GNYADA July 2015 Newsletter

13 Rise of Chipped Credit Cards Will Impact Dealers As credit card companies add new security technology, including chip- embedded security, businesses are responsible for upgrading their point of sale equipment, or they risk an embedded card transaction will shift from the credit card company/ issuing bank to the retailer. card processing vendor to ask about the process and cost of converting to EMV-compliant readers.

DDC Is Here to Help Need a hand upgrading your credit card system? You can find help through our Dealers Discount Club , specifically the payment technology provider Xenex . Also, starting October 2015, Merchant Lynx Services , an Allied Partner, will be offering to equip clients with embed- ded card readers; visit their website for information on setup costs.

Several factors are driving this initia- tive: Centrally, chip-embedded cards are issued virtually everywhere in the world except the U.S., and the vast increase in credit card-related fraud has prompted insurance compa- nies and other interested parties to push for increased protection. While there is currently no govern- ment mandate to move from magnetic strip cards to chip-embedded cards (or to replace card readers at retail- ers), that hands-off approach may not last long. When merchant agreements are updated later this year, dealers are encouraged to contact their credit- sequently ruled that GM could not terminate the franchise. Decisions from other jurisdictions have found General Motors’ statewide standards to be unreasonable: That several ALJs who routinely consider disputes between fran- chisors and franchisees have con- cluded that statewide averages are not reasonable performance indica- tors gives us pause. It seems sensible enough to conclude that car dealers located in different parts of a single state would face different barriers to success, including variations in local brand preferences. Ultimately, however, the New York Court of Appeals has been asked to rule on this issue because it involves an interpretation of New York’s Dealer Franchise Law. Accordingly, the New York Court of Appeals is to answer whether a statewide sales per-

14 increased liability for any resulting fraud. This is a reality that naturally affects auto dealerships. An international, private consortium, the EMV Coalition – representing Europay, Mastercard and Visa – has decided that, by October of this year, they will amend their merchant agree- ments to reflect this issue. The updates will basically specify that if a retailer does not upgrade their point of sale equipment to be compliant with chip-embedded cards, liability for any fraud associated with A federal Appeals Court has asked the New York Court of Appeals to weigh in on General Motors’ statewide sales performance stan- dard. The issue is whether or not this principle violates New York’s Dealer Franchise Law, by not adjusting for local market conditions. rejected the dealers’ argument that the GM standard (Retail Sales Index, or “RSI”) was “unreasonable, arbi- trary or unfair” and violated New York’s Franchised Motor Vehicle Dealer Act. However, in a separate proceeding, Beck challenged GM’s attempt to terminate their franchise; a DMV administrative law judge found it was unreasonable for GM to hold downstate dealers to a statewide stan- dard that doesn't realistically reflect the unique challenges of operating in the downstate market. The judge sub- The lower court in the Beck Chevrolet case had previously

GM’s Sales Performance Standard Under Review

formance standard like GM’s is “unreasonable, arbitrary, or unfair” when it disregards local market con- ditions and consumer preferences. Manufacturers use statewide and regional averages not only to termi- nate dealers, but also to justify add- points, impose facility capacity requirements, and set sales objectives in monetary incentive programs. Therefore, the New York Court of Appeals’ determination will have a profound effect on the franchised motor vehicle industry in New York and throughout the United States. GNYADA worked hard to create a Franchise Law protecting dealers throughout this state. The Association will be filing an Amicus Brief.

GNYADA thanks Russell P. McRory of Arent Fox for this article.

Greater New York Automobile Dealers Association • www.gnyada.com

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