The FTC's Used Car Rule (CRS Report for Congress)
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| Release Date |
Oct. 14, 1983 |
| Report Number |
IB81159 |
| Authors |
Bruce K. Mulock, Economics Division |
| Source Agency |
Congressional Research Service |
Summary:
New life was breathed into the Federal Trade Commission's (FTC's) used carrule on July 6 when the Supreme Court affirmed a lower court ruling that theso-called legislative veto power that Congress granted itself in 1980 overany rules the agency might subsequently develop is unconstitutional. Therule, which calls for used car dealers to disclose (on a window sticker)warranty information and "known defects, seemingly had been killed in May1982 when both the House and Senate passed concurrent resolutions ofdisapproval. The congressional action followed an intensive and expensivelobbying effort supported by many of the nation's 57,000 businesses that sellused cars.The rule which was finally adopted by the Commission after more than 5years of hearings, debate, and deliberation, is considerably weaker thanearlier versions. Its purpose, however, remains the same: to prevent anddiscourage oral misrepresentations and deceptive omissions of material factsby those selling used cars concerning warranty coverage and mechanicalcondition.Despite the rule's apparent new life, its fate is still very much indoubt. One reason stems from a case pending in the U.S. Court of Appeals forthe Second Circuit which was brought by several used car dealers. However, afar more serious reason, in the eyes of most observers, is the fact that theagency (by a 3 to 2 vote) has re-opened the rulemaking. That action islikely to produce one of three results: a delay in implementing the rule; a"modified" rule concerned only with warranty information (as has beenproposed by FTC Chairman Miller); or, killing the rule altogether.
