Shortly after I began writing this post, an article popped up on my Google Alerts about another dealer group, accused of deceptive marketing by their state attorney general’s office, having to pony up a six-figure settlement. Not surprising at all, I’m used to seeing these types of articles on a regular basis. Another day, another enforcement action against a car dealer.

In this case, the dealerships were accused of “having advertisements online and in print publications that misrepresented the actual prices of automobiles”, “dealership employees asking consumers to sign incomplete documents with the understanding that they would be completed using the negotiated vehicle price, but later entering a higher price”, and “allegedly charging consumers fees for unwanted or undisclosed warranties and services”. According to the article, the auto group denied any wrongdoing but agreed to the settlement.

But I digress. The above story really isn’t the point of this post, nor is it my intention to try to warn you of the legal dangers of non-compliance with the laws of the land. I, and my peers, write enough about that. Sure, I’m now a compliance consultant, but my ramblings here are based on the things I learned during my 20 plus years in automotive retail - and the realization that I probably had it all wrong.

This post is about Transparency. It’s about the Big Picture. It’s about opening your mind and stopping to think about the absurdity of old school tactics. Not from a legal or ethical mindset, but from a common-sense business perspective.

I realize that “Transparency” is the latest, and perhaps most over-used, buzzword in the car business. But please bear with me for a few moments while I pose a few questions. Hopefully, it will stimulate some “outside the box” thinking.

First, what is the upside of hiding information from your customers?

Sure, you have to do whatever it takes to stay ahead of the competition. Sure, that’s what the legendary automotive sales trainers taught us. Sure, the chances of getting into a legal bind are pretty slim. Sure, everybody else is doing it. Sure, if you give customers too much information they’ll just use it to shop you. Sure, there are ways to “manage” your online reputation, even if you have some unhappy customers. I get all that.

But – Big Picture Time – is the “anything it takes to make a deal” mentality really a sensible way to do business in today’s world? Do you really think this will lead to customer satisfaction and retention? Do you really believe that customers will continue to put up with this type of behavior forever?

Here’s how I look at it: Every time you…

Post a misleading ad, or

Charge a customer more than the advertised price, or

Lie to a customer about a vehicle being in stock, or

Present a foursquare with inaccurate numbers in order to confuse a customer, or

Present “packed” payments, or

Fail to truthfully disclose a vehicle’s history, or

You’re not completely honest and upfront with your customers

…there are some things you might want to consider:

1. You may be breaking the law – but it’s only illegal if you get caught, right?
2. What you’re doing may be an unethical business practice – but customers have no loyalty and you’re just trying to make a buck in a fiercely competitive marketplace, right?
3. You may be pissing off customers (or potential customers) – but “ya gotta have haters, right”?
4. You’re gambling with your future - this is an unsustainable way of doing business in the modern world and your continued success is greatly at risk.

Now you may be perfectly comfortable rolling the dice on number 1 and not care a lick about numbers 2 or 3, but what’s your answer for number 4?

I challenge you to think about it. Just think about it. Unfortunately, I didn’t when I worked in dealerships – I was a faithful practitioner of the old school ways.

Now, I realize that you may feel that this post is just more nonsense from an ex-car-guy-turned-consultant who doesn’t get it - and you may be right. Only time, and customer sentiment, will tell. But you may still want to ask yourself just how long are customers going to put up with business as usual?

Let’s face it; consumers have access to much more information, and choices, than they ever did. You can hate the internet and all its information. You can hate the idea of “transparency”. You can hate all the regulations that dealers have to contend with. You can hate the consumer advocates. You can hate the media and all of its anti-dealer sensationalism. But guess what? None of it is going away. The “But We’ve Always Done It This Way” mentality just doesn’t hold water anymore.

Now, I’m not a believer that the internet is going to somehow take over car buying. I totally agree that dealerships are, and will continue to be, the primary way that customers will purchase vehicles for a long time to come. But remember this; while customers may always choose to do business with dealerships, they don’t have to choose to do business with your dealership.

One final question: Are you a true professional who is ready, willing and able to succeed in the new world or are you hoping that things will never change?

In my book, transparency is not a dirty word, but complacency is.

Good luck and good selling.

Shortly after I began writing this post, an article popped up on my Google Alerts about another dealer group, accused of deceptive marketing by their state attorney general’s office, having to pony up a six-figure settlement. Not surprising at all, I’m used to seeing these types of articles on a regular basis. Another day, another enforcement action against a car dealer.

In this case, the dealerships were accused of “having advertisements online and in print publications that misrepresented the actual prices of automobiles”, “dealership employees asking consumers to sign incomplete documents with the understanding that they would be completed using the negotiated vehicle price, but later entering a higher price”, and “allegedly charging consumers fees for unwanted or undisclosed warranties and services”. According to the article, the auto group denied any wrongdoing but agreed to the settlement.

But I digress. The above story really isn’t the point of this post, nor is it my intention to try to warn you of the legal dangers of non-compliance with the laws of the land. I, and my peers, write enough about that. Sure, I’m now a compliance consultant, but my ramblings here are based on the things I learned during my 20 plus years in automotive retail - and the realization that I probably had it all wrong.

This post is about Transparency. It’s about the Big Picture. It’s about opening your mind and stopping to think about the absurdity of old school tactics. Not from a legal or ethical mindset, but from a common-sense business perspective.

I realize that “Transparency” is the latest, and perhaps most over-used, buzzword in the car business. But please bear with me for a few moments while I pose a few questions. Hopefully, it will stimulate some “outside the box” thinking.

First, what is the upside of hiding information from your customers?

Sure, you have to do whatever it takes to stay ahead of the competition. Sure, that’s what the legendary automotive sales trainers taught us. Sure, the chances of getting into a legal bind are pretty slim. Sure, everybody else is doing it. Sure, if you give customers too much information they’ll just use it to shop you. Sure, there are ways to “manage” your online reputation, even if you have some unhappy customers. I get all that.

But – Big Picture Time – is the “anything it takes to make a deal” mentality really a sensible way to do business in today’s world? Do you really think this will lead to customer satisfaction and retention? Do you really believe that customers will continue to put up with this type of behavior forever?

Here’s how I look at it: Every time you…

Post a misleading ad, or

Charge a customer more than the advertised price, or

Lie to a customer about a vehicle being in stock, or

Present a foursquare with inaccurate numbers in order to confuse a customer, or

Present “packed” payments, or

Fail to truthfully disclose a vehicle’s history, or

You’re not completely honest and upfront with your customers

…there are some things you might want to consider:

1. You may be breaking the law – but it’s only illegal if you get caught, right?
2. What you’re doing may be an unethical business practice – but customers have no loyalty and you’re just trying to make a buck in a fiercely competitive marketplace, right?
3. You may be pissing off customers (or potential customers) – but “ya gotta have haters, right”?
4. You’re gambling with your future - this is an unsustainable way of doing business in the modern world and your continued success is greatly at risk.

Now you may be perfectly comfortable rolling the dice on number 1 and not care a lick about numbers 2 or 3, but what’s your answer for number 4?

I challenge you to think about it. Just think about it. Unfortunately, I didn’t when I worked in dealerships – I was a faithful practitioner of the old school ways.

Now, I realize that you may feel that this post is just more nonsense from an ex-car-guy-turned-consultant who doesn’t get it - and you may be right. Only time, and customer sentiment, will tell. But you may still want to ask yourself just how long are customers going to put up with business as usual?

Let’s face it; consumers have access to much more information, and choices, than they ever did. You can hate the internet and all its information. You can hate the idea of “transparency”. You can hate all the regulations that dealers have to contend with. You can hate the consumer advocates. You can hate the media and all of its anti-dealer sensationalism. But guess what? None of it is going away. The “But We’ve Always Done It This Way” mentality just doesn’t hold water anymore.

Now, I’m not a believer that the internet is going to somehow take over car buying. I totally agree that dealerships are, and will continue to be, the primary way that customers will purchase vehicles for a long time to come. But remember this; while customers may always choose to do business with dealerships, they don’t have to choose to do business with your dealership.

One final question: Are you a true professional who is ready, willing and able to succeed in the new world or are you hoping that things will never change?

In my book, transparency is not a dirty word, but complacency is.

Good luck and good selling.

Since the news broke earlier this week about the FTC citing 5 auto dealers for deceptive advertising, I’ve been asked a number of questions by folks in the industry. Here’s my take on the situation:

What’s the big deal about advertising that the dealership will pay off a trade-in no matter what the customer owes? It’s a true statement.

The problem is not so much what the ads say, but what they don’t say. As far as regulators are concerned, if an ad doesn’t explicitly state that any negative equity will be added to the loan balance, it’s deceptive. While it may seem obvious to us that the customer is responsible for negative equity, some consumers (and lawmakers) apparently think that these advertisements imply that the dealer will buy the trade for the amount the customer owes, regardless of its real value.

Some basic principles that regulatory agencies consider are 1) advertising is considered deceptive if the advertisement has a “tendency or capacity to mislead the public”; 2) if an ad is deemed deceptive, an advertiser has liability regardless of whether there was intent to deceive and; 3) statements susceptible to both a misleading and a truthful interpretation will likely be construed to be deceptive.

We always fully disclose negative equity on our contracts and leases, why isn’t that good enough?

If regulators feel that the first contact with a consumer is secured by deception, a violation may occur even though the true facts are made known to the buyer before he or she enters into a purchase or lease. Since statements and representations in advertisements are evaluated based on their tendency to deceive, no actual harm to consumers need occur for there to be a violation.

Dealers have been using this type of advertising for years – did the FTC recently change the rules?

No, these types of incomplete statements about paying off trade-ins have been considered deceptive for a long time by both federal and state regulators, so this is nothing new. Bear in mind that the fact that others were, or are, engaged in like practices is not considered a defense.

As to why the Feds decided to take action against dealers now - your guess is as good as mine. The FTC has been threatening to step up enforcement against dealers for the last year or so, but to be honest; I’ve been a bit skeptical. The Feds have traditionally gone after bigger fish and left car dealers to state regulators. So, while this action may just be a flash in the pan, it can also be a major game changer.

How do we avoid this happening to us? I mean, if the regulators decide to go on a witch hunt, they’re going to get you one way or another.

I disagree. Again, the violations the FTC cited are not new or surprising to anyone who understands advertising regulations. If you have ever read or listened to my ramblings in the past you know that I have a tendency to harp on two issues - Education and Due Diligence.  Please forgive me for once again repeating myself, but this is important:

Protect yourself by doing the following:

• Ensure that any member of your staff involved with advertising is properly trained in all applicable regulations.
• Never assume that your ad agencies or vendors know, or are following, the rules. If you write the check, you’re responsible.
• If you’re not sure, don’t guess! Have your advertisements reviewed, and edited if necessary, by someone knowledge before publication (this should done for all of your advertising including websites, YouTube, social media, etc.). It may cost a few bucks, but it’s a small price to pay.

Since the news broke earlier this week about the FTC citing 5 auto dealers for deceptive advertising, I’ve been asked a number of questions by folks in the industry. Here’s my take on the situation:

What’s the big deal about advertising that the dealership will pay off a trade-in no matter what the customer owes? It’s a true statement.

The problem is not so much what the ads say, but what they don’t say. As far as regulators are concerned, if an ad doesn’t explicitly state that any negative equity will be added to the loan balance, it’s deceptive. While it may seem obvious to us that the customer is responsible for negative equity, some consumers (and lawmakers) apparently think that these advertisements imply that the dealer will buy the trade for the amount the customer owes, regardless of its real value.

Some basic principles that regulatory agencies consider are 1) advertising is considered deceptive if the advertisement has a “tendency or capacity to mislead the public”; 2) if an ad is deemed deceptive, an advertiser has liability regardless of whether there was intent to deceive and; 3) statements susceptible to both a misleading and a truthful interpretation will likely be construed to be deceptive.

We always fully disclose negative equity on our contracts and leases, why isn’t that good enough?

If regulators feel that the first contact with a consumer is secured by deception, a violation may occur even though the true facts are made known to the buyer before he or she enters into a purchase or lease. Since statements and representations in advertisements are evaluated based on their tendency to deceive, no actual harm to consumers need occur for there to be a violation.

Dealers have been using this type of advertising for years – did the FTC recently change the rules?

No, these types of incomplete statements about paying off trade-ins have been considered deceptive for a long time by both federal and state regulators, so this is nothing new. Bear in mind that the fact that others were, or are, engaged in like practices is not considered a defense.

As to why the Feds decided to take action against dealers now - your guess is as good as mine. The FTC has been threatening to step up enforcement against dealers for the last year or so, but to be honest; I’ve been a bit skeptical. The Feds have traditionally gone after bigger fish and left car dealers to state regulators. So, while this action may just be a flash in the pan, it can also be a major game changer.

How do we avoid this happening to us? I mean, if the regulators decide to go on a witch hunt, they’re going to get you one way or another.

I disagree. Again, the violations the FTC cited are not new or surprising to anyone who understands advertising regulations. If you have ever read or listened to my ramblings in the past you know that I have a tendency to harp on two issues - Education and Due Diligence.  Please forgive me for once again repeating myself, but this is important:

Protect yourself by doing the following:

• Ensure that any member of your staff involved with advertising is properly trained in all applicable regulations.
• Never assume that your ad agencies or vendors know, or are following, the rules. If you write the check, you’re responsible.
• If you’re not sure, don’t guess! Have your advertisements reviewed, and edited if necessary, by someone knowledge before publication (this should done for all of your advertising including websites, YouTube, social media, etc.). It may cost a few bucks, but it’s a small price to pay.

As most everyone knows, ignorance of the law is no excuse. Yet, it’s clear that some dealers really have no idea if their staff is knowledgeable enough to follow the maze of rules and regulations that govern their organizations. Indeed, there sometimes seems to be a tendency for folks to bury their heads in the sand and hope for the best. If this is the case in your dealership, you may want to ask yourself if it really makes sense to put the business and reputation that you have worked years to build at risk by acting like an ostrich.

It should come as no surprise that government watchdogs and consumer attorneys have clearly been ratcheting up their assault on the auto industry. Dealers are more and more frequently the targets of lawsuits, enforcement actions, and of course, the associated negative publicity. Even inadvertent violations of the rules can be shockingly costly.

Are you truly comfortable with the level of compliance in your dealership? Do you feel that your staff is properly trained and accountable for their business practices? Are you comfortable with the last set of eyes you have reviewing your paperwork? What do you think the result would be if you were forced to defend yourself in court?

As they say, “You don’t know what you don’t know”. So, why not take the time to find out by performing a risk assessment? Compliance audits are a vital step in protecting dealerships from legal claims. They can be performed by either knowledgeable dealership staff or by an outside party. At worst, we’re talking about an investment of a few thousand dollars that can potentially save millions. Kind of a no-brainer, isn’t it? Here are some benefits of compliance audits:

Identify training needs – Many dealers, general managers and finance directors are well-versed in automotive legal issues. On the other hand, many other dealer employees have little or no background or training in compliance. They may simply rely on doing things “the way they’ve always been done”. There’s a lot to know about dealership compliance nowadays and a lot of people who must know it. Staff members that negotiate with customers, present prices and payments, make representations and promises or create advertisements may represent the greatest risk of noncompliance in the dealership. Think about all the people involved in those activities on a daily basis – sales managers, closers, used car managers, sales consultants, service advisors, internet department and BDC personnel – you name it. And, of course, there is always employee turnover to contend with. Audit results will help minimize confusion about potential legal issues and identify areas where more training is needed.

Accountability – Employers often don’t know the intimate details of every transaction that takes place in their dealership. It’s possible that some employees believe that “questionable behavior” may benefit the dealership (or themselves) financially or that the behavior is the industry standard and therefore acceptable. Employees may be hesitant to break old habits that have served them well in the past. Trusting that all staff members do the right thing every time can be very risky. Regular audits will help to ensure that employees are following proper procedures, and will reinforce the message that the company policies are the real deal and the organization will not tolerate noncompliance.

Protection from liability – Compliance audits, along with formal policies and training, are vital parts of a good faith attempt at operating a compliant organization. The FTC has specifically stated that this may limit potential liability and will be considered in any prosecution. According to FTC commentary, “The Commission agrees that the establishment of appropriate procedures would warrant consideration in its decision as to whether law enforcement action would be an appropriate use of agency resources. The Commission is not aware of any instance in which an enforcement action was brought against a company for the actions of a single ‘rogue’ employee who violated established company policy that adequately covered the conduct in question.”

Here are some examples of violations that are frequently uncovered during compliance audits:

• Forms and documents that are out-of-date or missing
• Contracts and leases that are improperly completed
• Evidence of potential unfair and deceptive acts and practices (UDAP) claims such as payment packing, price-gouging, “yo-yo” financing, undisclosed vehicle history, or hidden finance charges
• Deferred down payments or negative equity not properly disclosed
• Backdated re-written contracts
• Missing Risk Based Pricing notices (or credit score disclosure), Adverse Action notices, OFAC reports, privacy policies or cash reporting forms
• Fees or additions not properly disclosed on contracts or leases
• Evidence of falsified information on credit applications, power booking, straw purchases, or forged documents
• Information Safeguards and Red Flag policies not in place or not followed properly
•  Advertising regulations not being adhered to

Burying your head in the sand and hoping for the best is simply not a sensible business strategy in this day and age. With every customer interaction, with every car sold or serviced, your dealership and its long-term growth are at risk without absolute adherence to state and federal laws. An investment in compliance programs and training will help protect your assets, your employees, your customers and your good name.

As most everyone knows, ignorance of the law is no excuse. Yet, it’s clear that some dealers really have no idea if their staff is knowledgeable enough to follow the maze of rules and regulations that govern their organizations. Indeed, there sometimes seems to be a tendency for folks to bury their heads in the sand and hope for the best. If this is the case in your dealership, you may want to ask yourself if it really makes sense to put the business and reputation that you have worked years to build at risk by acting like an ostrich.

It should come as no surprise that government watchdogs and consumer attorneys have clearly been ratcheting up their assault on the auto industry. Dealers are more and more frequently the targets of lawsuits, enforcement actions, and of course, the associated negative publicity. Even inadvertent violations of the rules can be shockingly costly.

Are you truly comfortable with the level of compliance in your dealership? Do you feel that your staff is properly trained and accountable for their business practices? Are you comfortable with the last set of eyes you have reviewing your paperwork? What do you think the result would be if you were forced to defend yourself in court?

As they say, “You don’t know what you don’t know”. So, why not take the time to find out by performing a risk assessment? Compliance audits are a vital step in protecting dealerships from legal claims. They can be performed by either knowledgeable dealership staff or by an outside party. At worst, we’re talking about an investment of a few thousand dollars that can potentially save millions. Kind of a no-brainer, isn’t it? Here are some benefits of compliance audits:

Identify training needs – Many dealers, general managers and finance directors are well-versed in automotive legal issues. On the other hand, many other dealer employees have little or no background or training in compliance. They may simply rely on doing things “the way they’ve always been done”. There’s a lot to know about dealership compliance nowadays and a lot of people who must know it. Staff members that negotiate with customers, present prices and payments, make representations and promises or create advertisements may represent the greatest risk of noncompliance in the dealership. Think about all the people involved in those activities on a daily basis – sales managers, closers, used car managers, sales consultants, service advisors, internet department and BDC personnel – you name it. And, of course, there is always employee turnover to contend with. Audit results will help minimize confusion about potential legal issues and identify areas where more training is needed.

Accountability – Employers often don’t know the intimate details of every transaction that takes place in their dealership. It’s possible that some employees believe that “questionable behavior” may benefit the dealership (or themselves) financially or that the behavior is the industry standard and therefore acceptable. Employees may be hesitant to break old habits that have served them well in the past. Trusting that all staff members do the right thing every time can be very risky. Regular audits will help to ensure that employees are following proper procedures, and will reinforce the message that the company policies are the real deal and the organization will not tolerate noncompliance.

Protection from liability – Compliance audits, along with formal policies and training, are vital parts of a good faith attempt at operating a compliant organization. The FTC has specifically stated that this may limit potential liability and will be considered in any prosecution. According to FTC commentary, “The Commission agrees that the establishment of appropriate procedures would warrant consideration in its decision as to whether law enforcement action would be an appropriate use of agency resources. The Commission is not aware of any instance in which an enforcement action was brought against a company for the actions of a single ‘rogue’ employee who violated established company policy that adequately covered the conduct in question.”

Here are some examples of violations that are frequently uncovered during compliance audits:

• Forms and documents that are out-of-date or missing
• Contracts and leases that are improperly completed
• Evidence of potential unfair and deceptive acts and practices (UDAP) claims such as payment packing, price-gouging, “yo-yo” financing, undisclosed vehicle history, or hidden finance charges
• Deferred down payments or negative equity not properly disclosed
• Backdated re-written contracts
• Missing Risk Based Pricing notices (or credit score disclosure), Adverse Action notices, OFAC reports, privacy policies or cash reporting forms
• Fees or additions not properly disclosed on contracts or leases
• Evidence of falsified information on credit applications, power booking, straw purchases, or forged documents
• Information Safeguards and Red Flag policies not in place or not followed properly
•  Advertising regulations not being adhered to

Burying your head in the sand and hoping for the best is simply not a sensible business strategy in this day and age. With every customer interaction, with every car sold or serviced, your dealership and its long-term growth are at risk without absolute adherence to state and federal laws. An investment in compliance programs and training will help protect your assets, your employees, your customers and your good name.

Keeping the lawyers at bay used to be a whole lot easier for dealerships. Unfortunately, new technology brings new challenges. A recent high-profile lawsuit involves a large dealer group named in a class-action lawsuit for allegedly failing to honor a text message opt-out request.  The suit, launched by a former employee, is seeking damages of at least $500 for each violation. While this may seem like yet another frivolous lawsuit by a disgruntled former employee, the potential for liability to this dealer group is substantial. Several recent text message cases have resulted in multi-million dollar settlements. For instance:

Twentieth Century Fox - $16 million class-action settlement ($200/ phone number)

Simon & Schuster - $10 million class-action settlement ($175/ phone number)

Timberland Company - $7 million class-action settlement ($150/ phone number)

Text (SMS) marketing is subject to a number of federal and state restrictions and the rules are extremely confusing. These regulations can be much more difficult to deal with than telemarketing or email regulations - primarily because many consumers are charged for text messages and the government feels that they should be afforded additional protection against unwanted solicitations. In many cases, the consumer must opt-in (give express permission) before you can legally send them a text message, even if you have an existing relationship with them.

Here are some things you should know before launching a text marketing campaign:

1. You can’t send a commercial text message (solicitation) to a phone number that’s on the national “Do Not Call” (DNC) list (subject to the “established business relationship” and other provisions of the national DNC rules).
2. You can’t send a commercial text message to a phone number that is on your company-specific DNC list.
3. You can’t send any text message whatsoever to a cell phone number – including sales pitches, service reminders, and communications with current customers - using an “automated dialer system” unless you have the consumer’s prior express consent.  This may include computers used to send automated text messages (yours or your vendors).
4. In some instances, a text message may also be considered an email and must comply with all of the standard CAN-SPAM requirements (contains your physical mailing address, cost-free opt-out mechanism, etc.). A text message will be considered an email if is sent to an email address – that is, if it has an internet domain name after the "@" symbol (for example: sending a message from your computer to a mobile carrier, such as 10digitmobilenumber@txt.att.net).
5. The CAN-SPAM Act also prohibits sending commercial e-mail messages to wireless devices without prior permission. So, no commercial text message that is deemed to be an email may be sent to a wireless device without express prior authorization. Merely having an "established business relationship" with the recipient is not enough.

Confused yet? Here are some suggestions to help protect yourself against legal challenges:

Consult your company-specific DNC list before sending a text message.

Consult the national DNC list and consider whether your messages are based on an "established business relationship," which may provide an exception from the national DNC compliance.

Determine whether your delivery meets the CAN-SPAM Act’s "email" definition, and if so, whether you have complied with the CAN-SPAM disclosure and opt-out requirements.

Put a process in place to ensure that all opt-out requests are honored quickly and permanently.

Develop an employee policy regarding text messaging and educate your staff on proper procedures.

Appoint an in-house compliance coordinator to monitor text messaging by both employees and vendors.

Consider instituting a policy of ALWAYS obtaining recipients’ express prior authorization before sending text messages, regardless of the circumstances or method of delivery.

Always consult knowledgeable legal counsel before launching a text marketing campaign.

 If you use an outside vendor to administer your text marketing campaigns, NEVER assume that they know all the rules and regulations - run it by your legal team first. If you’re writing the check, you’re responsible.

I know - it’s mind-boggling how difficult it can be to deal with these regulations. But just remember - it only takes one consumer (or one employee) to get the legal ball rolling, and it’s certainly not difficult to find a lawyer who’s ready, willing, and able to sue a car dealer.

Keeping the lawyers at bay used to be a whole lot easier for dealerships. Unfortunately, new technology brings new challenges. A recent high-profile lawsuit involves a large dealer group named in a class-action lawsuit for allegedly failing to honor a text message opt-out request.  The suit, launched by a former employee, is seeking damages of at least $500 for each violation. While this may seem like yet another frivolous lawsuit by a disgruntled former employee, the potential for liability to this dealer group is substantial. Several recent text message cases have resulted in multi-million dollar settlements. For instance:

Twentieth Century Fox - $16 million class-action settlement ($200/ phone number)

Simon & Schuster - $10 million class-action settlement ($175/ phone number)

Timberland Company - $7 million class-action settlement ($150/ phone number)

Text (SMS) marketing is subject to a number of federal and state restrictions and the rules are extremely confusing. These regulations can be much more difficult to deal with than telemarketing or email regulations - primarily because many consumers are charged for text messages and the government feels that they should be afforded additional protection against unwanted solicitations. In many cases, the consumer must opt-in (give express permission) before you can legally send them a text message, even if you have an existing relationship with them.

Here are some things you should know before launching a text marketing campaign:

1. You can’t send a commercial text message (solicitation) to a phone number that’s on the national “Do Not Call” (DNC) list (subject to the “established business relationship” and other provisions of the national DNC rules).
2. You can’t send a commercial text message to a phone number that is on your company-specific DNC list.
3. You can’t send any text message whatsoever to a cell phone number – including sales pitches, service reminders, and communications with current customers - using an “automated dialer system” unless you have the consumer’s prior express consent.  This may include computers used to send automated text messages (yours or your vendors).
4. In some instances, a text message may also be considered an email and must comply with all of the standard CAN-SPAM requirements (contains your physical mailing address, cost-free opt-out mechanism, etc.). A text message will be considered an email if is sent to an email address – that is, if it has an internet domain name after the "@" symbol (for example: sending a message from your computer to a mobile carrier, such as 10digitmobilenumber@txt.att.net).
5. The CAN-SPAM Act also prohibits sending commercial e-mail messages to wireless devices without prior permission. So, no commercial text message that is deemed to be an email may be sent to a wireless device without express prior authorization. Merely having an "established business relationship" with the recipient is not enough.

Confused yet? Here are some suggestions to help protect yourself against legal challenges:

Consult your company-specific DNC list before sending a text message.

Consult the national DNC list and consider whether your messages are based on an "established business relationship," which may provide an exception from the national DNC compliance.

Determine whether your delivery meets the CAN-SPAM Act’s "email" definition, and if so, whether you have complied with the CAN-SPAM disclosure and opt-out requirements.

Put a process in place to ensure that all opt-out requests are honored quickly and permanently.

Develop an employee policy regarding text messaging and educate your staff on proper procedures.

Appoint an in-house compliance coordinator to monitor text messaging by both employees and vendors.

Consider instituting a policy of ALWAYS obtaining recipients’ express prior authorization before sending text messages, regardless of the circumstances or method of delivery.

Always consult knowledgeable legal counsel before launching a text marketing campaign.

 If you use an outside vendor to administer your text marketing campaigns, NEVER assume that they know all the rules and regulations - run it by your legal team first. If you’re writing the check, you’re responsible.

I know - it’s mind-boggling how difficult it can be to deal with these regulations. But just remember - it only takes one consumer (or one employee) to get the legal ball rolling, and it’s certainly not difficult to find a lawyer who’s ready, willing, and able to sue a car dealer.

It’s no secret that auto dealerships have frequently been forced to defend themselves against discrimination claims by employees and agencies such as the Equal Employment Opportunity Commission. As a result, many dealers have instituted comprehensive human resources programs to avoid potential problems. However, new technology brings new challenges.

As the use of social media grows, more and more dealerships are using the internet to screen potential employees. Many managers tasked with hiring find these sites to be particularly helpful because they perceive that this information reflects a more accurate representation of the applicant beyond the interview. This influx of information regarding applicants would seem to be a great way to vet their ability to "fit in" with a company.

While social media may allow employers to learn vast amounts of information about job applicants, hiring managers who even casually use these tools to gather information about a prospective employee could expose the dealership to legal risks.  Given the real possibility for inappropriate and illegal uses in the hiring context, organizations need to carefully consider how, if at all, they utilize the sites when screening candidates.

Discrimination Claims - When a job candidate is the subject of a social media search there’s a possibility that the search will reveal information that would be off limits in an interview, such as age or marital status. Hiring managers should be very careful in using private information people are posting publicly to make hiring decisions. An employer's availing themselves of such information could pave the way for allegations of discrimination if the employee or applicant believes that the employer used such information to make an adverse employment decision. A risk may be created that that this protected class information actually is being considered or, even if it is not, putting your organization in the position of having to defend a claim knowing that this information existed on the sites you visited. Risk factors include:

1. Information regarding age, race, religion, sex, disability, or other protected characteristics, such as pregnancy, illness or disability. For example, a person’s Facebook page may disclose their religion.  Once an employer knows that information, the fact that the employer knew the potential employee’s religion can be used in an employment discrimination suit.
2. Checking social media or the Internet only on applicants of a certain race or gender.
3. Searching on all applicants, but using the same information differently against one particular type of applicants.  For example, if all of your applicants had pictures of themselves of drinking alcohol in public, but you viewed that fact more negatively against females, that could be considered discrimination.
4. Rejecting an applicant based on conduct protected by lawful off-duty conduct laws.
5. Rejecting an applicant because of his or her political activities may violate state constitutional law.

To avoid these legal obstacles, you may decide that it's better to not even collect that information, so you can say that you didn't have access to it. Another procedure would be to have someone other than a hiring manager or decision maker in human resources conduct an online background check of job applicants. The individual who does the online check should avoid sharing with decision makers any personal information about a job candidate that’s not relevant to the hiring decision. This individual should be properly trained to avoid improper access and to screen out information that can’t be lawfully considered in the decision-making process. Having a firewall between the hiring manager and social media information about job applicants makes it difficult for a plaintiff subsequently to contend that the hiring manager discriminated against him or her based on a legally protected characteristic.

Invasion of privacy claims by potential employees.  Generally, a potential employee will have a tough time asserting this claim because you need a “reasonable expectation of privacy” and a lot of people keep their social media profiles open to the public.  However, it’s clear that if the applicant is using the highest privacy settings and the employer somehow gets past all these barriers, the claim is stronger.

A point to consider is how the hiring manager will obtain access to the candidate's page. Many social media users have some degree of privacy established in their settings. As a result, access to the candidate's page may require "friending" the applicant and the applicant accepting the request. Not a good idea.

Using an outside agency to screen applicants – If an employer uses a third party to conduct searches on job candidates the federal Fair Credit Reporting Act and applicable state law on background checks likely will apply. The Fair Credit Reporting Act governs "employment background checks for the purposes of hiring" and applies if "an employer uses a third-party screening company to prepare the check." Thus, if an employer is using an outside resource to view social networking sites and provide information, the applicant must be informed of the investigation, given an opportunity to consent, and notified if the report is used to make an adverse decision. It’s important to ensure that any company you use to perform background checks follows the correct procedures, and that your employment applications contain the proper notifications.

Best practices for the use of social media in hiring decisions:

1. Develop a policy on whether or not the hiring manager will search the internet or social media sites in hiring.
2. If you decide to use social media in hiring, do the searches on applicants consistently and in a uniform manner.
3. Make sure candidates are notified, in writing, about the companies use of social media to gather information, e.g., on job applications.
4. Ensure that employment decisions are made based on lawful, verified information. Don’t allow factors to be considered that have no relevancy to job performance, such as race, age, or sexual orientation. They’re all protected statuses by law and using them as criteria for hiring is discriminatory.
5. Follow best practices in identifying a legitimate, nondiscriminatory reason for the hiring decision with the documentation supporting the decision.
6. Prohibit “friending” a potential employee to learn things about them that the general public doesn’t have access to.
7. Discourage supervisors from being social media friends with their direct reports.

It’s no secret that auto dealerships have frequently been forced to defend themselves against discrimination claims by employees and agencies such as the Equal Employment Opportunity Commission. As a result, many dealers have instituted comprehensive human resources programs to avoid potential problems. However, new technology brings new challenges.

As the use of social media grows, more and more dealerships are using the internet to screen potential employees. Many managers tasked with hiring find these sites to be particularly helpful because they perceive that this information reflects a more accurate representation of the applicant beyond the interview. This influx of information regarding applicants would seem to be a great way to vet their ability to "fit in" with a company.

While social media may allow employers to learn vast amounts of information about job applicants, hiring managers who even casually use these tools to gather information about a prospective employee could expose the dealership to legal risks.  Given the real possibility for inappropriate and illegal uses in the hiring context, organizations need to carefully consider how, if at all, they utilize the sites when screening candidates.

Discrimination Claims - When a job candidate is the subject of a social media search there’s a possibility that the search will reveal information that would be off limits in an interview, such as age or marital status. Hiring managers should be very careful in using private information people are posting publicly to make hiring decisions. An employer's availing themselves of such information could pave the way for allegations of discrimination if the employee or applicant believes that the employer used such information to make an adverse employment decision. A risk may be created that that this protected class information actually is being considered or, even if it is not, putting your organization in the position of having to defend a claim knowing that this information existed on the sites you visited. Risk factors include:

1. Information regarding age, race, religion, sex, disability, or other protected characteristics, such as pregnancy, illness or disability. For example, a person’s Facebook page may disclose their religion.  Once an employer knows that information, the fact that the employer knew the potential employee’s religion can be used in an employment discrimination suit.
2. Checking social media or the Internet only on applicants of a certain race or gender.
3. Searching on all applicants, but using the same information differently against one particular type of applicants.  For example, if all of your applicants had pictures of themselves of drinking alcohol in public, but you viewed that fact more negatively against females, that could be considered discrimination.
4. Rejecting an applicant based on conduct protected by lawful off-duty conduct laws.
5. Rejecting an applicant because of his or her political activities may violate state constitutional law.

To avoid these legal obstacles, you may decide that it's better to not even collect that information, so you can say that you didn't have access to it. Another procedure would be to have someone other than a hiring manager or decision maker in human resources conduct an online background check of job applicants. The individual who does the online check should avoid sharing with decision makers any personal information about a job candidate that’s not relevant to the hiring decision. This individual should be properly trained to avoid improper access and to screen out information that can’t be lawfully considered in the decision-making process. Having a firewall between the hiring manager and social media information about job applicants makes it difficult for a plaintiff subsequently to contend that the hiring manager discriminated against him or her based on a legally protected characteristic.

Invasion of privacy claims by potential employees.  Generally, a potential employee will have a tough time asserting this claim because you need a “reasonable expectation of privacy” and a lot of people keep their social media profiles open to the public.  However, it’s clear that if the applicant is using the highest privacy settings and the employer somehow gets past all these barriers, the claim is stronger.

A point to consider is how the hiring manager will obtain access to the candidate's page. Many social media users have some degree of privacy established in their settings. As a result, access to the candidate's page may require "friending" the applicant and the applicant accepting the request. Not a good idea.

Using an outside agency to screen applicants – If an employer uses a third party to conduct searches on job candidates the federal Fair Credit Reporting Act and applicable state law on background checks likely will apply. The Fair Credit Reporting Act governs "employment background checks for the purposes of hiring" and applies if "an employer uses a third-party screening company to prepare the check." Thus, if an employer is using an outside resource to view social networking sites and provide information, the applicant must be informed of the investigation, given an opportunity to consent, and notified if the report is used to make an adverse decision. It’s important to ensure that any company you use to perform background checks follows the correct procedures, and that your employment applications contain the proper notifications.

Best practices for the use of social media in hiring decisions:

1. Develop a policy on whether or not the hiring manager will search the internet or social media sites in hiring.
2. If you decide to use social media in hiring, do the searches on applicants consistently and in a uniform manner.
3. Make sure candidates are notified, in writing, about the companies use of social media to gather information, e.g., on job applications.
4. Ensure that employment decisions are made based on lawful, verified information. Don’t allow factors to be considered that have no relevancy to job performance, such as race, age, or sexual orientation. They’re all protected statuses by law and using them as criteria for hiring is discriminatory.
5. Follow best practices in identifying a legitimate, nondiscriminatory reason for the hiring decision with the documentation supporting the decision.
6. Prohibit “friending” a potential employee to learn things about them that the general public doesn’t have access to.
7. Discourage supervisors from being social media friends with their direct reports.