Products Liability Law Daily Consumer groups sue FTC over Consent Orders permitting sale of unrepaired ‘certified’ cars
Tuesday, February 7, 2017

Consumer groups sue FTC over Consent Orders permitting sale of unrepaired ‘certified’ cars

By Colleen Kave, J.D.

A coalition of automobile safety and consumer organizations has filed a lawsuit asking the U.S. Court of Appeals for the District of Columbia Circuit to review and overturn Federal Trade Commission’s (FTC) consent orders that allow General Motors, Lithia Motors, and Jim Koons Management Company to advertise that vehicles encumbered with unrepaired safety recalls are safe and qualified to be sold as "certified" cars. According to a news release issued by The Center for Auto Safety, the consent orders clear the way for dealers to use deceptive language, such as "repaired for safety," "safe," and "passed a rigorous inspection," paired with a confusing, misleading disclaimer that cars "may be subject to a safety recall" (Consumers for Auto Reliability and Safety v. Federal Trade Commission, February 6, 2017).

"Certified" cars are supposedly subject to rigorous safety inspections, and the classification leads consumers to believe that the vehicles have not only been inspected, but that any significant problems have been repaired. Dealers and manufacturers charge an average of $1,200 extra for vehicles bearing the "certified" label.

The petitioners—Consumers for Auto Reliability and Safety (CARS), The Center for Auto Safety, U.S. Public Interest Research Group (PIRG), MASSPIRG, CONNPIRG, and CALPIRG—allege that the FTC’s consent orders, which set a de-facto standard for the entire auto industry, constitute a dangerous and irresponsible abuse of authority, protect unscrupulous auto dealers, and jeopardize the safety of car buyers, passengers, and everyone else who shares the roads and adjacent areas, including sidewalks and parking lots. Other parties, including safety organizations and individual consumers who responded to the FTC’s request for public comments on the proposed consent agreements, also expressed strenuous opposition to the orders and urged the agency to reconsider and modify the agreements to prohibit false advertising. Moreover, Senators Chuck Schumer (D-N.Y.), Dick Durbin (D-Ill.), Bill Nelson (D-Fla.), Richard Blumenthal (D-Conn.), and Ed Markey (D-Mass.) denounced the consent orders as "anti-safety" and "anti-consumer" in a letter to the FTC, and U.S. Representative Jan Schakowsky, the leading Congressional champion of auto safety in the House, also urged FTC Chairwoman Edith Ramirez to reconsider.

The consent orders are already prompting changes in the auto industry, with at least one major car manufacturer issuing an update to dealers that gives them permission to certify used vehicles with open recalls. Additionally, AutoNation, the largest new car dealership chain in the U.S., has reversed its policy of ensuring that all used cars are repaired prior to sale and also allows its new car dealers to sell unrepaired recalled cars, citing the FTC’s consent orders and the election of an anti-regulation President Trump as authority for changes.

In mid-December, the FTC proposed similar consent agreements with CarMax, the largest retailer of used cars in the country, and the Asbury and West-Herr car dealership chains, and consumer groups are opposing those consent orders, as well, citing detailed reports documenting CarMax’s deceptive sales of unrepaired recalled vehicles as "certified" cars. According to these reports, CarMax sold cars with defects including faulty brakes, wheels that fall off, axles that break, unsecured hoods, seat belts that fail in crash situations, and Takata airbags that propel metal fragments at drivers and passengers. The National Highway Traffic Safety Administration (NHTSA) has warned owners of vehicles with such defects to refrain from driving until the necessary repairs have been completed.

While state laws prohibit dealers from engaging in such deceptive practices, some of those laws may not be enforceable until after someone has been injured or killed.

The case is No. 17-1038.

Companies: General Motors, LLC; Lithia Motors; Jim Koons Management Co.; Consumers for Auto Reliability and Safety; The Center for Auto Safety; U.S. Public Interest Research Group (PIRG); MASSPIRG; CONNPIRG; CALPIRG

MainStory: TopStory MotorVehiclesNews

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