Dealers in Arizona scored a major victory late Friday when the U.S. District Court in Arizona ruled strongly in favor of a 2019 law that gives local dealerships greater ability to protect customer data that resides in dealer management systems.

Two dealer management system (DMS) providers, CDK and Reynolds & Reynolds, last August sued the State of Arizona to overturn the 2019 law, seeking an injunction to keep the law from ever going into effect. Late Friday, the court found that the DMS providers were ultimately unlikely to succeed on the merits of their case and denied their request for a preliminary injunction, paving the way for the law to go into effect.

The law was passed unanimously by the Arizona legislature in April 2019, where it was vigorously supported by the Arizona Automobile Dealers Association (AADA).

“This is a great victory for dealers,” said NADA President and CEO Peter Welch. “Data is the auto retail industry’s oxygen, and dealers need vendors that work with them, not against them, in service of consumers. If all these parties don’t work together, we will hurt not only ourselves but also our customers.”

As a result of the case, during the time the case proceeds at the trial court and pending any appeal, Arizona’s dealer data law will go into full force and effect and may be enforced by both the Arizona Attorney General and private parties.

“We are very happy that the Arizona dealer law has now gone into effect,” said AADA President Bobbi Sparrow. “We are confident it will promote data security and competition for the benefit of Arizona consumers.”

Although the DMS providers initially brought the case only against the State of Arizona, AADA intervened as a party and played a significant role in defending the law. NADA’s Legal Defense Fund has contributed over $500,000 to AADA for outside legal fees.

The 2019 dealer data law contains several important provisions for dealers. Among other things, it:

• makes it illegal for vendors to charge for access to the customer and other dealer data held in dealer systems;
   
• makes it illegal for any third party to take any action with regard to such data without the dealer’s written permission; and
   
• makes vendor contracts unilaterally terminable by dealers on 90-days’ notice.