Legal Alert

Consumer Fraud Act Amendment Would Prohibit Automakers and Dealers from Offering Vehicle Feature Subscriptions

October 17, 2022

Summary

New Jersey State Representative Paul Moriarty (D - Camden and Gloucester) has formally proposed a new bill to prohibit auto manufacturers and dealers from offering subscriptions for vehicle features if the components necessary for that feature are already installed on the vehicle at the time of sale.

The Upshot

  • The bill would prohibit automotive dealers or manufacturers from offering subscription services for any vehicle features that utilize components already installed on the vehicle, if those features can function without ongoing expense to the dealer, manufacturer, or any third-party service provider.
  • The list of vehicle features covered is broad and would include telematics, and driver assistance features, as well as convenience features like heated seats.
  • The Attorney General could assess civil penalties up to $20,000 per violation.
  • The private right of action available under the New Jersey Consumer Fraud Act would apply.

The Bottom Line

If enacted, the bill would significantly impact the ability of automakers to offer consumers the choice of purchasing additional convenience features through a subscription model; a model that has historically applied to telematics services and has recently gained in popularity for other features. It potentially would also expose dealers and automakers to significant risk of additional litigation alleging violations of New Jersey’s expansive Consumer Protection Act.

The New Jersey Legislature is considering a bill that would make it a violation of the state’s Consumer Fraud Act, N.J.S.A. 56:8-1, et seq., for automotive dealers or manufacturers to offer subscription services for any vehicle features that utilize components already installed on the vehicle, if those features can function without ongoing expense to the dealer, manufacturer, or any third-party service provider.

Introduced in reaction to the recent introduction of feature-based subscriptions by several automakers, the bill applies its prohibition broadly to all “convenience or safety function[s],” including driver assistance systems. There is a small carve-out noted in the drafter’s statement for “third-party service provider that offers features such as satellite radio or in-car Wi-Fi.” However, the bill would significantly impact the ability of automakers to offer consumers the choice of purchasing additional convenience features through a subscription model; a model that has previously applied widely to telematics services, which is gaining in popularity for other features. The bill also interferes with automakers’ ability to leverage over-the-air software updates to give consumers the option to selectively enable additional features.

If passed, Assembly Bill 4519, introduced on September 22, 2022, by Representative Paul Moriarty, would define a violation of the act as an unlawful practice. That would impose a civil penalty of $10,000 for a first violation and $20,000 for subsequent violations. Of significant concern for manufacturers and dealers is that, while not expressly mentioned in the bill or drafter’s statement, the private right of action and other remedies (including treble damages) available under New Jersey’s Consumer Fraud Act would also apply. Thus, this bill has the potential to significantly impact both local auto dealer franchisees and global automakers whose vehicles are sold to New Jersey residents. Careful consideration will need to be given to what features are included in subscription options to avoid liability. Strategically ensuring that subscription features require an “ongoing expense” on the backend to maintain could also be key to compliance.

Ballard Spahr’s Product Liability and Mass Tort Group has substantial experience representing companies that make and sell products in a wide range of litigation and counseling matters, including the defense of class actions and related opt-out group claims, as well as regulatory compliance. Please contact us for more information.

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