Proposed FTC regulations met with dealer hesitancy

Proposed FTC regulations met with dealer hesitancy

Just over half of dealers surveyed by Automotive News think stricter regulation of dealership advertising and finance and insurance practices would have a negative impact on the industry, but opinions are mixed on changes to day-to-day business.

Roughly 54 percent of dealers surveyed believe the Federal Trade Commission’s proposed regulations would be a net negative, according to the 2023 Dealer Outlook Survey of 264 dealers and dealership managers. About 15 percent believe the change would be positive, and 19 percent think it would be neither. The remaining respondents were unsure.

The survey respondents had mixed thoughts on what the impact would be on their own business practices, with nearly equal percentages recording moderate, mild and no impact.

Under the proposed regulations, products that do not provide additional benefit would be banned, and dealers would be required to disclose both an offering price and a list of add-on prices to the customer.

These changes have become the center of a contentious debate. The FTC has repeatedly voiced a desire to increase consumer protections while some industry leaders have expressed concern that the policies are redundant and harmful.

The survey responses reflected this. One respondent wrote the regulations are “just another bureaucratic added cost,” while another said the new rules would be “better for the customer” and that the process “needs transparency.”

Dean Anderson of Burien Toyota, about 10 miles south of Seattle, said many of the proposed protections already exist under state law, making the federal regulations redundant.

“We’re required to do substantial additional paperwork, the duplication of a lot of the things that we already do,” Anderson said.

This paperwork includes documentation of “express, informed consent” as outlined in the proposed regulation to any products or add-ons that raise the price above the advertised offer.

Complying with these requirements, Anderson added, also would require training that comes at the dealership’s expense.

Beyond being an inconvenience, he is worried the extra paperwork would impede their ability to make a customer’s experience “quick and efficient.”

Overall, Anderson believes the regulations represent an unfair “one-size-fits-all” approach by the FTC. Dealers who do good business would be unnecessarily burdened, he said, for the sake of managing the few “egregious offenders.”

Bob Zeigler of Zeigler Chevrolet in Claysburg, Pa., about 100 miles east of Pittsburgh, believes these regulations would not change much.

Fines and crackdowns on misleading practices have shown dealerships the consequences of bad business, Zeigler said.

As a result, most dealerships are operating with up-to-date practices, he said. Because of this, following the new rules won’t impact day-to-day operations.

“We have always had rules, and I don’t think the dealers are abusing the system,” Zeigler said.

In the minority of respondents who view the regulations positively was Jack Ballinghoff, COO of Ourisman Automotive Group of Marlow Heights, Md., just south of Washington, D.C. Ourisman Automotive Group ranks No. 20 on Automotive News‘ list of the top 150 dealership groups based in the U.S., with retail sales of 29,564 new vehicles in 2021.

For Ballinghoff, his perspective is more about the spirit inspiring the changes than the details.

“I am embracing any forces that bring our dealership and our business model closer to frictionless transactions and work toward improving our reputation with consumers,” Ballinghoff said.

Through personal observation and customer reports, Ballinghoff has seen how some dealers have learned that “they can boost their profits in any way they have wanted to,” he said. These “excesses” prompt intervention, he said.

To make positive change possible though, the FTC must ensure any new rules are clearly defined and implementable, Ballinghoff said. This sentiment reflects a similar hesitancy among dealers who believe the regulations are vague and confusing.

Ourisman is already independently evaluating their products to ensure each “is worthwhile and has benefit to the customer.” The greatest change in business practices would be in greater documentation, Ballinghoff said. Instead of burdening the customer, however, he believes this would help to increase consumer trust in dealers.

“I don’t think that by being transparent, we have to be less profitable,” Ballinghoff said.

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