June 28, 2023
By Barrie Charapp Beaty
On May 25, 20023, the United States Supreme Court issued a decision in Sackett v. Environmental Protection Agency. The decision will have a significant impact on all assertions of power by a federal agency, most important, for auto dealers by those that the Federal Trade Commission seeks to use.
Before the Supreme Court decision, the EPA had claimed the term “waters of the United States” used in the enabling statute for the agency should be broadly defined. Under the broad definition, areas adjacent to permanent bodies of water with a significant nexus to the permanent bodies were considered “waters of the United States”.
The EPA used this broad definition to support its power to regularly slow down or shut down construction projects by claiming impact on the “waters of the United States” when those were simply temporary wetlands or ponds.
The decision by the United States Supreme Court clarifies that the EPA does not have the power to expand its jurisdiction. The decision by the Supreme Court will significantly cut back the claims of jurisdiction by federal agencies, most notably for dealers the FTC.
So how does this affect your dealership? It will rein in federal agencies that attempt to expand their regulatory jurisdiction and actions under that claimed jurisdiction. As an example, the FTC has outstanding a proposed sweeping trade regulation rule on sales of motor vehicles. The proposed rule goes far beyond filling in the definition of unfair and deceptive practices. It contains multiple new affirmative obligations for dealers.
The latest decision by the Supreme Court follows a notable earlier decision in Dobbs v. Jackson Women’s Health Organization in limiting the power of federal agencies.
Dealers concerned that the FTC is now in the hands of the zealots who will have no limits on actions involving dealers can take comfort in the Supreme Court not agreeing that a federal agency may make its own rules. The Supreme Court has clarified that the jurisdiction of a federal agency will be limited by being narrowly defined by what Congress has provided.
For example, in the case of the FTC trade regulation rule, one must question whether the FTC has authority to impose affirmative requirements when selling a motor vehicle, or is it limited to defining “unfair or deceptive acts and practices”? The definition in a case about the “waters of the United States” can have a significant impact on dealer business.