The Federal Trade Commission (FTC) recently issued a decision that could impact diversity, equity, and inclusion (DEI) practices in companies offering price-varied goods and services nationwide. The FTC settled a case involving an Arizona car dealership accused of misleading pricing practices and discriminatory financing.
The dealership allegedly advertised prices lower than the actual cost, targeting consumers to visit the dealership. Additionally, they were accused of arranging financing with higher rates for Latino customers compared to non-Latino, White customers.
Republican FTC Commissioner Melissa Holyoak supported the majority's findings of violations under the Equal Credit Opportunity Act (ECOA) but expressed concerns about the inclusion of a Section 5 violation, warning of potential negative impacts on businesses.
Holyoak emphasized the importance of avoiding race-based policies and highlighted potential unintended consequences of broad liability standards based on disparate impact theories.
The FTC's decision could lead businesses engaging in sales and price differentiation to consider race or DEI factors to evade FTC scrutiny. The FTC, a federal agency enforcing consumer protection and competition laws, aims to safeguard the public from unfair business practices.
Comprising five commissioners, the FTC currently has two Republicans and three Democrats, with Lina Khan nominated as chair by President Biden. Section 5 of the FTC Act prohibits unfair or deceptive acts in commerce, applying to all individuals engaged in commercial activities.
Holyoak criticized the use of disparate impact theory in Section 5, cautioning against expanding unfairness authority beyond its traditional scope. She noted the potential risks of applying unfair discrimination claims based on statistical analysis and disparate impact.
The FTC's decision reflects a broader effort to combat discrimination across the economy, raising questions about the agency's authority and approach to addressing DEI issues in business practices.
