In the Matter of CarMax, Inc., File No. 1423202 #00012

Submission Number:
Steven Taterka
Initiative Name:
In the Matter of CarMax, Inc., File No. 1423202
It is appalling that the FTC is considering a settlement which would ratify the sale of any car under recall without the safety defect necessitating the recall first being fixed. Federal law has long prohibited the sale of new cars under recall where the necessary repairs have not been made. Recent federal legislation, the Raechel and Jacqueline Houck Safe Car Rental Act of 2015, codified at 49 U.S.C. § 30102(a) et seq., additionally prohibits rental companies from selling, leasing or renting any automobile under safety recall where the repairs have not yet been made (rental fleets of less than 35 vehicles are exempt due to a last minute exemption added by a congressman who is also a car dealer). This recent federal legislation was enacted following the tragic deaths of the Houck sisters driving a rental car that had been recalled for a power steering hose defect but had not been repaired. I fail to see any justification for putting one group of drivers, i.e., drivers of used cars, at risk while at the same time federal law explicitly recognizes the necessity of protecting another group, i.e., drivers of new cars. The proposed consent order focuses on the practice of selling used cars without "clearly and conspicuously" disclosing that the defect for which the vehicle is under recall has not been repaired. The flaw with this approach is that it assumes some level of notice is sufficient to allow the retail sale of potentially dangerous vehicles. The proposed consent order thus shifts responsibility for getting the repair performed from the selling dealer to the consumer. Previously five states, New Jersey, California, Maryland, Virginia and Tennessee, each considered legislation that would have authorized such sales with "disclosure" but each rejected it. The FTC is thus proposing to approve this "disclosure" approach which would immunize dealers for selling unsafe recalled cars notwithstanding that five states have already considered and rejected it. If the FTC was to condone this practice, it would be a first from an agency whose mission is to protect consumers, not put their lives at risk. A major flaw with the proposed settlement is that it assumes customers will be able to get the necessary repairs made. That may not be the case since even if customers rush to the nearest franchise dealer for repairs, parts may not be available for months or longer. Current examples are the malfunctioning GM ignition switches and exploding Takata airbags. Even with some form of disclosure, customers purchasing these unrepaired vehicles may not always be aware that their vehicle is under recall. The purchase of a vehicle involves signing a multitude of documents including a buyers order, credit application, retail installment sales contract, application for title & registration, odometer disclosure statement, power of attorney and perhaps other documents depending on whether the customer also purchased an extended warranty, credit life and/or credit disability insurance, GAP insurance/waiver, etc. To expect customers to focus on disclosure of an unrepaired recall in a stack of documents to sign after the customer has spent hours test driving a car and negotiating price, financing and add-on items is unrealistic. Of additional concern, if a customer purchasing an unrepaired recall vehicle does not bring it to a franchise dealer for repair, drivers and passengers in OTHER vehicles are at risk. Such other vehicles may be involved in an accident with the recalled vehicle, an accident which might not have happened if the recalled vehicle had been repaired. Finally, the proposed disclosure language that unrepaired recall cars "may be" subject to recalls for safety issues is very confusing. While we're at it, why not "may be" a prior salvage vehicle, or "may" have a false odometer reading, or "may have" been in a flood, etc.? In these contexts such language has already been rejected by courts. The FTC should reject this settlement.