The Motor Vehicle Dealer Board (MVDB) recently included in the February 2012 issue of Dealer Talk Newsletter an article titled “Lead Providers and Bird Dogs”. It quotes Virginia Code Section 46.2-1537 which basically says it is unlawful to compensate anyone other than a licensed salesperson for the sale of a vehicle. The article gives two variations of how a Bird Dog fee is commonly paid. The first variation has the Bird Dog fee getting paid only if a referral or lead results in a sale. The second variation has the Bird Dog fee being paid on a per lead basis whether or not any lead ever results in a sale. It goes on to state a task force was created and on January 9, 2001 it concluded that, “. . . licensed motor vehicle dealers may only compensate an unlicensed third-party vendor by a flat payment structure (e.g., per month) rather than per sale, per referral or any other transactional basis.”
Now that got my attention because I know of many car dealers, new and used, who use lead providers and Pay Per Click (PPC) advertisers whose cost structures are in contradiction to this taskforce ruling. Many of our Virginia clients have had to stop using some effective online lead providers. For those not familiar, a lead provider is usually one or several websites that attract car buyers. Some may list your vehicles on their site. If and when they get a car buyer in your area that is interested in shopping for a car, they will extract from the buyer their contact information before the site gives the buyer any real information. The website lead is then sold to the dealership on a per lead basis. This provider typically offers no guarantees about the lead other than if the address or phone number is wrong, you don’t pay for it. It doesn’t matter if it results in a sale or not. You can buy 10 leads or 10,000 and what you do with them or how well you do with them is your concern, not the lead provider’s.
I asked for clarification from the MVDB about this and I expressed my concerns for those who use another form of online advertising, Pay Per Click (PPC). I explained that any dealer can pay Google, Yahoo, Bing and others to have links to their website placed as the first search result when someone searches for something like “used car dealer in Virginia”. If you want to be the first link to show up for that search phrase you get a Google account and you bid on as many unique search phrases as you like. The highest bidder gets the first link, second highest gets the next and so on. These are sponsored links and usually show up in the first three links on the page as well as in the links on the right hand column of any search results page.
PPC means Pay Per Click. If your search phrase gets clicked on 10 times and you agreed to pay $1 for each click, you owe Google $10. That, to me, translates into about the same as Pay Per Lead, which the MVDB says is not legal. When I asked whether or not this advertising model was legal, the response I got from Bruce Gould, Executive Director of the MVDB, was, “As I understand your real world example –an individual ‘clicks’ on a dealer’s name within a list of dealership names and as a result is taken to the dealer’s website. — I don’t see a problem. I am not able to provide legal advice as I am not an attorney.”
Did I miss something? The taskforce said, “dealers may only compensate an unlicensed third-party vendor by a flat payment structure (e.g., per month) rather than per sale, per referral or any other transactional basis”. Does this mean that Google and other PPC providers are getting a pass? If so, what is the difference between a sale that was generated from a Google search and one that is generated from another website?
Do not get me wrong, I am happy to hear that car dealers are able to utilize PPC. We have many clients utilizing this form of advertising. However, the distinction between PPC and PPL is murky at best and I think the ban on legitimate PPL services is wrong. Some clients have told me a few of the better PPL companies have created a flat fee program for them but when they did, the number and quality of leads they got dropped dramatically. Other than the advertisers, who does this hurt? The car dealers who feel this disparity the most are those located near the borders of other states. The dealership down the street may also be in another state and because of that, may have access to advertisers our Virginia dealerships don’t have.
All this came about in an effort to stop car dealers from paying unlicensed salespeople. I contend that still happens too much today. A law that was intended to prevent an unscrupulous dealer from circumventing the licensing laws is actually preventing reputable dealerships from fully benefiting from the services of reputable, nationwide advertisers. Meanwhile, it is still possible for some Virginia dealers to circumvent the Bird Dog Rule. There is one Virginia dealership advertising on their website that if you refer someone to them and they enter into a car loan with that dealership’s related finance company that they will give you $200 off your loan. When I brought this to the attention of the MVDB I got an email response from Bruce Gould where he stated, “The law that is enforced by the MVDB prohibits payment of a fee in connection with the ‘sale of a motor vehicle’. This dealer is paying a fee in connection with the financing of a vehicle.”
I think there is a better way to curb the use of unlicensed salespeople while at the same time allowing our dealers to utilize reputable companies with proven programs who do business in an ethical manner. This taskforce ruling is twelve years old. The Internet is much different today. Before now, a Pay Per Lead program was impossible but with the tracking capabilities of the Internet, it is becoming commonplace in other industries. I am told the MVDB has no plans of addressing this topic in the future.