Both the ongoing Coronavirus pandemic and the fallout from the 2020 election are expected to have the most legal impact on dealers in 2021 and affect many other issues. Dealers must contend with the consequences of the pandemic as well as anticipated changes in governance and policies. Below is a rundown of the top legal trends that are expected to impact the franchised automotive retailing industry in 2021.

COVID-19

COVID-19 changed virtually everything in early 2020. In a matter of weeks, unemployment levels soared from record lows to record highs. Many dealers were closed for up to two months, and buy-sell activity died. Congress took unprecedented action, spending trillions of dollars to pay both people and businesses during short closures and slowdowns.

Business for dealers roared back in the summer, and buy-sell transactions were robust in the second half of the year. Unemployment dipped under 8%. By the fall of 2020, most dealers had come full circle with brisk sales and service activity.

In the final months of 2020, the pandemic surged, again, resulting in the re-impositions of limitations on certain businesses and other activities in several states. Amid this negative news, several pharmaceutical companies developed approved vaccinations in record time. As of the end of March, more than 100 million Americans have been vaccinated, with the pace accelerating as vaccine distribution and processes improve. The expectation is that everyone desiring vaccinations will get them by mid-summer.

No one should expect the ways of doing business to return to a pre-COVID “normal” anytime soon. Instead, preventive measures are expected to continue well into 2021. Even after that, dealers will likely continue with standards of hygiene, masking and social distancing. Dealers now readily serve customers at their homes upon request. Pick-ups and deliveries may become as commonplace in dealership sales and service as home delivery of meals.

Dealers must take care to enforce rules mandated by their states. A rising number of consumers vow to do their car shopping and deliveries at home — a phenomenon that already was taking hold before the pandemic struck. Dealers should now operate as if the next pandemic is coming, with strong safety measures and an enhanced virtual capability.

Significance of the 2020 Election

The 2020 election was like no other in American history. The Senate majority remained in limbo until the January 5, 2021 runoff elections for Georgia’s two senators. Now, with a 50-50 split between the parties, Democrats have control, with Vice President Harris as the tie-breaking vote. Democrats also enjoy a narrower edge than before in the House of Representatives.

The Biden administration vows to be focused on the reinvigoration of regulations, be consumer-oriented, and further the “greening” of American life and business. Dealers must expect legislative and regulatory influence that will drive product development, choice and performance. CAFE standards will be revisited. Electric vehicles will be further encouraged and incentivized; credit questions about racial disparity may see federal investigations of dealer practices; unionization will be encouraged again, and the NLRB will not be sympathetic to businesses. President Biden will likely preside over many legislative, executive and regulatory changes that will impact dealers.

The Data, Internet, Social Media, Identity Theft and Privacy Minefield

For dealers, this topic encompasses a moving set of targets that embrace both opportunity and risk. No dealer can operate successfully without meaningful emphasis upon cybersecurity and capability, including regular updates in hardware, software and regulatory developments. But enormous dangers and challenges loom because dealerships are vulnerable to cybercrimes, particularly in certain areas of their business. According to a December 9, 2019, Automotive News article (Retailers Prime Targets For Data Theft), an average of 153 viruses and 84 malicious spam emails are aimed at dealer computer networks and are blocked by technology each day. There are many cyber pitfalls that affect dealers, including direct attacks by cybercriminals, identity theft, ransomware and other threats, all of which are surging.

We’ve also seen an increase in lawsuits related to the Americans with Disabilities Act and comparable state laws, claiming that consumers cannot easily access dealer websites with certain impairments. Many dealers have paid substantial settlements in attorneys’ fees and “corrected” the “offending” websites. It is incumbent upon every dealership to have “cyber-savvy” employees and ensure the dealership has continuous access to updates in relevant technology and associated legal developments.

Threats to the Auto Dealer Franchise Model

For decades, franchised dealers have witnessed growing and creative efforts by auto manufacturers and other entities to invade the franchised retail auto business realm. The NADA, state associations and others have done a stellar job in making the case that franchised dealers are indispensable to fairness, honesty and excellence in retail service and sales and best serve America’s consumers. Dealer associations and other industry supporters will need to continue emphasizing the franchise system’s consumer benefits, including price competition, easy access to warranty, recall and general repairs, a commitment to improving public safety, local accountability and more.

Race, Gender and Identity in the Workplace

After George Floyd’s death, while in police custody on May 25, 2020, there was a dramatic and instantaneous change in policies throughout America. These changes did not just affect police conduct but also impacted businesses, schools and more. New policies proliferated that will alter how dealers operate with their employees and customers. Further, we can expect to see auto franchisors’ accelerated efforts to recruit and place more minority owners and managers of dealerships. The #MeToo movement seeks to end the mistreatment of women in the workplace and elsewhere, and Congress is also expected to consider “equity-based” legislation. Dealers may have to cope with a bevy of new laws and regulations in this area.

Consumerism

Look for a resurgence of the Consumer Financial Protection Bureau (CFPB), a more active Federal Trade Commission (FTC) and more laws and a heavy enforcement hand by the Biden administration. Dealers are already pro-consumer but need to be wary of an overly aggressive FTC and state regulators who, all too often, target dealers who have done nothing wrong. In 2021, expect to see more government legislation, regulations, and enforcement activities to proactively protect consumers from allegedly unfair or discriminatory sales practices.

Factory Sales Performance Standards

Dealers mostly acknowledge the wisdom of factories that push them to retail more cars — and incentivize them to do so. At the same time, the Covid era might have caused some factories to consider whether facilities requirements should be overhauled. They recognize the growing emphasis on off-site and virtual retailing, but some factories do act as though their image requirements should not be challenged. Dealers should be vigilant to not enter into commitments that cost more than a program is worth or sign agreements that commit to unreasonable future performance or renovations.

International Trade

Trade relations are a high priority for President Biden. This emphasis could lead to smoother movement of imported vehicles and higher costs to dealers and consumers. Look for moves to, essentially, erase hard lines and financial penalties/tariffs/sanctions.
Regulatory Overreach
The Biden administration embraces a robust regulatory scheme, and dealers should expect some increased expenses for compliance purposes.

Dealer Advertising

Dealer advertising in 2021 faces a minefield of potential hazards. Both the FTC and state/local agencies scour the media to find deviations from advertising requirements. It is incumbent on dealers to assure compliance with all advertising laws and regulations to avoid potentially harsh penalties.