FTC Rule on Deceptive Car Sales Is Struck Down

A Federal Trade Commission rule targeting deceptive car sales among automobile dealers has been vacated. Mayer Brown writes that the Fifth Circuit ruled, in National Automobile Dealers Association, et al. v. FTC, that the FTC failed to follow required procedures in promulgating the Combating Auto Retail Scams Trade Regulation Rule (the “CARS Rule”).

That rule addressed a variety of deceptive practices, including misrepresentations about the vehicle’s actual price, various add-on products and services, and payment terms. 

Other federal regulations address Section 5 of the FTC Act’s prohibition against unfair or deceptive acts or practices (UDAP), which prohibits dealers from misrepresenting vehicle costs or engaging in various bait-and-switch tactics.

State attorneys general have state laws that address unfair or deceptive car sales, and many are inclined to invoke them. Nineteen state AGs filed amicus briefs in support of the FTC in the Fifth Circuit case.

A few states have also addressed the issue through legislation. In California, a law introduced earlier this year covers some of the same ground as the failed FTC CARS rule. It includes a ten-day right of cancellation for used vehicles. 

A Pennsylvania law that focuses more on representations about a car’s condition, such as history of flood damage, went into effect in 2024, while in Massachusetts, a 2025 regulation addresses deceptive pricing across the board, including in auto dealerships. 

“The FTC CARS Rule appears to be in the rearview mirror,” the writers conclude, “but for auto dealers and lenders, prohibitions against UDAP under federal and state law remain rules of the road.”

Therefore, they say, auto dealers and lenders “should continue monitoring practices that the FTC CARS Rule was intended to target, including pricing disclosures and the marketing and sales of ancillary products.”