A federal appeals court recently struck down the buying transparency rule, which many advocates argued would have made the car-buying process more transparent and saved consumers billions of dollars.

The United States Court of Appeals for the Fifth Circuit ruled against the Combating Auto Retail Scams Trade Regulation (CARS) rule, claiming that the Federal Trade Commission (FTC) failed to follow the proper procedure. The rule aimed to tackle common deceptive tactics in car sales, like bait-and-switch schemes and hidden fees, while also offering protections for military personnel against dishonest dealers falsely claiming military affiliations.

According to the FTC, the rule would have saved consumers over $3.4 billion and reduced car-buying time by 72 million hours annually. However, critics from groups like the National Automobile Dealers Association (NADA) and the Texas Automobile Dealers Association (TADA) said the FTC’s research was rushed and not thorough enough.

Had the rule been implemented, it would have required car dealers to clearly display the price of a vehicle along with all mandatory fees upfront in every advertisement, as noted by Erin Witte, director of Consumer Protection at the Consumer Federation of America. The rule also aimed to address deceptive practices that often leave consumers paying much more than expected for a car.

Witte explained that the advertised price is “almost never” the final price, with dealerships often refusing to give a price over the phone, encouraging potential buyers to come in person instead. This tactic, she said, is designed to pressure customers into paying more. She emphasized that while some car dealers operate honestly, many are undercut by deceptive competitors who inflate prices after customers spend hours on the lot.

Tom Maoli, a New Jersey car dealership owner, expressed support for the buying transparency rule, saying it would have boosted consumer trust in franchise dealerships. Historically, he noted, car buyers have a negative view of the treatment they receive at dealerships.

However, NADA and TADA argued that the rule would have complicated the car-buying process, adding time, paperwork, and extra costs for both dealers and consumers. They estimated that consumers would spend an additional 60 to 80 minutes per transaction and face multiple new forms to complete during the car-buying process.

The court’s decision focused on procedural concerns, stating that the FTC skipped a vital step in the rule-making process—the Advance Notice of Proposed Rulemaking (ANPRM). This step allows the public to give input before a rule is drafted. Instead, the FTC began with the second step, the Notice of Proposed Rulemaking (NPRM), which outlines a plan for the rule and invites public comment before finalizing it.

Witte argued that the FTC should have been allowed to fast-track the rule given its authority to regulate motor vehicle dealers. She defended the rules thorough research and public input, pointing out that the FTC had spent years gathering data from enforcement actions, dealer conversations, consumer advocates, and actual car buyers.

The FTC will now need to restart the rule-making process if it intends to pursue the buying transparency rule again. It remains uncertain whether this will happen, Witte concluded.