| Compliance Alert

Wiretapping Litigation Highlights Importance of Website Tracking Compliance

What's new:  In recent months, plaintiff attorneys have sent demand letters and filed lawsuits regarding website tracking technologies. Plaintiffs have alleged that before clicking or interacting with any buttons on a dealer website, third party tracking technologies (such as cookies and pixels) capture and transmit activity to third parties in violation of federal and state statutes that prohibit wiretapping - most commonly, the California Invasion of Privacy Act (CIPA).

Why it matters:  Website tracking technologies are common across virtually all industries and sectors to enhance the customer's experience by optimizing websites to their preferences and supporting third party tools like chat platforms. Demand letters are typically a way to get a quick monetary settlement from a dealership to avoid litigation. Lawsuits, however, have been filed by plaintiffs against businesses, including those that have not responded to the demand letter.

What's next:  Dealerships cannot prevent others from sending demand letters or filing lawsuits, even if the allegations have little or no merit. However, dealerships can mitigate these risks by getting consumer consent to share website activity through robust cookie banners that do not load until a consumer consents and the dealer's privacy policy discloses that tracking technologies are being used.

Dealers are encouraged to consult NADA's Best Practices for Tracking Consumer Website Activity. Dealers should know what tracking is occurring on their websites and ensure their privacy policy accurately discloses what information is being collected and shared with third parties. Responding to a demand letter is an individual business decision for the dealership and should be done after consultation with counsel.

NADA will host a webinar to discuss the issue on Monday, July 13 at 1:00 p.m. ET with Usama Kahf, an experienced dealership litigator from Fisher Phillips who has represented dealerships in these matters to provide updates and practical strategies to help assess risk. Please register HERE.

This memorandum is offered for informational purposes only and is not intended as legal advice. Consult an attorney who is familiar with federal, state, and local law addressing these topics and your operations for guidance on the legal sufficiency of your privacy practices.