OEM Data Sharing Agreements: What Dealers Need to Know

By Richard Sox & Andrew Thomas

At this point it is safe to say OEM data sharing agreements are here to stay. While these types of agreements have been around for over a decade, they have been a focal point for manufacturers in recent years as they provide streamlined access to customer data and other information. As the automotive industry (and society in general) continues to lean into the digital world, these data sharing agreements have adapted and expanded. In fact, these types of agreements are now more frequently tied to monetary incentives and other dealer benefits which are not even directly related to the data being exchanged. As such, dealers must analyze the potential costs and benefits of such data sharing in addition to having awareness of potential legal concerns regarding these agreements.

Let’s look at Hyundai’s recent Dealer Information Sharing Agreement (“DISA”) as an example. Beyond any concerns regarding franchise or consumer data protection laws, the DISA also places a variety of obligations on dealers, and compliance with these obligations costs money. Some obligations under the DISA include: creating and maintaining security policies and procedures, implementing yearly security audits, indemnifying the manufacturer from lawsuits in certain situations, and procuring specific insurance to cover the actions contemplated by the agreement. Each of these obligations have a cost, and some of these costs are much easier to predict than others—dealers can get quotes for insurance costs, while indemnification costs in the event of a security breach are speculative and could vary widely. On the flip side of the DISA, dealers get access to certain information that may not otherwise be available, and they become eligible for certain incentives and other benefits. The incentives and the data certainly have value, but dealers need to analyze whether the value of these items outweighs costs of compliance with the DISA, as this analysis is dealer specific. 

In addition to state and federal laws regarding consumer data, numerous states have also implemented franchise laws attempting to address data sharing between the dealer and other entities. These laws are changing rapidly, and dealers should be aware of any and all protections that these state franchise laws provide.

In any event, data sharing agreements are not all the same, and in fact can vary substantially from brand to brand. In every instance that a dealer is presented with such an agreement, they should both (1) have it reviewed by a knowledgeable attorney to determine what legal issues the agreement may pose; and (2) determine whether the benefits of executing the agreement outweigh the potential costs of compliance with the agreement.