Clifford Chance

On May 19, 2023, Montana became the nineth state in the U.S. to enact comprehensive data privacy legislation with Montana Governor, Greg Gianforte, signing Montana Senate Bill 384, an Act establishing the consumer data privacy act (the Montana Consumer Data Privacy Act or MTCDPA). The MTCDPA comes into effect on October 1, 2024. The MTCDPA joins other U.S. state data privacy laws that are either in effect or will soon come into force (together with the MTCDPA, the State Data Privacy Laws). This article summarizes key provisions of the MTCDPA.

Scope and Applicability

The MTCDPA applies to a person that conducts business in Montana or produces products or services that are targeted at Montana consumers, and either:

• controls or processes personal data of at least 50,000 Montana consumers (excluding personal data processed for completing payment transactions) 
• controls or processes personal data of at least 25,000 Montana consumers and derives over twenty-five percent (25%) of gross revenue from the "sale" of any personal data.

In contrast to most other State Data Privacy Laws, the first prong of the MTCDPA's applicability threshold excludes entities that process personal data of Montana consumers solely for the purpose of completing a payment transaction, likely exempting many brick-and-mortar stores that only collect payment data.

However, the MTCDPA is similar to most other State Data Privacy Laws with respect to certain exclusions and exemptions. For example, the MTCDPA only applies to personal data collected from "an individual who is a resident of [the] state" and, like most State Data Privacy Laws other than the California Consumer Privacy Act and California Privacy Rights Act, expressly excludes personal data collected or processed from individuals acting in an employment or commercial context (e.g., business-to-business activities). The MTCDPA also includes exemptions in line with most other State Data Privacy Laws, such as for state political subdivisions or entities, nonprofit organizations, institutions of higher education, and any information or data regulated by certain other privacy laws, including the Health Insurance Portability and Accountability Act and the Gramm-Leach-Bliley Act.

Controller and Processor Regime

The MTCDPA, like certain other State Data Privacy Laws, contains the regulatory framework of the European Union's General Data Protection Regulation, which distinguishes roles and responsibilities between controllers and processors. The MTCDPA defines a "controller" as an individual or entity that, alone or jointly with others, determines the purpose and means of processing personal data and a "processor" as an individual or entity that processes personal data on behalf of a controller.

The MTCDPA requires controllers to provide consumers with a reasonably accessible, clear, and meaningful privacy notice, which, among other things, discloses

• the categories of personal data processed by the controller and the purpose of such processing
• the categories of personal data and third parties with whom the controller shares personal data
• how consumers may contact the controller and exercise their privacy rights, including the appeals process.

Controllers also may only process personal data to the extent such processing is "reasonably necessary and proportionate" and "adequate, relevant, and limited to what is necessary" for certain specified purposes. Controllers are also required to implement and maintain reasonable administrative, technical, and physical data security practices to protect the confidentiality, integrity, and accessibility of personal data and to reduce reasonably foreseeable risks of harm to consumers.

Similar to certain other State Data Privacy Laws, the MTCDPA requires that controllers conduct and document data protection assessments in connection with certain processing activities such as targeted advertising, processing sensitive data, selling personal data, or using personal data for certain profiling purposes. A data protection assessment must identify and weigh the benefits of the processing activity with potential risks to consumers (as mitigated by the safeguards employed by the controller related to such risks). Data protection assessment obligations under the MTCDPA apply to activities created or generated after January 1, 2025, and are not retroactive. Controllers may use data protection assessments created pursuant to other laws with similar requirements, including other relevant State Date Privacy Laws, for MTCDPA compliance purposes.

Like most other State Data Privacy Laws, the MTCDPA requires controllers and processors to enter into a written contract, which governs the processor's data processing procedures performed on behalf of the controller. The MTCDPA requires contractual provisions that clearly set out instructions for the processing of applicable data, describe the type of data subject to and the duration, nature, and purpose of such processing, and specify the rights and obligations of each party. Processors must be subject to a duty of confidentiality with respect to the applicable data and enter into subcontracts with sub-processors to ensure similar protections. Processors are also required to assist controllers with complying with applicable obligations (1) under the MTCDPA (e.g., responding to consumer rights requests and completing data protection assessments) and (2) related to the security of personal data processing and notification of security breaches under Montana Code § 30-14-1704.

Consumer Rights and Requests

The MTCDPA provides a variety of individual consumer rights that align with those found in most other State Data Privacy Laws. These rights provide consumers with a right to access, correct, delete, and obtain a copy of their personal data, and to opt-out of the selling of personal data and/or sharing of personal data for targeted advertising.

The MTCDPA also permits parents and guardians to exercise rights on behalf of their children (defined as individuals under the age of thirteen (13)). Children's data must be processed in accordance with the Children's Online Privacy Protection Act, 15 U.S.C. § 6501 et seq. (COPPA), which requires consent from parents or guardians.

The MTCDPA also grants consumers certain rights with respect to other "sensitive data." The MTCDPA's definition of "sensitive data" is similar to definitions seen in most other State Data Privacy Laws, which encompass a consumer's racial or ethnic origin, religious beliefs, mental or physical health diagnosis, information about a person's sex life, sexual orientation, citizenship or immigration status, genetic or biometric data, children's data, and precise geolocation data. Similar to certain other State Data Privacy Laws, like the Virginia Consumer Data Protection Act, the MTCDPA provides an "opt-in" regime with respect to the processing of sensitive data where controllers may not process a consumer's sensitive data "without obtaining the consumer's consent" (or in accordance with COPPA if the "sensitive data" is children's data).  

Right to Appeal

Under the MTCDPA, a controller must respond to a consumer's request to exercise a right within forty-five (45) days of receipt of such request. A controller can extend the response period by an additional forty-five (45) days when reasonably necessary and in consideration of the complexity and number of consumer requests received within the initial forty-five (45) day period by providing notice and an explanation to the consumer. Like most other State Data Privacy Laws, if the controller denies a consumer's request, the controller must explain the justification for the denial and include instructions for appeal that are conspicuously available and similar to the process for submitting consumer rights requests. Within sixty (60) days of receipt of an appeal request, a controller must inform the consumer of any action taken or not taken in response to the appeal. If the appeal is denied, the controller must provide the consumer with an online mechanism or other method through which the consumer may contact the Montana Attorney General to submit a complaint.

Selling Personal Data

The MTCDPA defines the "sale of personal data" as "the exchange of personal data for monetary or other valuable consideration by the controller to a third party." The MTCDPA also provides exceptions to the "sale of personal data" in line with a number of other State Data Privacy Laws, including a controller's disclosure of personal data:

• to a processor that processes personal data on behalf of the controller 
• to a third party for purposes of providing a product or service requested by the consumer
• to the controller's affiliates
• that the consumer intentionally made available to the general public and did not restrict to a specific audience
• to a third party as an asset that is part of a proposed or actual merger, acquisition, bankruptcy, or other transaction.

As noted above, controllers must provide consumers with the ability to opt-out of the selling of their personal data. Similar to the Connecticut Data Privacy Act and Colorado Privacy Act, controllers must provide an opt-out method that uses a preference signal sent with the consumer's consent to the controller by January 1, 2025. Such an opt-out method may not unfairly disadvantage another controller, must be consumer-friendly and easy to use, and may not use a default setting (i.e., the opt-out mechanism must require that the consumer make an affirmative, freely given, and unambiguous choice to opt-out).

Targeted Advertising

The MTCDPA defines "targeted advertising" as "displaying advertisements to a consumer in which the advertisement is selected based on personal data obtained or inferred from that consumer's activities over time and across nonaffiliated internet websites or online applications to predict the consumer's preferences or interests." Like most other State Data Privacy Laws, the MTCDPA expressly excludes certain activities from the definition of "targeted advertising," such as advertisements based on :

• activities within a controller's own websites or online applications
• the context of a consumer's current search query or visit to a website or online application
• the consumer's request for information or feedback
• processing that measures or reports the performance, reach, or frequency of an advertisement.

The MTCDPA imposes the same opt-out requirements on controllers in connection with targeted advertising as it does with respect to the sale of personal data.

Deidentified and Pseudonymous Data

The MTCDPA defines "deidentified data" as data that cannot be used to reasonably infer information about or otherwise be linked to an identified or identifiable individual or device, and such data is expressly excluded from the definition of "personal data." Similar to certain other State Data Privacy Laws, the MTCDPA requires that controllers in possession of deidentified data take reasonable measures to ensure that such data cannot be associated with an individual and contractually obligate any recipients of deidentified data to comply with all applicable provisions of the MTCDPA. Additionally, like some other State Data Privacy Laws, such as the Virginia Consumer Data Protection Act, Utah Consumer Privacy Act, and Connecticut Data Privacy Act, the MTCDPA requires controllers to "publicly commit" not to re-identify deidentified data.

The MTCDPA defines "pseudonymous data" as personal data that cannot be attributed to a specific individual without the use of additional information. Certain consumer rights (e.g., right to access, delete, opt-out, etc.) under the MTCDPA do not apply to pseudonymous data if the controller demonstrates that any additional information necessary to identify the consumer is kept separately and subject to effective technical and organizational measures that prevents the controller from accessing such information.

The MTCDPA requires controllers that disclose deidentified data and/or pseudonymous data to exercise reasonable oversight to monitor compliance with any contractual commitments with third parties related to such deidentified data (including avoiding attempts to re-identify such data) and/or pseudonymous data and to take appropriate actions to address any breaches of such contractual commitments.

Enforcement and Penalties

In contrast to the California Consumer Privacy Act and California Privacy Rights Act, the MTCDPA does not provide consumers with a private right of action and is not enforced by a dedicated privacy agency. Rather, the MTCDPA is enforced by the Montana Attorney General. Under the MTCDPA, the Montana Attorney General, prior to initiating an action, will provide a controller with sixty (60) days' written notice of violation. The controller may correct the alleged violations within the sixty (60) day period. If uncured, the Montana Attorney General may initiate an action against the controller. The right to cure provision sunsets on April 1, 2026. In contrast to most other State Data Privacy Laws, the MTCDPA does not expressly specify a civil penalty amount for violations.