In the previous edition of Automotive Dealer, I discussed who owns the goodwill in your dealership and concluded that there is a reasonable legal basis for the proposition that the franchisee/Dealer does.
In this article, I will discuss in more detail one of the ways that Dealers might try to protect their goodwill.
The customer database is a significant asset to any business, including dealerships. In my view, a customer database is an asset that attaches to the dealership business rather than to the branding/trademarks. It is essentially created by the hard work of Dealers and built up over many years.
In the automotive industry, various sound commercial reasons necessitate the sharing of customer information with distributors and OEMs. For example, if a product is recalled the distributor and OEM ought to know who to contact regarding the recall. The use of customer information should be for purposes such as safety, reporting and more efficient customer interaction.
Customer information should not be shared amongst the Dealer network or used inappropriately, for example, to entice another Dealer to make a large investment in a PMA that eventually leads to the termination of the incumbent Dealer.
Data Sharing Policy
Preventing the inappropriate use of customer information is difficult and hard to police. Some National Dealer Councils, distributors and OEMs have agreed data sharing policies that are supplementary to the Dealer Agreement.
When discussing the content of data sharing policies it is important that such policies should acknowledge and protect a dealership’s customer information and have proper regard to the legal ownership of the customer database. The policy should contain provisions to ensure customer information is not inappropriately used either during or after the term of a Dealer Agreement.
That said, it is important to acknowledge that many distributors who have high performing Dealer networks and excellent relationships with their Dealers use customer information appropriately, operate fair data sharing policies, and have regard to the interests of Dealers.
Ultimately, effective and fair data sharing policies can be a win-win for distributors and Dealers. Distributors gain from direct lines of communication with customers (this also assists the Dealer network), and Dealers are protected from misuse of customer databases.
For more information, or if you have any questions about this article, you can contact Vinesh George by emailing firstname.lastname@example.org
Company Secretary and Legal Counsel, AADA