As with all industries looking to communicate with current and potential customers, auto dealers need a robust and well-vetted compliance program to ensure their engagement initiatives comply with federal and state consumer protection laws.
Unaware businesses can easily run into issues involving the Telephone Consumer Protection Act (“TCPA”), a complex regulation which applies to dialing and texting equipment, and which comes with significant and automatic penalty provisions. Court dockets have exploded in recent years with TCPA claims. Multi-million dollar class action lawsuits and government enforcement actions pose substantial risks to dealerships that communicate with consumers. Marketing messages, service communications such as recall notices, appointment confirmations, and other important notifications all serve as potential TCPA risks for auto dealers.
Since 2012, TCPA class action lawsuits against car dealers have resulted in settlements ranging between $2.5 million and $5.7 million. In a recent case, a Fort Lauderdale Ford dealership allegedly hired a third-party marketing firm to run a “buyback campaign” by calling and texting over 27,000 cell phones in the dealership’s database. One call recipient filed a federal lawsuit that resulted in a settlement of $4.8 million in late 2018.
Now, at least one plaintiff is looking to extend TCPA liability from dealerships to manufacturers. Earlier this week, a proposed class action suit was filed against a California car dealer and Hyundai Motor America Inc., (“Hyundai”) alleging violations of the TCPA. The complaint states that the dealer sent an automated text message simply asking the consumer how her car shopping was going, and alleges that Hyundai is liable because it encouraged its franchise dealerships to send text messages promoting the sale of their goods and services to consumers. This marks an attempt to drastically expand TCPA liability in this industry (and, perhaps, any industry with independent franchises).
Compounding these issues is the current uncertainty in the law. Last year, the D.C. Court of Appeals overturned several components of the Federal Communications Commission’s (“FCC”) overly broad interpretation of the TCPA’s scope. Subsequent court decisions have provided conflicting interpretations and enforcement that continue to muddle an already challenging regulatory landscape. Petitions asking the FCC to revisit the issue are pending and the Commission is expected to rule again later this year.
In the meantime, the risk to dealerships (and possibly manufacturers) is real. Having an audited communications platform and compliance practices – whether the campaign is managed in-house or outsourced to a vendor – is the best way to ensure marketing campaigns and other customer communications are conducted within the confines of the law.