What Dealers Need To Know About Manufacturer Data Sharing Agreements

By Andrew G. Thomas 

Over the past few years, many state legislatures have been keenly focused on implementing and improving consumer data privacy laws both in general and in the automotive franchise sphere. As a result, many manufacturers have reacted by implementing form “data sharing” agreements with their dealer bodies. This is a particularly interesting area as well, as vehicles and the automotive industry in general continue to collect more and more data to better serve customers. 

The agreements we have seen thus far vary drastically, with some putting onerous requirements on dealers and others being mostly fair. But what do dealers do if confronted with one of these data sharing agreements? First and foremost, dealers need to be generally aware of the relevant consumer data laws that apply to their state. In addition to other things, these agreements typically require that the dealer adhere to all applicable consumer data laws.  

However, dealers must also be acutely aware of what additional requirements these agreements place on dealers, as well as any benefits. Some of these agreements require dealers to implement and maintain specific security features, such as only allowing specific individuals to access computer systems with sensitive data or segregating data provided by the OEM from data collected by the dealer. These agreements also commonly attempt to assign liability to a specific party under certain circumstances, and/or require that one party indemnify the other and pay for expenses relating to any litigation. In short, these agreements can impose requirements that are potentially very costly.  

As such, it is important that dealers read and fully understand these agreements. Given the complex nature of the issues and areas of law implicated by these data agreements, it is also highly recommended that dealers consult with a qualified and experienced attorney to discuss what the potential risks and benefits of the agreement might be. Ultimately, whether a dealer chooses to sign this type of agreement is a business decision, but having a complete understanding of the issues, risks and benefits involved will lead to better decision-making. 

If you have any questions relating to a manufacturer data sharing agreement, or consumer data rights as they relate to motor vehicle dealers, you should contact an experienced franchise attorney.