final rule being published in the Federal Register.

The Proposed Rule exempts individuals who are selling a business, an ownership interest in a business, or all of a business’ operating assets, where the individual restricted by the non-compete was a substantial owner, member, or partner in the business entity (owning at least a 25% stake in the business entity).

The FTC is expected to finalize the Proposed Rule later this year, so dealerships should evaluate any non-compete clauses they may have with current or former employees with their HR professionals and attorney.

FTC Civil Penalties Increased

Finally, the FTC recently adjusted the maximum civil penalty dollar amounts for violations of 16 provisions of law the FTC enforces. The threshold was increased from $46,517 to $50,120 in 2023. If your dealership has noted the FTC penalty in your ISP, Safeguard Rule Policy or other documents, make sure to update the dollar amount.