I am happy to report back on our recent legislative success that will benefit the dealers of Montana. I would like to give a special thank you to our team: Scott Reichner our Contract Lobbyist, Jim Sewell and Craig Charlton, our Attorneys, Bruce Knudsen our Executive Vice President, our Legislative Committee our Board and of course the dealers of Montana. It was definitely a team sport. Certainly a job well done.

MTADA’s successful legislative program for the 2023 Session, sponsored by Sen. Barry Usher, just concluded with a celebratory signing by Governor Gianforte. Senate Bill 411, as passed and signed by the Governor, addresses the following issues.

Update to Data Privacy Law

MTADA was successful in seeing a data privacy and protection statute enacted into law in the 2019 Session as Mont. Code Ann. §30-11-717, 718 and 719. The existing law was similar to AZ, but not identical. The AZ law was upheld by the 9th Circuit Court of Appeals. SB 411 revised the Montana statutes to mirror the provisions of the approved AZ law. Pg. 1 to pg. 4, line 3.

Update the Definition of “Motor Vehicle”

The definition of Motor Vehicle was revised to include motorboats. Personal watercraft (i.e. jet skis) were already included in the definition, and it appeared omitting motorboats may have been an oversight. The effect of this amendment is to give motorboat dealers the same statutory protections afforded to jet ski dealers. Pg. 18, line 17.

Written Franchise Agreement Required

Mont. Code Ann. § 61-4-202(3) does not specifically state that the motor vehicle manufacturer and dealer will enter into a written franchise agreement although industry practice requires it and other provisions of the code seem to assume that the franchise agreement be in writing. See, for example, Mont. Code Ann. § 61-4-204. SB 411 updates the code to make it clear that a written franchise agreement is required by adding subsection (e) to § 61-4-202(3). Pg. 20, lines 2-8.

Limitation on Manufacturer’s Ability To Limit Dealer’s Choice of Vendors

As you are all aware, many automotive manufacturers are embarking on a course of conduct to inject themselves into the retail relationship between the dealer and his customer by requiring the dealer to use a manufacturer’s handpicked data management firm — always more expensive — and excluding the dealer’s historic free choice to pick the provider that offers the required services and the best price. Mont. Code Ann. § 61-4-208(1)(a)(v) already prohibits such conduct by manufacturers in the acquisition of goods or services generally. SB 411 amends the code section to make it clear that the prohibition also includes interfering with the motor vehicle dealer’s choice of data management system or digital retail platform and prohibits the manufacturer from withholding any benefit including monetary incentives and vehicle allocation. Pg. 21, lines 15-23.

Limitation on Manufacturer’s Ability To Involve Itself in the Retail Sale of Motor Vehicles. The “Agency Model.”

As noted above, many automotive manufacturers embarked on a course of conduct to inject themselves into the retail relationship between the dealer and their customer. This initiative is generally referred to as the “Agency Model.” The Agency Model moves sales of new automobiles from several dealerships around the state to a single seller — the manufacturer. The Agency Model proposed by the manufacturers is an attempt by the manufacturers to:

• Eliminate inventory on the dealer’s sales lots for customers to shop.
• Eliminate the financing options customers have at a local dealership and/or bank and force customers to accept factory financing.
• Eliminate negotiation on trade-in vehicles.
• Eliminate competition between dealers on after-sales benefits like oil changes, repairs and other related services.

The idea that the Agency Model will be good for dealers or consumers is a myth. If permitted by law, the agency model would likely be the beginning of the end of new car dealerships. Following the lead of the Commonwealth of Virginia, SB 411 makes revisions to Title 61, Chapter 4, the provisions of the Montana code that deal with motor vehicle dealers and manufactures to keep the manufacturers out of the retail business and prohibit coercion or retaliation by the manufacturers against dealers who don’t go along.

Here is a summary of the changes in Mont. Code Ann. § 61-4-208 enacted:

• Prohibiting threat to or denial of incentive payments to compel dealers to go along. Pg. 22, line 11.
• Taking into account the manufacturer’s ability to supply adequate vehicles to the dealer when setting the dealer’s minimum sales requirements. Pg. 23, line 1.
• Prohibiting amendment of the franchise agreement under threat to withhold incentive payments. Page 23, line 22.
• Prohibiting the manufacturer from selling vehicles via a website. Pg. 23, line 26.
• Prohibiting the manufacturer from retaining ownership of or consigning vehicles until delivery to the consumer. Pg. 24, line 1 and line 9.
• Prohibiting the manufacturer from negotiating the terms of sale with a retail customer. Pg. 24, line 17.
• Prohibiting the manufacturer from unilaterally changing the franchise agreement, including a dealer’s area of responsibility, requiring notice of a proposed amendment, giving the affected dealers the right to request mediation and protest the proposed action and setting standards for review. Pg. 24, line 25 continuing on pgs. 25 and 26.

The revisions will apply to all presently existing or subsequent systems of distribution of motor vehicles, including all existing franchise agreements except to the extent that such application would impair valid contractual agreements in violation of the State or Federal Constitution. SB 411 became effective on passage and approval.

To read SB 411, click the following link http://laws.leg.mt.gov/legprd/LAW0203W%24BSRV.ActionQuery?P_SESS=20231&P_BLTP_BILL_TYP_CD=SB&P_BILL_NO=411&P_BILL_DFT_NO=&P_CHPT_NO=&Z_ACTION=Find&P_ENTY_ID_SEQ2=&P_SBJT_SBJ_CD=&P_ENTY_ID_SEQ=