Legal Update
Aug 19, 2019
“Monroney Stickers” And Protecting Car Buyers From Fraud In The Age Of Online Motor Vehicle Sales
When Congress adopted legislation in 1958 requiring that manufacturers affix a label—today called a “Monroney sticker”—in the window of each new motor vehicle they produced showing the suggested retail price for the vehicle and installed accessories, the assumption was that no car buyer would ever purchase a vehicle without first visiting their local dealer to take that vehicle for a test drive. This conventional wisdom has been tested in recent years, as consumers have shown a willingness to make increasingly significant purchases online. In 2018, Ryan Keeton, co-founder and chief brand officer for Carvana.com—an online retailer of newer used cars usually two to three years old—reported that 20% of car buyers completed the entire transaction on a mobile device; for millennials, he reported that this percentage was closer to 30%.1New car buyers who buy online may never even see the “Monroney sticker” in the window before they take delivery of their new car. This trend toward online sales will undermine the consumer protection purpose of the “Monroney sticker” and present new challenges for regulators, manufacturers, and car buyers in the 21st century.
Origins of the “Monroney Sticker”
Few may recall, but manufacturers did not always place a “Monroney sticker” in the windows of new motor vehicles they shipped to dealers. The sticker’s namesake, Senator Almer Stilwell “Mike” Monroney of Oklahoma, had chaired a subcommittee of the Senate Interstate and Foreign Commerce Committee formed in 1955 to investigate dealer complaints of abusive treatment by manufacturers. After Congress passed the Automobile Dealers’ Day in Court Act in 1956, Senator Monroney’s subcommittee continued to probe deceptive dealer practices.2
Senator Monroney’s concern was focused on “price packing,” which he defined as “the boosting of the manufacturer’s suggested retail price in order to mislead the purchaser into believing he received a larger allowance or trade-in,” or more bluntly, "the falsification of the manufacturers suggested retail price.”3Senator Monroney urged the adoption of legislation that would “simply require the manufacturer to place a price tag on the windshield or window of the car in the form of a label.”4A committee report from the House of Representatives likewise identified “packing” as a threat to the industry and declared legislation necessary because “the new car dealers have been plagued by unfair and unscrupulous marketing practice on the part of some dealers, which have been injurious to the new car dealers as a whole, injurious to the car manufacturers, and bewildering to the purchasers of new cars.”5
The product of Senator Monroney’s effort was the Automobile Information Disclosure Act of 1958, which required manufacturers, prior to shipping new vehicles to dealers, to affix a label to each new vehicle disclosing the make, model, and serial number of the vehicle; the equipment installed in the vehicle and the manufacturer’s suggested resale price (MSRP) for the vehicle and equipment, as well as any charges for the transportation of the vehicle to the dealer. The statute is codified at 15 U.S.C. §§ 1231-1233, and has since been amended to require disclosure of additional information, including fuel economy and crash-test ratings. As described in the Senate subcommittee report, the disclosure of this information does not interfere with the buyer’s “freedom to bargain over the price of the car” or the dealer’s right “to sell the new car for any price he desire[s],” but it does “assure that the purchaser [will] start the negotiations with the minimum necessary information.”6
Modern Challenges for Regulators and Manufacturers
A critical assumption made by Senator Monroney and Congress in 1958 was that a buyer would “start the negotiations” after seeing the label affixed to the inside windshield or window of a new car. In 2019, that is no safe assumption, and consumers have shown a willingness to buy increasingly expensive products online—even cars, often the most significant purchase consumers will make in their lives other than their homes. Trying to stay ahead of this trend, the American Association of Motor Vehicle Administrators (AAMVA) in April 2017 formed an Internet Vehicle Sales Working Group to spend two years developing best practices for the regulation of internet vehicles sales; that working group is expected to release the results of its efforts shortly.7Whatever recommendations are made by the AAMVA working group, the trend toward online buying will present manufacturers with their own set of challenges in the coming years. Prohibited by dealer statutes in most (if not all) states from selling directly to consumers, manufacturers will need to develop their own strategies to ensure that customers are not misled and the manufacturer’s brand is not tarnished by rogue dealers on this new digital frontier.
1 “How Carvana Convinces Shoppers to Buy Cars on Their Mobile Phones,” Internet Retailer, Digital Commerce360, Aug. 2, 2018, https://www.digitalcommerce360.com/2018/08/02/howcarvana-convinces-shoppers-to-buy-cars-on-their-mobile-phones/.
2 Robert Peele, The Senator Behind the Window Sticker, N.Y. TIMES, Jan. 2. 2009, https://www. nytimes.com/2009/01/04/automobiles/04MONRONEY.html
3 S. REP. NO. 85-1555, at 2-3, 4 (1958).
4 Id. at 2.
5 H.R. REP. NO. 85-1958, at 2 (1958).
6 S. REP. NO. 85-1555, at 2.
7 See American Association of Motor Vehicle Administrators, Internet Vehicle Sales Working Group, https://www.aamva.org/Internet-Vehicle-Sales-Working-Group-General/.
