RULES AND REGULATIONS
Title 37—LAW
OFFICE OF ATTORNEY GENERAL
[37 PA. CODE CH. 301]
Automotive Industry Trade Practices
[54 Pa.B. 4122]
[Saturday, July 20, 2024]The Office of Attorney General (OAG), through its Public Protection Division, amends 37 Pa. Code Chapter 301 (relating to automotive industry trade practices) by amending §§ 301.1, 301.2 and 301.4 (relating to definitions; advertising and sales presentation requirements; and general provisions—motor vehicle dealer) to read as set forth in Annex A.
A. Effective Date
This final-form rulemaking will be effective 30 days after publication in the Pennsylvania Bulletin.
B. Contact Person
For further information on this final-form rulemaking, the primary contact is John Abel, Chief Deputy Attorney General, Bureau of Consumer Protection and the secondary contact is Mark Wolfe, Deputy Attorney General, Bureau of Consumer Protection, Office of Attorney General, Strawberry Square, 15th Floor, Harrisburg, PA 17120, (717) 787-9707.
C. Statutory Authority
This final-form rulemaking is being made under the authority of section 3.1 of the Unfair Trade Practices and Consumer Protection Law (act) (73 P.S. § 201-3.1), regarding the statutory rulemaking authority of the OAG.
D. Purpose and Background
This final-form rulemaking is designed to improve, enhance and update the OAG's unfair or deceptive acts or practices regulations. The specific purpose of this final-form rulemaking is described in more detail under the summary of final-form rulemaking.
E. Summary of Final-Form Rulemaking
1. Introduction
The OAG enforces and administers the act. The OAG has determined that it is necessary for the enforcement and the administration of the act to amend the existing automotive industry trade practices regulations to provide adequate protections to consumers regarding the inspection of motor vehicles and the written disclosure of certain attributes of a motor vehicle's roadworthiness.
2. Policy and determination
The OAG has long taken the policy position that certain unfair or deceptive automotive industry market trade practices constitute unfair methods of competition and unfair or deceptive acts or practices in violation of the act.
Through the experience of investigation and litigation, the OAG has identified that motor vehicle dealers are increasingly utilizing electronic means to advertise the sale of particular motor vehicles and motor vehicle goods and services, a practice which is not explicitly captured in the automotive industry trade practices regulations' current definition of ''advertisement.'' The OAG has further identified that the disclosures and inspections which motor vehicle dealers are currently required to perform are insufficient to fully inform consumers that they are purchasing motor vehicles bearing certain unsafe conditions. The OAG has determined that this final-form rulemaking under the act will remedy these vacuums under Commonwealth law.
3. Automotive industry trade practices
The OAG has adopted the staff recommendation to make certain amendments to the Automotive Industry Trade Practices regulations in Chapter 301 (Auto Regulations). First, § 301.1 includes electronic means in the definition of ''advertisement.'' Second, § 301.2(5) is amended to require that the disclosure of the enumerated conditions be provided in writing. Third, § 301.2(5.1) is created. Paragraph (5.1) directs that a motor vehicle dealer may not advertise or offer a motor vehicle for sale unless the selling motor vehicle dealer designates a certified inspection mechanic to inspect a motor vehicle not more than 30 days after it enters the motor vehicle dealer's inventory for all conditions listed in § 301.2(5). Thereafter, if the motor vehicle accumulates 500 miles or more while in the inventory of the selling motor vehicle dealer, the dealer must inspect the motor vehicle for the conditions listed in § 301.2(5) not more than 30 days prior to sale, excluding the ability of the vehicle to pass a State inspection. This section does not apply to sales of motor vehicles between two motor vehicle dealers, the sales of motor vehicles under a duly authorized vehicle auction license, the sales of salvaged or nonrepairable motor vehicles bearing the applicable certificate, or the sales of motor vehicles which are located outside this Commonwealth during the entire time it is advertised or offered for sale.
Finally, § 301.4(9.1) clarifies that compliance with § 301.2(5) regarding written disclosures is still required notwithstanding any use of the term ''AS IS'' under § 301.4(9) regarding disclaiming warranty. The selling motor vehicle dealer must describe the vehicle as being sold ''AS IS'' and list in writing any conditions listed in § 301.2(5) that are present in the vehicle.
These amendments have been prepared in light of comments previously submitted by interested parties, the Pennsylvania Automotive Association and the Independent Automobile Dealers Association of Pennsylvania.
4. Basic policy choice
''The operative provision of the Unfair Trade Practices and Consumer Protection Law provides: 'Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. . .are hereby declared unlawful.''' 73 P.S. § 201-3 (Emphasis omitted). Gabriel v. O'Hara, 368 Pa. Super. 383, 391, 534 A.2d 488, 492 (1987). The operative provision of the act provides the Legislature's basic policy choice which guides the OAG's rulemaking. The OAG proposes that Chapter 301 be amended to read as set forth in Annex A.
F. Paperwork
Generally, this final-form rulemaking will not increase paperwork and will not create new paperwork requirements. This final-form rulemaking will have a de minimis impact on paperwork for class action representatives purporting to settle and release OAG claims under the act.
G. Benefits, Costs and Compliance
Through this final-form rulemaking, consumers will be further protected from unfair methods of competition and unfair or deceptive acts or practices in the conduct of trade or commerce by unscrupulous businesses. The clear articulation of this unfair or deceptive trade practices regulation will make the regulation easier to understand by the public and will facilitate compliance.
This final-form rulemaking will have no adverse fiscal impact on the Commonwealth or its political subdivisions. The OAG estimates that the cost of compliance with this final-form rulemaking may average $540 annually plus $41 per vehicle entering the inventory of a dealership, subject to several caveats, including whether the particular motor vehicle dealership already subjects all vehicles entering their inventory to a safety inspection.
H. Sunset Review
The OAG is not establishing a sunset date for these regulations because they are needed for the OAG to carry out its statutory authority and because the OAG will periodically review these regulations for their effectiveness.
I. Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P.S. § 745.5(a)), on April 28, 2023, the OAG submitted a copy of the notice of proposed rulemaking, published at 53 Pa.B. 2590 (May 13, 2023) and a copy of a Regulatory Analysis Form (RAF) to the Independent Regulatory Review Commission (IRRC) and to the chairperson of the Judiciary Committee of the Senate and to the chairperson of the Judiciary Committee of the House of Representatives.
Under section 5(c) of the Regulatory Review Act, the OAG is required to submit to IRRC and the Senate and House committees copies of comments received during the public comment period, as well as other documents when requested. The OAG received and reviewed a number of public comments following its submission of its proposed rulemaking, as well as comments from IRRC and Representative Eric Nelson, MS, CSP. These comments have been considered and responded to by means of the Comment and Response Document included with the Regulatory Analysis Form (RAF) and summarized as follows. The Comment and Response Document is available to be viewed on IRRC's web site at http://www.irrc.state.pa.us by searching for Regulation # 59-001 or IRRC # 3373. Further, the OAG held a public hearing on December 13, 2023, at which it heard testimony from the Pennsylvania Automotive Association, both regarding the proposed rulemaking in general and in response to certain questions posed by the OAG in the Pennsylvania Bulletin.
Following the initial submission of this final-form rulemaking to IRRC and the Senate and House committees, on February 6, 2024, the OAG received an additional comment and suggestion from the Pennsylvania Automotive Association. Concluding that this suggested, slight modification would still effectuate the goals of this final-form rulemaking effort, the OAG temporarily withdrew its final-form rulemaking on February 23, 2024, to incorporate it into the rulemaking.
The OAG resubmitted this final-form rulemaking to IRRC and the Senate and House committees on March 19, 2024. Under section 5.1(j.2) of the Regulatory Review Act (71 P.S. § 745.5a(j.2)), on May 14, 2024, the final-form rulemaking was deemed approved by the Senate and House committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on May 15, 2024, and approved the final-form rulemaking.
J. Summary of Comments and Responses
The OAG considered each of the comments it received on its proposed rulemaking and identified 17 discrete questions, concerns and requests for clarification to which it has responded in its Comment and Response Document. These comments and the OAG's responses, including changes made in this final-form rulemaking, are summarized in this section.
IRRC requested that certain additional information be added to the RAF accompanying the rulemaking.
First, IRRC requested that the OAG quantify the number and type of consumer complaints it has received from consumers over the last 5 years and to explain how this final-form rulemaking will help prevent similar problems from occurring. From January 1, 2019, through December 18, 2023, the OAG's Bureau of Consumer Protection received more than 150,500 written consumer complaints. Over 22,000 (approximately 15%) have concerned motor vehicles, representing one of the most common categories of consumer complaint year to year. Of these motor vehicle complaints, the OAG has determined that the issues intended to be addressed by this final-form rulemaking were presented in complaint narratives at least 6,500 times. The OAG anticipates that this final-form rulemaking will address these problems in two primary ways. First, a consumer may be less inclined to purchase a vehicle if they are shown in writing that a vehicle bears certain conditions which render it not roadworthy. Second, this final-form rulemaking will allow the OAG to more effectively enforce the act against the fraction of unscrupulous motor vehicle dealers who, under the regulations as they are presently written, may be able to skirt the law by claiming that certain unsafe conditions in a motor vehicle were disclosed verbally and, at any rate, were sold ''AS-IS.'' In requiring these disclosures to be made in writing, the OAG will be on firmer footing should it be necessary to bring a proceeding to enjoin unfair or deceptive trade practices.
Second, IRRC requested that the OAG more concretely identify the types and numbers of persons, businesses (including small businesses) and organizations which will be affected or required to comply with the regulation and the possible costs associated with compliance. Using data from the United States Census Bureau and the State Board of Vehicle Manufacturers, Dealers and Salespersons, the OAG estimates that approximately 150 motor vehicle manufacturers, 6,000 motor vehicle dealers and over 10,000 motor vehicle repair shops constitute the ''regulated community'' covered by the Auto Regulations. The change in this final-form rulemaking applicable to all of these entities, amending the definition of ''advertisement'' is not expected to impose any significant costs. The bulk of this final-form rulemaking applies only to motor vehicle dealers. As previously set forth and in the OAG's RAF, the annual cost of compliance for a motor vehicle dealer may be $540 to inspect the limited class of vehicles which will accumulate 500 miles while in their inventory for certain conditions and $41 to subject each vehicle entering their inventory to a full safety inspection. However, this figure is subject to several caveats, including the size of the particular dealership and whether it already adheres to the common industry practice of inspecting all vehicles which come into their inventory. As a final note, the OAG estimates that approximately 95% of affected motor vehicle dealers would be considered ''small businesses'' under Federal and State guidelines. Per the United States Small Business Administration, 99.9% of American businesses are small businesses. The OAG expects that used motor vehicle dealers likely align with this figure, and new motor vehicle dealers are both fewer and less likely to be small businesses, and thus only reduce our estimated percentage slightly.
IRRC also asked certain clarifying questions. To address each question in turn: (1) If an auto dealer lists all of its inventory on its web site, that action would be considered an advertisement and therefore subject the auto dealer to all applicable requirements of Chapter 301. (2) There is no difference between a customer that finds an inventory list on a web site by means of their own research and a customer that is persuaded to view a web site through another advertisement, insofar as the Auto Regulations are concerned. (3) Out-of-State businesses have the same obligations as a business based in this Commonwealth in relation to the Auto Regulations, except where explicitly exempted therefrom, and the OAG has long relied on the act to enforce compliance upon all businesses which allegedly violate the act, wherever they are located.
IRRC further requested that the OAG explain how it will implement and administer the revised definition of ''advertisement.'' In short, the amended definition of ''advertisement'' is merely intended to modernize the regulations and make explicit what had always been considered to be the case, that is that online advertisements fall within the definition of ''advertisement'' as presently written.
The OAG received additional comments from IRRC and the public which led directly to changes from the proposed rulemaking to this final-form rulemaking.
First, the OAG did not intend for the change of title from ''Bureau of Consumer Protection'' to ''Unfair Trade Practices'' to be included in the proposed rulemaking. The existing title of Part V is retained in this final-form rulemaking.
Second, the OAG deletes the proposed addition to § 301.2(5) in this final-form rulemaking. This would have required the advertiser or seller of a motor vehicle to disclose in writing ''any other material condition which substantially impairs vehicle use or safety.''
Third, the OAG takes several steps to make paragraph (5.1) clearer in both what is expected of motor vehicle dealers and to which kinds of transactions it is intended to apply. As a threshold matter, the OAG notes that it intends that this final-form rulemaking use the term ''inspect'' in its ordinary meaning (that is, to take a careful look) and not, in itself, to refer to a PennDOT safety inspection. However, since one of the conditions which would render a motor vehicle not to be unroadworthy is the inability to pass State inspection, this would be the practical effect.
Fourth, the OAG modifies the ''500 mile'' provision of paragraph (5.1) from a requirement that the motor vehicle dealer inspect vehicles in their inventory for certain conditions within 30 days after each time those vehicles accumulate 500 miles while in the dealer's inventory. In consideration of certain concerns with the practical implementation of this provision, it now requires the selling motor vehicle dealer to inspect the vehicle for certain conditions not more than 30 days prior to the sale of a vehicle which has accumulated more than 500 miles while in the dealer's inventory.
To better set forth the OAG's intent under paragraph (5.1), it is split into several subdivisions itself. Paragraph (5.1)(i)(A) addresses inspection upon a motor vehicle's entry into inventory and requires a certified inspection mechanic designated by the selling motor vehicle dealer to inspect the motor vehicle for ''all conditions listed in paragraph (5),'' including the ability or inability to pass a State inspection. Paragraph (5.1)(i)(B) addresses the limited class of situations in which a motor vehicle accumulates 500 miles or more while in the selling motor vehicle dealer's inventory. It merely requires the selling motor vehicle dealer to inspect the motor vehicle ''for all conditions listed in paragraph (5), except the condition listed in paragraph (5)(iii).'' The remaining conditions for which a motor vehicle dealer would be required to take a careful look for should not take substantial time or labor to discover, and further do not require the services of a certified inspection mechanic.
On the applicability of paragraph (5.1), the OAG notes that the definition of ''dealer or motor vehicle dealer'' in § 301.1 the Auto Regulations only includes persons who are ''engaged in the business of selling, offering for sale or negotiating the retail sale of motor vehicles.'' However, given concerns raised in the comments, the OAG makes a further alteration to paragraph (5.1) to expressly exempt certain transactions. These exemptions are now contained in subparagraph (ii), which states that the section ''shall not apply to the advertisement or offering for sale of a motor vehicle under any of the following circumstances: (A) To another motor vehicle dealer. (B) Pursuant to a duly authorized vehicle auction license. (C) Bearing a certificate of salvage or a nonrepairable vehicle certificate, or both. (D) Located outside this Commonwealth at all times during which it is advertised or offered for sale.'' The OAG makes these exemptions in recognition that certain types of motor vehicle transactions already have effective self-imposed safeguards in place and are largely populated by buyers who are more sophisticated than average and therefore less likely to require the protections afforded by this final-form rulemaking. The change also addresses issues which may arise in both compliance with and enforcement of the Auto Regulations in the context of a limited class of out-of-State motor vehicle dealers using certain novel business methods.
The OAG thanks the public, IRRC and Representative Eric Nelson, MS, CSP for providing comments in response to the proposed rulemaking. As a direct result of these comments, the OAG was able to prepare this final-form rulemaking which it believes to be much improved and which will more effectively protect consumers from harm from certain unscrupulous actors in the advertisement and sale of motor vehicles.
K. Findings
The OAG finds:
(1) Public notice of proposed rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P.L. 769, No. 240) (45 P.S. §§ 1201 and 1202), referred to as the Commonwealth Documents Law, and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2 (relating to notice of proposed rulemaking required; and adoption of regulations).
(2) A public comment period was provided as required by law and all comments received were considered in drafting this final-form rulemaking.
(3) This final-form rulemaking does not enlarge the purpose of the proposed rulemaking published at 53 Pa.B. 2590 (May 13, 2023).
(4) This final-form rulemaking has been submitted to and has been deemed approved by the chairperson of the Judiciary Committee of the Senate and the chairperson of the Judiciary Committee of the House of Representatives.
(5) This final-form rulemaking has been submitted to and has been approved as being in the public interest by IRRC.
(6) This final-form rulemaking has been approved for form and legality by the Office of Attorney General, Legal Review Section.
(7) The adoption of this regulation in the manner provided by this Order is necessary and appropriate for the administration and enforcement of the act.
L. Order
The OAG, acting under the authority of section 3.1 of the act, orders:
(1) The regulations of the OAG, 37 Pa. Code Chapter 301, are amended by amending §§ 301.1, 301.2 and 301.4 to read as set forth in Annex A, with ellipses referring to the existing text of the regulations.
(2) The OAG shall certify this final-form rulemaking and deposit it with the Legislative Reference Bureau as required by law.
(3) This final-form rulemaking shall take effect 30 days after publication in the Pennsylvania Bulletin.
MICHELLE A. HENRY,
Attorney General(Editor's Note: See 54 Pa.B. 3134 (June 1, 2024) for IRRC's approval order.)
Fiscal Note: Fiscal Note 59-001 remains valid for the final adoption of the subject regulations.
Annex A
TITLE 37. LAW
PART V. BUREAU OF CONSUMER PROTECTION
CHAPTER 301. AUTOMOTIVE INDUSTRY TRADE PRACTICES § 301.1. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
Advertisement—An oral, written or graphic statement which offers for sale a particular motor vehicle or motor vehicle goods and services or which indicates the availability of a motor vehicle or motor vehicle goods and services, including a statement or representations made in a newspaper, periodical, pamphlet, circular, other publication or on radio or television; contained in a notice, handbill, sign, billboard, poster, bill, catalog or letter; placed on a web site, in a mobile application, on a social media outlet or on any other electronic platform; or printed on or contained in a tag or label which is attached to merchandise.
* * * * * § 301.2. Advertising and sales presentation requirements.
With respect to an advertisement or sales presentation offering or making available for sale a new or used motor vehicle or maintenance service or repair on a new or used motor vehicle, the following will be considered unfair methods of competition and unfair or deceptive acts or practices:
* * * * * (5) The representation in an advertisement or sales presentation that a motor vehicle or motor vehicle goods or services are of a particular style, model, standard, quality or grade if they are of another or if the representation conflicts with a written notice or disclosure required under this chapter. For the purposes of this chapter, a motor vehicle which is offered for sale is represented to be roadworthy, and the advertiser or seller shall disclose in writing prior to sale the following conditions if the advertiser or seller knows or should know that the conditions exist in the motor vehicle:
(i) Frame bent, cracked or twisted.
(ii) Engine block or head cracked.
(iii) Vehicle unable to pass State inspection.
(iv) Transmission damaged, defective or so deteriorated as to require replacement.
(v) Vehicle flood damaged.
(vi) Differential damaged, defective or so deteriorated as to require replacement.
(5.1)(i) The advertisement or offering of a motor vehicle for sale unless:
(A) A certified inspection mechanic designated by the selling motor vehicle dealer has inspected the motor vehicle not more than 30 days after the motor vehicle comes into the inventory of the selling motor vehicle dealer or advertiser for all conditions listed in paragraph (5); and
(B) The selling motor vehicle dealer has inspected the motor vehicle not more than 30 days prior to the sale if the motor vehicle accumulates 500 or more miles while in the inventory of the selling motor vehicle dealer or advertiser for all conditions listed in paragraph (5), except the condition listed in paragraph (5)(iii).
(ii) This section shall not apply to the advertisement or offering for sale of a motor vehicle under any of the following circumstances:
(A) To another motor vehicle dealer.
(B) Pursuant to a duly authorized vehicle auction license.
(C) Bearing a certificate of salvage or a nonrepairable vehicle certificate, or both.
(D) Located outside this Commonwealth at all times during which it is advertised or offered for sale.
(6) The making of a representation or statement of a fact in an advertisement or sales presentation if the advertiser or salesperson knows or should know that the representation or statement is false and misleading or if the advertiser or salesperson does not have sufficient information upon which a reasonable belief in the truth of the representation could be based.
* * * * * § 301.4. General provisions—motor vehicle dealer.
(a) With regard to a motor vehicle dealer, the following will be considered unfair methods of competition and unfair or deceptive acts or practices:
* * * * * (9.1) In an instance where a motor vehicle is not roadworthy at the time the motor vehicle is offered for sale, using the term ''AS-IS'' as set forth in this section does not satisfy the written disclosure requirement in § 301.2(5) (relating to advertising and sales presentation requirements). The written contract, required under subsection (a)(1) for the sale of a motor vehicle, must instead include, in a clear and conspicuous manner on the face of the document, information that the motor vehicle is sold ''AS-IS'' and a list of the conditions, as set forth in § 301.2(5) of this chapter, present in the motor vehicle.
(10) Failing to forward to the proper Commonwealth agency amounts and forms tendered by a purchaser, such as sales tax and transfer and registration fees, within the time prescribed by law.
(b) If the sales presentation and agreement of sale has been effected in a language other than English, the written information, notice and disclosures required by subsection (a) shall be given in the principal language in which the sale was transacted as well as English.
[Pa.B. Doc. No. 24-1016. Filed for public inspection July 19, 2024, 9:00 a.m.]
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