NADA Secures Dual Victory: Overcoming Historic Snowstorm and Overturning FTC’s CARS Rule in Court

The National Automobile Dealers Association (NADA) achieved a significant victory by successfully hosting the NADA Show 2025 in New Orleans last week, despite the city being hit by its most severe snowstorm in over a century just days before the event. Adding to their success, the U.S. Court of Appeals for the Fifth Circuit, located in New Orleans, ruled in favor of NADA and the Texas Automobile Dealers Association (TADA) on Monday, overturning the Federal Trade Commission’s (FTC) CARS Rule.

In October, three judges heard oral arguments in the legal challenge brought by the dealer associations against the FTC’s CARS Rule. On Monday, the court ruled 2-1 to vacate the rule, which was originally set to take effect last summer.

Julia Whitelock, a partner at Hudson Cook, shared the 23-page ruling with Cherokee Media Group. She explained that the Fifth Circuit’s decision on January 27, 2025, held the FTC accountable to its own regulations. The court found that the FTC failed to follow the required procedural steps, specifically issuing an advanced notice of proposed rulemaking (ANPRM) before enacting the CARS Rule under Section 18(a)(1)(B) of the FTC Act. This procedural misstep was deemed significant enough to invalidate the rule. Whitelock noted that while the FTC could seek further review, the ruling underscores the importance of adhering to established procedures.

The court also rejected the FTC’s argument that the Dodd-Frank Act provided a clear directive to bypass regular Administrative Procedure Act (APA) procedures. Instead, the court found that the Act merely authorized the FTC to use APA procedures but did not eliminate the agency’s additional procedural requirements, including the need for an ANPRM.

NADA President and CEO Mike Stanton hailed the decision as a win for both the rule of law and consumers. He criticized the CARS Rule as rushed, poorly researched, and unnecessary, arguing that it would have added significant time, complexity, and cost to the car-buying process. Stanton emphasized that the ruling allows dealers to focus on improving the customer experience and streamlining transactions.

The FTC’s CARS Rule, unveiled in late 2023, aimed to combat deceptive practices in auto retail, such as bait-and-switch tactics and hidden fees. However, the rule faced strong opposition from NADA and the dealer community. In January, the FTC postponed the rule’s effective date pending the outcome of the legal challenge.

Stanton expressed relief at the FTC’s decision to delay the rule, reiterating NADA’s stance that the rule was unnecessary and would complicate the car-buying process. He pledged to continue opposing the rule through legal and legislative channels.

While the dealer community may feel inclined to celebrate, auto finance lawyer Steve Levine cautioned against premature jubilation. He praised the Fifth Circuit’s decision as well-reasoned but warned that the FTC could still pursue new rulemaking. Additionally, he noted that many states might adopt similar regulations, particularly concerning advertising and pricing transparency.

Levine also suggested that the FTC and Consumer Financial Protection Bureau (CFPB) under the Biden administration had taken aggressive regulatory positions, seemingly unconcerned about potential court reversals. This approach, he argued, ultimately led to the overturning of the CARS Rule.

In summary, NADA’s successful hosting of the 2025 NADA Show and the favorable court ruling mark significant achievements for the association and the dealer community. However, the regulatory landscape remains uncertain, and dealers must remain vigilant as states and federal agencies continue to explore new rules and enforcement actions.