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Derrick Woolfson

Derrick Woolfson Business Development Manager

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What Are We Really Signing? Top Things to Consider Before Signing a Vendor Contract

As a disclosure, this article is by no means offering and or suggesting not to sign a dealer contract. The purpose of this article is to discuss concerns around data privacy, brand image and the use of your dealers likeness to promote their brand otherwise, which in some cases can influence new to market products and services.  On the dealer level - when signing for a new product or vendor - we have contracts to sign; contracts that solidify our partnership with a vendor, to use their products and services. I can offer firsthand, however, that in previous experiences there were only a few questions asked before signing the contract; those questions, though, were about the terms mostly - i.e., what is the length of the contract, the setup fees, how much dealer support do we get? How is the account management set up? While those are good questions, they do not delve deep enough past the surface. Below the surface of that contract are some unnerving conditions and terms. So before you sign that next contract here is some of the top things to consider. 

The Vendor Has Full Access to Your Brands Image and Content Related to Your Brands Image to Promote Products and Services. 

That question above, of course, is not the only language used in dealer contracts. However, more often than not there is a clause in the contract that offers the vendor full access to your brand image and content. Content in which they can freely use to promote other products and services. Albeit, in many cases - the vendor does then acknowledge that if they were to demo their product - using your store as an example - that they would otherwise black out personal information. The bigger question, however, is what does this mean? 

On the surface, it could broadly mean that the vendor literally unequivocally has access to your brand's image and likeness to promote their products and services. Most commonly, if your dealer has the same OEM as a potential client, the vendor could offer that “your dealer” is using this product; this is not always the case, though - the vendor might say "another dealer (OEM) uses this product."  To which they can provide the client with an inside view of how your dealer is using their product. That said, it poses some significant concerns. One of those significant concerns is that with the competitive landscape, does a dealer truly want their direct competition having inside access to what their dealer is doing?

Moreover, while I am cognizant that a vendor has every right to promote their products and services, there have been instances - depending on the product and or service - where it has been asked for the vendor to sign an addendum. An addendum that is a non compete clause - a clause that protects your dealer - where they cannot sign up a dealer that is a direct competition.  This is by no means to offer and or suggest that the vendor you are currently using - and or wanting to use - would be willing to sign an addendum to protect your dealership from your direct competition. However, depending on the scope of the services it could be a question worth asking. 

Who is Responsible for the Dealers Data? What Rights Does the Vendor Have When it Comes to Using Your Dealers Data? What Does All of this Mean? 

As mentioned above, in many cases the vendor can use your data when offering a prospective client a demo. However, the vendor (in many cases; this is not to say all do) would black out personal information. For example, a vendor might offer: “I have a dealer in your market using this product. Here are some sample reports I can show you.” Where, they are not using the name of your dealer; they are however showing the prospective dealer your information, which (as mentioned above) is in many cases blacked out. While this might not seem to be a big concern; it is a concern worth noting. 

With regards to the privacy of your dealer's data, it is a considerable concern as to what the vendor can otherwise do with your dealer's data. Namely, can they use your data to offer new services and or sell your data to other companies. In which case, they can then use that data to develop new to market products and services. It has also been noted that are vendors who have “pixels,” in which case they were deliberately gathering data from dealerships websites. That data could then be used for what was mentioned above. At the end of the day, the biggest question - with reference to these concerns - is what access and or rights does the vendor have with your data? If there were to be a data breach with the vendor because of their using your customer's data in other means other than the purpose of their product or service - what does this mean for the dealership? Is the dealership then responsible for the issues? Alternatively, is the vendor responsible? This is a concern because in many (not all) of the vendor contracts, if it states that they have full access to your data, then they might not be liable. Further, in many cases, the language used in their contracts is very ambiguous, which raises even more concerns. That said, it is best to review those questions and ask the vendor directly what it actually entails and or means. Specifically, how does it apply to your dealership? 

Data Protection. Who Has Access to Your Data? How to Manage Third Parties Access to Your Data. 

It is not uncommon for a vendor to integrate directly with your CRM. For example, you might have a trade-in tool that is integrated. As such, there are concerns to consider; that is, what other access does that vendor then have with your customer data? How is your data then protected because of adding the vendor? For the contracts, I have reviewed, the vendor is mostly not responsible for what the other vendor does, which makes sense.  However, it does not necessarily then mean that the CRM vendor should not otherwise have safeguards in place that disable vendors from using the data in ways that do not pertain to the purpose of their relationship with the dealer. That being said, it is best to then review and inquire on these concerns directly with the vendor who is integrating the new service/product into their CRM. Asking them what access does the new vendor potentially have, and what they are doing to protect your data. Ensuring that there is clear communication between all parties that are involved. In doing so, it can assist in protecting your dealership should there be an issue. 

Bottom Line: this is by no means accusing vendors of any malicious practices and or otherwise stating that vendors are purposefully - or intentionally -  using your dealer's data for their own good to bring new products to market using your dealership's data.  Rather, the purpose and context of this article is to discuss how your dealer handles vendor contracts. With the notion that there is nothing wrong with asking the vendor what their contracts actually mean when it comes to their clauses, which sometimes states their overall ability to use your dealers brand and image to promote their products and services. In addition to inquiring what measures, if any,  they have in place to ensure that your data is as safe as possible from a data breach. Understanding, too, that not all vendors have secured information (such as social security numbers, addresses, etc.); however, if one of your vendors is integrated into the CRM - what if any access do they have to the secured data, which could pose risks to that secured information? There are also lawyers - though costly - who can assist your dealership in navigating the context of the language used in their contracts. The purpose of these discussions with lawyers is to ensure that you are protecting your dealerships most valuable asset, its data. 

How do you handle or approach vendor contracts? Do you have outside lawyers review contracts before signing them? Do you take time to review contractual concerns with your dealer team before signing? 
 

In the meantime, join the conversation here! 

Chris K Leslie

cant forget about those lovely coterminous clauses

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