Americans should have full confidence in the commitment of our nation’s law enforcers to identify and root out unlawful conduct that disproportionately harms communities of color. The Federal Trade Commission (FTC) has made advancing racial equity a policy priority by focusing on marketplaces where consumers of color consistently experience structural barriers. It has frequently called on its authority to penalize car dealers that exacerbate these barriers for Black and Latinx car buyers by charging them higher prices. Unfortunately, individual commissioner statements in two recent unanimous FTC actions against car dealers have alarmed the advocacy community because they demonstrate that the Commissioners are not aligned about whether and how it should punish racial discrimination. 

The enforcement actions target car dealers with a history of packing expensive, unwanted and unauthorized add-on products (like key replacement packages, microscopic chemical coating, and disability/life insurance policies) to vehicle sales and discriminating against Black and Latinx consumers by charging them higher prices. Arizona car dealer Coulter Motor Company settled allegations by the FTC and Attorney General Kris Mayes that it charged on average $1,200 more to its Latinx customers in interest and add-ons than it did to white consumers. Asbury Auto Group, one of the largest auto dealers in the country, allegedly encouraged employees to “pack add-ons” more often with Latinx consumers and non-native English speakers, and it charged nearly $300 more to Black consumers for the same add-on products than it did to white consumers. 

The FTC and Attorney General Mayes argue that charging higher prices to these consumers based on their race runs afoul of the Equal Credit Opportunity Act (ECOA) and constitutes unfair conduct. The ECOA claims are based on the disparate impact theory of liability, where a facially neutral policy is discriminatory if it results in outcomes that disproportionately harm members of a protected class, even if the violations are unintentional. The FTC charged Coulter and Asbury with employing practices that  resulted in Black and Latinx consumers being charged more for the same products. These two cases – where consumers who are members of a protected class are harmed in demonstrable and meaningful ways by a business policy – demonstrate how ECOA’s disparate impact liability addresses discriminatory practices.

The FTC is also charged with preventing unfair and deceptive acts and practices (commonly, “UDAPs”). Other federal agencies and states have similar statutory authority to enjoin UDAPs. Discrimination – unjustified differential treatment – is certainly unfair, and federal agencies have relied on UDAP authority to address discriminatory practices for many years, including the FTC, the Department of Transportation (and its predecessor, the Civil Aeronautics Board), and federal financial regulators. 

The Commissioners voted unanimously in both actions (to settle Coulter and file an administrative lawsuit against Asbury), but ”concurring” commissioner statements in Coulter and Asbury evidence a sharp divide on how and whether our nation’s top consumer protection agency should penalize marketplace conduct that disproportionately harms Black and Latinx consumers. Rather than using the statement opportunity to call out rampant and longstanding racial discrimination in auto financing, these statements criticize the decisions by undermining the judicial doctrine of ECOA’s disparate impact liability and the “novel theory” that discrimination is unfair. It is particularly troubling that these statements were issued in cases that allege egregiously discriminatory conduct by car dealers. 

Almost every aspect of auto ownership is more expensive for consumers of color due in no small part to the practices of car dealers and their business partner-finance companies. Black consumers are twice as likely to be charged a pricing markup for their car and less likely to get approved for a loan, and a national study of add-on products showed widespread price discrimination against Latino consumers. Asbury and Coulter are hardly unique; they are the latest in a line of cases from the FTC cracking down on discriminatory car pricing. It is critical that the FTC continue to use ECOA and its UDAP authority to penalize car dealers for discriminating against consumers of color. These are bedrock principles designed to protect all consumers and to achieve racial equity.

Without vigorous public law enforcement, discriminatory practices go largely unchecked because consumers are usually unaware that they have occurred. Indeed, in Asbury and Coulter, the vast majority of surveyed consumers (75% and 92%, respectively) did not know that the car dealers had packed their loans with these add-on fees, or they believed the dealer’s falsehoods that they were required to buy them. Certainly, those who paid more due to their skin color or English-speaking abilities were likewise unaware of the differential impacts. Asbury’s internal audits showed ample evidence of add-on packing conduct, but it did not bother to contact the consumer victims. Even if a consumer does learn about discriminatory misconduct, their contracts and “terms and conditions” are riddled with claim suppression devices (like arbitration clauses, class-action bans, and mass arbitration constraints) that successfully hide lawsuits and dramatically decrease the chances of holding the law violator accountable. With the rise of artificial intelligence and digital discrimination, disparate impact will continue to be a crucial tool to protect consumers. Had the FTC not pursued these claims of ECOA or unfairness, thousands of consumers would never know how these car dealers violated their rights.

Discrimination is not a novel concept, and regulations designed to prevent it are not the product of “novel theories.” Common sense tells us that policies charging people of color more for the same goods and services are unfair. In Coulter and Asbury, the FTC took action to apply its authority to combat discrimination, but the dissension among the Commissioners about whether and how it should have raised these claims is problematic. The FTC must continue its work toward making our markets more equitable rather than undermining its existing tools that can be used to achieve this goal.