Pub. 1 2019-2020 Issue 3

25 California’s Old Laws are Killing the NewGeese that Lay the Golden Eggs Shane McCallan, CNCDA NextGen Dealers Committee and CNCDA Regulatory Affairs Committee O ne of CNCDA’s objectives is to help our mem- bers stay in compliance with the massive layers of state, federal and local laws encumbering the automotive retail industry. While the as- sociation does this on a daily basis, a large part is adjust- ing business practices to changing technology used by existing and new generations of customers, businesses and employees, including millennials. To state it otherwise, this challenge becomes strained when old laws meet new innovations. A parallel struggle exists between California’s antiquated employment laws and new forms of work, such as the emerging “gig economy” (Uber/Lyft/Amazon/Instacart, and so on). Dealers need to remain conscious and aware of a host of state and federal laws whose roots are as outdated as a 15-year-old flip phone. The federal Telemarketing Sales Rule and the Telephone Consumer Protection Act (TCPA) expressly prohibits telemarketing sales calls that deliver prerecorded messages, whether answered in person by a consumer or by an answering machine or voicemail ser- vice, unless the seller has previously obtained the recipi- ent's signed, written agreement to receive such calls. The FCC has extended antiquated phone dialing machines to text messages, which is where new car dealerships and your service drive comes into play. Vendors offering text messaging solutions have been hitting the service drive in recent years. Even though the 15-year-old technology behind text messages is no longer as hip as current social media platforms such as Instagram, Twitter, Pinterest, and Facebook, text mes- sages can still be relevant and valuable for your business, on both the dealer and consumer fronts. Beyond simply advising the consumer about the status of the car being serviced, it can be used to facilitate payment process- ing (including outside of office hours), improve customer reviews and is also valuable for data analytics. To quote a classmate of mine from the NADA Academy, “car dealers are 15 years behind in everything.” It’s quite true, especially when you consider technology. However, the reality is, you are still subject to some crush- ing laws passed in the 90s that you need to be aware of before signing up with any new vendor. This is largely because plaintiffs’ attorneys have used these old laws as an easy way to extract the lawyers’ fortunes from busi- nesses when no actual monetary loss is incurred by the consumer (their “clients”). Due to recent rulings by the FCC, these lawsuits can extend to new tech like the automated text messaging services used by third-party service-drive vendors. And that creates liability for the dealership. Without digging too much into the legal weeds, the U.S. Court of Appeals for the Fourth Circuit affirmed a district court’s judgment in a May 30, 2019 decision, imposing more than $61 million in damages against Dish Network because of a third-party vendor that Dish engaged. Dish is a much bigger target than a single dealership’s ser- vice department, but the verdict was nothing to laugh at, especially since the penalty was caused by the actions of a vendor, not Dish Network itself. And Dish is probably more sophisticated when it comes to technology than your service department. Accordingly, please ensure that your service drive text messaging vendors agree (in writing) that the service they provide to you and your customers is compliant with fed- eral and state law. That may require an indemnity agree- ment. You don’t want to be one of the large car dealership groups that get hit with a judgment for over $1 million! This article is not intended to provide legal guidance. Please consult with your own legal counsel before you engage a third-party vendor to facilitate your service drive by using automated text messaging services. 3