Pub. 2 2022 Issue 2

Continued on page 16 The best business relationships have a personal element. down your name, address, and whatever is on your driver’s license. They also pull up your credit report. Everything gathered goes into the data management system. When a dealer uses their system, gets data out in a specific format or allows another vendor to pull information because they are putting a sales or service promotion together, the data management companies charge huge fees to extract the data. When dealers stop using their system because of the fees, they make it hard for dealers to get their own data out of the DMS by charging more fees. Everyone wants customer data. But who owns it? The statute was designed to make it clear that the data in the DMS belongs to the dealer and the management system has no interest in the data itself. It provides that the data belongs to the dealer, and no DMS provider has the right to take it away or charge exorbitant fees to the dealer just because it is stored electronically. As a result, these companies can no longer charge large fees or limit access. There are a few data management system providers, but two of the biggest companies are Reynolds and Reynolds and CDK Global. After the Montana bill passed, the two companies sued Arizona for any number of what they felt were constitutional violations. Arizona and its dealers won, and they won again on appeal in the Ninth Circuit Court of Appeals in San Francisco. Then both companies gave up on their fight. So we know our framework is constitutional and fair, directly protects dealers and makes it clear dealers own the data. Most states will probably enact something very similar to the laws in Arizona and Montana. I think agency questions are coming up later. One of the big deals about the agency relationship is similar to the question settled by the data law: who owns the customer and the data? Answering that question will be the next big thing between dealers and OEMs. However, it is helpful that we have the data law. Another important change for dealers was doing away with the manufacturer’s right of first refusal. According to the manufacturer’s sales and service agreement, it used to be possible to block a dealer if they decided to sell, which meant a manufacturer could prohibit a dealer from selling to a long-term employee or family member. If a dealer had two or three franchises and found a buyer, but one of the manufacturers had a right of first refusal, the manufacturer could also insist on buying one of the dealerships. Minus one dealership, the dealer could then lose the entire sale. In the last session, provisions were made about dispute resolutions between dealers and manufacturers. It used to be that the major way to deal with a manufacturer was to file a lawsuit, but nothing prevented the manufacturer from dragging you off to federal court. Things move more slowly in federal courts than state courts, and the slow pace favors manufacturers. Also, it is ungodly expensive to litigate in federal court, especially in Montana, which has a limited number of federal courts. The state’s only federal courts are in Helena, Missoula, Billings, Great Falls and Butte. Thanks to work done in the last session, dealer law now has a provision to prevent cases from dragging out. Dealers can request the manufacturer engage in mediation within 60 days or so. If mediation fails, the dealer can send the case to the Montana Department of Justice as an administrative law proceeding. That way, the dealer doesn’t have to worry about getting dragged off to federal court. The whole process is streamlined and inexpensive. It provides an avenue for the dealer to use in response to what a manufacturer has proposed or done. Most of the changes I’ve discussed all happened in the last 10 years. What is the greatest challenge to the franchise system? The greatest challenge is the advent of buying and marketing vehicles electronically, including EVs in general. EVs are certainly at the tip of the spear as far as what the next big issue will be because the current administration strongly emphasizes the subject. But out-of-state companies and Montana dealers have marketed vehicles across state lines over the internet for some years now. Montana is already using federal money to install charging stations up and down the highways, and the association recently had a summit on charging stations in Helena. Legislators, representatives from the power industry and Tesla representatives all showed up at the capital. Everyone had a chance to see and drive EVs such as the Ford Lightning and Ford Mustang, and the event was a hot topic in the trade press. What’s the agency model being promoted by manufacturers? Manufacturers are promoting an agency model in Australia and Europe that would be bad news for American consumers because it is a recipe for price fixing. It allows manufacturers to require selling all vehicles at the same price. But those prices won’t be lower. When the OEMs set the price, they will set it as high as they think they can get away with. The OEMs are never happy with their share of the pie. They always want more. Tesla uses a kind of agency model because it has no dealers; however, the agency model is not prevalent in the U.S. apart from Tesla. The dealer model is the opposite of the agency model. OEMs can’t set the price. They can suggest a price, but the dealer who owns the vehicle looks at competitive and market 15