Key Issues Discussed At The National Association Of Dealer Counsel Conference

04.28.22

The National Association of Dealer Counsel (NADC) is a nationwide professional organization of over 600 attorneys who represent automobile and other vehicle dealers. Because we are NADC members, we recently had the privilege of attending the semi-annual conference, where the hottest topics in dealership litigation and transactions were discussed. This article provides a brief overview of the conversations that we think dealers should know about.

Dealers Should Be All-In On Electric Vehicles

Electric vehicles are here and it is undeniable that they are changing the motor vehicle landscape. The National Automobile Dealers Association (NADA) says that ​“dealers should be all-in on electric vehicles.” But dealers do not need to be all-in on the direct sales model that manufacturers want. Manufacturers are actually prohibited from directly or indirectly operating a motor vehicle dealership in Wisconsin. The franchise model that has existed for hundreds of years will provide an efficient framework for electric vehicle sales, as long as dealers are committed to them.

Dealers Must Start Preparing For The New FTC Safeguards Rule

In December 2021, the Federal Trade Commission published amendments to the Standards for Safeguarding Customer Information (the ​“Safeguards Rule”) within the Gramm-Leach-Bliley Act. Those amendments take effect on December 9, 2022, but dealers need to start preparing now. The amended Safeguards Rule imposes numerous requirements on motor vehicle dealers to improve accountability of information security programs and protect consumer information. Some manufacturers are already demanding that dealers provide proof of compliance, so more is to be anticipated. Taking steps now to ensure compliance by December 2022 is critical to avoiding fines and other penalties. Dealers should talk to an attorney for guidance on this and carefully select a vendor who will facilitate compliance at a reasonable cost. 

Automatic Remote Updates May Impact Dealer Profitability

Dealers should keep an eye on manufacturer use of automatic remote updates on vehicles. From correcting recall issues to triggering heated seats and installing remote starts, manufacturers are trending toward a streamlined method of providing customers with features that previously required them to be physically present at a dealership. The automatic nature of these updates impacts whether they qualify as repairs. Since no part is being installed, a dealer’s service profitability could be impacted when they are not reimbursed for automatic updates that ordinarily would fall within the scope of a warranty repair. And it could arguably be a deceptive trade practice for a manufacturer to provide a customer with only a license to a feature that is later automatically updated by the manufacturer itself. Some preliminary legislative discussions are pushing to allow dealers to provide remote updates with service repair orders, but nothing is concrete on that yet.

Reinsurance Should Be Reconsidered

Reinsuring the premiums for Finance and Insurance products (i.e. vehicle service contracts, guaranteed asset protection, tire and wheel repair, etc.) can help increase profit. But if a dealer’s reinsurance program or provider changes, attorneys should be involved to review the process. Reinsurance policies may have hidden fees or restrictions on funds that require careful navigating and special considerations after a transaction is completed.

Damages Claims Have Many Sources

Knowing your rights is critical to maximizing profit and maintaining control over your market area. If a dealer has been wronged by a manufacturer, the first step is to evaluate what claims the dealer may have. Claims against manufacturers come in the form of relocation protests, performance standard disputes, wrongful terminations, facility incentive disputes, and allocation claims, among others. Before bringing those claims, attorneys can help dealers determine whether the manufacturer is doing something prohibited by a state or federal statute, doing something prohibited by the dealer agreement, or engaging in conduct that is actionable in some other way (i.e. fraud, negligence, or misrepresentation).

When a dealer has an actionable claim, attorneys can then evaluate whether the dealer suffered any monetary damages and whether it has enough proof that those damages were related to the manufacturer’s conduct. A dealer may be entitled to damages based on the dealer agreement itself, state law, federal law, or case law. And recovery could be based on lost profits or loss in value. But even where no monetary damages are likely, an injunction might be possible, which could require the manufacturer to either stop the unlawful conduct or start acting lawfully. With a range of options out there, dealers should consult an attorney to evaluate their potential claims after being wronged by a manufacturer.