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Petition to FTC Calls CarMax Ads Deceptive

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Carmax logoA dozen vehicle safety and consumer groups have asked the Federal Trade Commission to stop CarMax Inc. (the largest used-car seller in the United States) from saying it “rigorously” inspects the cars “when it fails to complete recall repairs before selling the vehicles,” David Shepardson writes for The Detroit News. Jerry Hirsch reports for the Los Angeles Times that the groups and Sen. Charles E. Schumer (D-N.Y.) petitioned the FTC earlier this week alleging that CarMax engages in deceptive advertising when the company says every vehicle it sells passes “a rigorous 125-point inspection.”

Schumer and the groups issued the petition during a period when there have been more car recalls than ever — about 53 million vehicles in 18 months, which comprise about 20% of all vehicles on the road, Hirsch notes. Rosemary Shahan, president of Consumers for Auto Reliability and Safety, the nonprofit group that spearheaded the petition, said CarMax is “playing recalled-used-car roulette with its customers’ lives,” Hirsch writes. Shepardson quotes from the four-page petition:

‘There is absolutely no excuse for CarMax or other auto dealers not to ensure that the used vehicles they sell to consumers are not ticking time-bomb cars with unrepaired safety recalls.’

Some of the groups that signed the petition include Consumers Union (which publishes Consumer Reports), the center for Auto Safety, the Consumer Federation of America, the U.S. Public Interest Research Group, and the National Consumers League, Shepardson writes.

Hirsch quotes Schumer:

‘Car dealers shouldn’t sell used cars that have a safety recall to consumers, period. Far too many times we have seen the tragic and often fatal consequences when deficient cars are allowed on the road, and it’s time for the FTC to do everything it can to put a stop to it.’

Although U.S. law prohibits auto dealers from selling new cars that have been recalled, there is no such law that applies to used cars, Hirsch writes. In a June 2 letter to the California Assembly’s Business, Professions and Consumer Protection Committee (which had been considering a law that would ban used car dealers from selling unrepaired recalled cars), attorneys representing CarMax wrote that it would be impractical for the company to manage recall repairs of the used cars it sells because CarMax would have to bring the cars to dealers for the repairs, Hirsch writes. (The manufacturer would cover the cost of recall repairs, not CarMax, he notes.) The California bill died in committee. A lawyer for CarMax (which has 16 stores in California) had sent a letter to California legislators opposing the bill, Shepardson reports.

In the June 2 letter, the CarMax legal team wrote that the system is broken, because manufacturers do not allow independent dealers like CarMax to make the recall repairs. Hirsch quotes the CarMax attorneys:

‘Further, the manufacturers do not even grant independent auto dealers like CarMax access to their internal databases in order to search a manufacturer’s website.’

On Tuesday, CarMax made a statement saying it supports federal legislation that would require car retailers to fix recalled vehicles if at the same time the law would require manufacturers to allow retailers to make such repairs, Hirsch writes.

The Richmond, Va.-based CarMax sells about 500,000 used vehicles annually in the U.S., via 130 stores nationwide, Hirsch writes. Shepardson writes that CarMax has sold more than 5 million vehicles.

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