FTC Goes Back to Bad ‘70s Policies in Motor Vehicle Dealer Rule

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Last night at CEI’s annual Julian L. Simon Memorial Award Dinner, CEI celebrated the 1970s—both the fashions and the deregulation toward the end of the decade that helped reverse the era of inflation and stagnation. We also released this great accompanying dinner movie, “Saving the 70s, Saving the World.”

Unfortunately, many federal agencies seem to want to go back to the pre-deregulatory interventionist policies that led to the bad parts of that decade. In comments I filed earlier this week with the Federal Trade Commission (FTC) and a related blog post, I lamented that the FTC seemingly wants to go back to its pre-deregulatory 1970s policies of unrestrained nannyism in “protecting” consumers from their own preferences.

In its Motor Vehicle Trade Regulation Rule, the FTC dictates that “a dealer may not charge for an add-on product or service if the consumer would not benefit.” Yet, the FTC does not say how it will determine whether a consumer would “benefit” from an add-on product or service. The proposed rule would also specifically prevent many consumers from buying popular auto products like nitrogen-filled tires and guaranteed-asset protection policies that would cover the amount owed on a car loan in the case of destruction of the vehicle in a theft or accident.

In the comments, I noted that the FTC “rule’s “no benefit” edict harkens back to the FTC’s paternalistic, overreaching crusades of the 1970s, such as seeking a near-total ban on television advertisements aimed at children. I continued:

Such actions alarmed members of Congress from both parties, and led a 1978 Washington Post editorial that described the FTC as a “national nanny.” Congress responded by delaying FTC appropriations and authorization several times in the 1970s and 1980s, and—as mentioned—eventually limiting the FTC’s authority for going after an “unfair act.” The FTC should not return to these misguided paternalistic crusades, which ultimately take its focus away from preventing actual fraud and deception in the market.

I noted that the FTC “no benefits” edict also likely exceeds its authority to go after both “deceptive” and “unfair” products. Noting that in 1994 Congress limited the definition of “unfair” in the Federal Trade Commission Act to only cover practices that are likely to cause “substantial injuries” to consumers that are neither avoidable nor offset by countervailing benefits, I wrote that “a dealer charging for a product or service that merely has ‘no benefit’—according to the FTC—does not meet the law’s definition of either a ‘deceptive’ or ‘unfair’ act that the FTC is empowered to prohibit.”

Hopefully, for the sake of the timeless values of consumer choice and individual sovereignty, the FTC will decide not to go back to the 1970s, or for Congress and the courts will prevent it from doing so.