Not many people enjoy sitting in a car dealership spending hours evaluating or making a costly purchase, but it’s far more frustrating when the dealership allegedly engages in practices that face the ire of law enforcement.

A recent case announced by the Federal Trade Commission (FTC) is important for many reasons. First, it’s a helpful example of some of the new strategic approaches taken by the FTC after the Supreme Court’s decision in AMG. Second, it’s a helpful example of some of the priorities of the current FTC. And third, the allegations are quite serious and raise important equity issues. It is also a record-setter; at $10 million, it is the largest settlement for any FTC auto lending case.

The case is Napleton – and the FTC, along with the state of Illinois, sued Illinois-based Napleton, a large auto dealership, as well as one individual, the general manager of two of the dealership locations. The allegations are broad and varied. The agencies allege that the defendants deceived consumers – and engaged in unfair practices – through a complex and time-consuming purchasing process that at times included charges for add-ons that were made without consumers’ consent, and at other times saw the company insisting that the add-ons were required. The complaint alleges that more than $70 million in unauthorized add-on fees were imposed. But it doesn’t end there. Indeed, the complaint states that “[a]ccording to a survey of Napletons’ customers, at least 83% of them were charged for add-on products without authorization or as a result of deception.” Although not specified in the complaint, it would appear likely that law enforcement conducted that study as part of its investigation.

With respect to the general manager, the complaint states that he received complaints about add-ons and failed to correct the practices. In fact, in response to a corporate customer retention manager who stated that she was beginning to see “a small pattern with customers claiming they’re not given proper disclosures for products being added to the deal,” the general manager stated in part, “Tough times.” Ignoring problems when they are brought to your attention is one way to get yourself named individually in an FTC lawsuit.

In addition to the add-on allegations, the complaint details other advertising problems, including missing disclosures and some allegations that are specific to Illinois advertising laws for motor vehicles.

As if that weren’t enough, there are also some very serious allegations regarding violations of the Equal Credit Opportunity Act (ECOA). According to the complaint, “Corporate Defendants have charged, on average, Black borrowers more for markups and add-ons than similarly situated non-Latino White consumers.” The complaint details the disparities in charges between Black consumers and non-Latino White consumers and that the differences are statistically significant.

There is a lot to unpack about this case. First and foremost, it is a joint action between the FTC and a state. As we have previously stated, this approach can allow the FTC to obtain substantial monetary relief despite being stripped of its authority to obtain monetary relief under Section 13(b) by the Supreme Court in the AMG decision. It is a technique that we anticipate we will continue to see more frequently. And to the extent the FTC increasingly looks to partnering with the states, this decision makes the risk of noncompliance with the varied and often esoteric state laws more risky as well.

The case also highlights the FTC’s increased focus on issues involving discrimination. A few years ago, we saw another auto dealer case involving discrimination allegations. And more recently, the FTC has been focused on whether artificial intelligence is being harnessed in ways that may be, advertently or not, leading to discriminatory outcomes. An insightful 2021 blog post by an FTC staffer provides a lot more information about what the agency is currently thinking about regarding the use of AI and potential discrimination and serves as an important reminder for companies to closely consider. As targeted advertising becomes increasingly sophisticated and segmented, marketers should be alert to potential discriminatory outcomes in the offers they are making, even if unintentional.

A joint statement from Commissioner Slaughter and Chair Khan in connection with the auto case makes it pretty clear that in future ECOA cases, they would want the agency to use its unfairness authority as well. The statement discusses how discriminatory practices can be evaluated under the FTC’s three-part unfairness test and concludes that this would be a valid use of this authority in future cases (and would have been in this case as well). Given that Alvaro Bedoya’s nomination to be the fifth commissioner appears to be proceeding, it is probably safe to assume that future ECOA cases at the FTC will also likely include an unfairness allegation.

The case is also a reminder of the FTC’s continued focus on so-called dark patterns, particularly as they relate to billing practices. We have seen a lot of focus recently on subscription services’ hidden costs and drip fees. These and other billing practice issues clearly remain important to the agency.

And finally, given all the recent talk about the FTC and rulemaking, it is worth noting that in the Dodd-Frank Act, Congress gave the FTC authority to engage in rulemaking regarding unfair or deceptive practices involving auto dealers. Nothing has been announced about this recently, but former Commissioner Chopra frequently raised his concerns that the FTC had not yet exercised this authority. We will keep you posted if there are any developments on that front.