Assessment of Costs Associated with the Implementation of the Federal Trade Commission Notice of Proposed Rulemaking (RIN 2022-14214), CFR Part 463Download Now
The Federal Trade Commission (FTC) published a proposed Motor Vehicle Dealers Trade Regulation Rule (16 C.F.R. § 463) (“Trade Rule”) on July 13, 2022. In the Trade Rule, the FTC solicited “comments from the public to improve [benefit or cost] estimates before the promulgation of any final Rule.” In response to this solicitation, the National Automobile Dealers Association (NADA) requested the Center for Automotive Research (CAR) to conduct this study to help determine and analyze the potential impact of the Trade Rule, if finalized as proposed, on franchised light-duty vehicle dealerships, their likely actions in response, and the costs associated with compliance.
Estimated costs for dealer compliance and the impact on their transactions with consumers were derived from approximately 60 dealer surveys and 15 interviews, conducted from August 2022 through December 2022, with dealers, ESIGN contract technology providers, and IT developers,3 as well as regulatory training professionals. CAR’s survey focused on five key areas including: 1) prohibited misrepresentations, 2) new consumer disclosure requirements, 3) “Add-On” prohibitions and disclosures, 4) recordkeeping, and 5) consumer vehicle transactions. Importantly, dealers were asked for incremental costs, directly related to regulatory compliance only.
The Center for Automotive Research also included qualitative feedback from dealers within our study to support key survey findings, provide essential dealer feedback, and capture respondents’ viewpoints on key regulatory challenges for consideration. Additionally, CAR researchers elected to present our dealer survey findings using median values, to reduce the influence of outlier responses, and to provide the most conservative estimate of costs.
According to the analysis in this study, median upfront costs for compliance with the Federal Trade Commission Rule, if finalized as proposed, were estimated by dealers to be USD 46,950 per location. These upfront costs include updated training, IT system investment, as well as planning and preparation. This results in a total median upfront cost of USD 2,184,348,750 for automobile dealers nationally.