government affairs blog
Last week, the Massachusetts legislature’s Joint Committee on Professional Licensure and Consumer Protection held yet another hearing on Right to Repair. While a great many people thought that the issue was settled when the commonwealth’s voters overwhelmingly approved a referendum establishing a requirement that car companies share repair and diagnostic information, tools and software with independent shops and car owners, there is still unfinished business to settle in the long-fought battle over the issue.
As most AAIA members are aware, the Right to Repair Coalition in Massachusetts and the car companies reached an historic agreement on right to repair in late July 2012. That agreement was enacted by the Massachusetts legislature on July 31 of last year in the closing hours of the session and was signed by the governor on Aug. 7. However, the agreement and subsequent enactment of legislation came too late to remove the referendum from the Nov. 6 ballot. Not surprisingly, the referendum was approved by the voters by an 85-15 percent margin, the largest in commonwealth history. So now Massachusetts has two Right to Repair laws which, while similar in purpose, have some differences in scope and in how the requirements are implemented.
Both laws immediately require that independent shops have full and affordable access to the information, tools and software to work on late model vehicles. Both bills further require that car companies maintain all of their information and software in a cloud that an independent shops can obtain using a generic PC, and which utilizes a standardize vehicle interface known as J2534. However, the ballot measure implements this requirement by model 2015 and the bill by model year 2018. The ballot measure also covers motorcycles and trucks, a requirement that was removed from the law that passed the legislature.
One other issue that was raised during the hearing was telematics. Telematics is the ability for a vehicle to send information regarding diagnostics, mileage and GPS wirelessly to the vehicle manufacturer. Absent access to this information, car companies will have the ability to provide services direct to the motorists, providing a competitive advantage to their franchised dealers in communicating directly with motorists regarding the service needs of their vehicle. Obviously, the issue raises competitive flags for many in the aftermarket, including AAIA. Although neither Right to Repair law addresses the need for the aftermarket to have access to telematic system, it is an issue that was discussed during the hearing and will likely be the subject of future conversations between the aftermarket and the car companies.
While the hearing centered on many issues related to the Right to Repair law and the need for reconciliation of the two laws, it also became apparent from the discussion as to how far the Right to Repair issue has come. For years, legislators in Massachusetts debated whether they should be the first in the nation to enact Right to Repair legislation. Now there is a sense of pride over having successfully found a compromise that will become the model for either a national agreement or other state action on this issue. Clearly, the hard work put in by legislators, combined with the strong support by the voters for competition in the repair industry, has established a new benchmark. Hopefully that legacy will continue as the industry tackles future issues, such as telematics.
It is common in business to hear that it isn’t a matter of if you will be sued, but when. Since its passage in 1986, California’s Prop 65 has created a cottage industry of attorneys living off of that principle. Finally, in early May, California Governor Jerry Brown announced he would like to see changes to the state’s law to curb some of the financial incentives for invoking lawsuits under this premise. That announcement was a welcome sign from his office that there is finally recognition of the major problems the law has created for businesses either in California or those that sell products into the state.
Several automotive aftermarket companies have faced lawsuits over Prop 65 violations, spending hundreds of thousands of dollars in fees, only to be forced into a financial settlement. It is critical that businesses are well-informed about Prop 65, because ignorance is, unfortunately, not an acceptable defense in a California court.
Passed by voters in the ‘80s, the Safe Drinking Water and Toxic Enforcement Act of 1986 (Prop 65) established a list of chemicals known to cause cancer, birth defects or reproductive harm. The list is required to be updated by the California Office of Environmental Health Hazard Assessment (OEHHA) at least once a year and currently contains roughly 800 chemicals.
If you are a business in California or doing business in California, the OEHHA summarizes the requirements this way: “Businesses are required to provide a ‘clear and reasonable’ warning before knowingly and intentionally exposing anyone to a listed chemical.” The warning can be a label on a product, a notice in a workplace or other reasonable notifications.
Many companies run afoul of Prop 65 by not providing proper product or work place labeling, not monitoring the list updates to come into compliance, and not controlling for the discharge of listed chemicals into sources of drinking water. But other pitfalls exist.
One potential for being sued over a Prop 65 violation can occur due to the small company exemption provided in current law. If your company employs less than 10 people, no labeling is required. However, if your company purchases products from a small manufacturer that is not required to label, but then incorporates them into another product or repurposes and rebrands it for sale in California, and your company does not meet the exemption, then you must label that product with the Prop 65 warning.
It’s violations of the warning requirements and “catch 22’s” that have created an industry of law firms dedicated to seeking out and suing companies over Prop 65. Current law allows the majority of funds determined in a settlement to go to the plaintiff, rather than to the state for public health programs. This creates a major financial incentive to sue and environmental groups have been more than happy to help lawyers grow this problem.
Governor Brown acknowledged this issue by proposing changes that would cut this incentive. According to the first press release, he would like to see his administration, industry and lawmakers discuss the following options:
- Cap or limit attorney’s fees in Proposition 65 cases.
- Require stronger demonstration by plaintiffs that they have information to support claims before litigation begins.
- Require greater disclosure of plaintiff’s information.
- Set limits on the amount of money in an enforcement case that can go into settlement funds in lieu of penalties.
These kinds of reforms will no doubt face strong opposition from the legal community and environmental and public health groups profiting off of the current statutory language.
The OEHHA has committed to discussing potential reforms, however, and is beginning with a public workshop on addressing the need to reform warning labels. For businesses interested in getting involved in the revision of Prop 65 or that want to monitor potential changes on the horizon, the first workshop will be held July 30and public comments and attendance are welcome.
While these workshops will not create policy changes on-site, they will have significant influence over the regulatory changes that come in the future.
As mentioned, the issue of financial incentive changes will face significant objection from those involved in perpetuating the harm currently being done to businesses, and the most likely reason why a workshop on that topic is not the OEHHA’s preferred starting point.
Regardless of the topic for reform, it is critical that aftermarket organizations are involved as these workshops arise. Providing comments to the OEHHA, attending in-person or watching these workshops onlineare the first steps in the industry gaining reforms to the law that could help end the daily threat of egregious Prop 65 lawsuits.
AAIA encourages all companies in California or doing business in California to stay up on Prop 65 and will continue to inform members of updates on this issue as they come along.
While news from Capitol Hill continues to dominate the headlines, legislators are, more than ever, focused primarily on what’s happening in their local districts and states. When it comes to being reelected, it’s no longer how a legislator is polling nationally nor how voters view Congress as a whole, but rather how an individual is viewed in the eyes of his or her own constituents. Thus, what holds true for legislators must hold true for the aftermarket’s advocacy efforts. In order for us to more effectively reach out and inspire action on the part of legislators, we must approach them in such a manner that highlights the impact on where 99 percent of their focus is: their home districts.
In meeting this important advocacy goal, we have added two new features to our political advocacy website,www.aaiagovernmentaffairs.org. The first of which serves to strengthen our messaging through district-specific economic data on our industry while the other addresses our industry’s organizational efforts by encouraging collaboration with state-specific aftermarket organizations.
Economic Impact by District: Our first new addition to the site features an interactive map and drop-down menu that display analytical reports on aftermarket economic data by congressional district. These reports, which display up-to-date employment numbers, facility counts and key talking points, all in an effectively advocacy-focused manner, can serve as useful tools in correspondence with legislators. Ever wondered how many jobs the aftermarket employs in your district? This new feature not only highlights those numbers, but it delivers them in such a way that a legislator can truly appreciate the impact of your business and others in the supply chain. This sort of information, when compartmentalized in this fashion, is one of the most useful instruments in a company’s advocacy arsenal since much of politics is not only local, but also numbers-driven.
Click here to access the “Aftermarket Economic Data by District” page. It can also be found under the “Information for Legislators” tab on the left.
State Advocacy Groups: The second resource we now offer is a comprehensive list of every state aftermarket association that AAIA has partnered with over the years to address issues at the state and local levels. Given that most of the hot-button issues on our radar continue to initially appear at the state level, our first line of defense remains the state aftermarket groups, who constantly have their ear to the ground in their respective regions. These groups are both well-connected with state legislators and well-positioned within the industry to advocate on behalf of the aftermarket in most state capitals. Our hope is to use this page to not only help you connect with your state aftermarket group, but also to promote state-centered legislative events and alerts critical to our advocacy efforts.
Click here to access the “State Associations” page. It can also be found under the “Additional Resources” tab on the left.
As we’ve said before, for a $300 billion industry that supports four million American jobs, the aftermarket’s messaging influence and political organization do not come close to matching its economic robustness. We hope that by using these tools, the industry can both effectively deliver its message and organize swiftly at a more local level. Please feel free to contact us with any questions or feedback at firstname.lastname@example.org
On June 17, President Barack Obama and EU leaders announced the launch of U.S.-EU Transatlantic Trade and Investment Partnership (TTIP) negotiations. A comprehensive U.S.-EU free-trade agreement would reduce the cost of doing business for U.S. and EU companies by eliminating tariffs and streamlining divergent regulatory measures. The potential tariff savings alone make the TTIP a potential game changer. A U.S.-EU free-trade agreement that eliminates all tariffs will allow U.S. and EU exporters to avoid an estimated $10.5 billion in annual duties paid on bilateral goods trade. About $6.4 billion in duties were paid on U.S. goods exports to the EU in 2011, and $4.1 billion on EU exports to the U.S. And, as evident in the automotive aftermarket, about half of U.S.-EU trade in goods and 37 percent of trade in services are between companies linked by ownership. Tariff elimination will, in particular, benefit the auto, machinery and chemical industries, all of which generally support immediate duty phase-outs.
In addition to tariff cuts, enhanced regulatory coherence is one of the pillars of the TTIP talks. The U.S. and EU will seek to reduce costs stemming from product and services rules, while maintaining appropriate measures to protect human health, safety and the environment. AAIA is actively monitoring the negotiations and has submitted initial comments to U.S. negotiators seeking regulatory equivalence, or mutual recognition, in several areas, including automotive repair and diagnostic equipment, telematics applications, competition policy, and testing and certification requirements.
While the automotive sector has been identified as a key sector with a significant transatlantic relationship, and where the biggest relative increase in trade resulting from the TTIP is expected to take place, the expected impact may actually be understated. This is because much of the data focuses exclusively on the potential increase in motor vehicle imports and exports, while ignoring the significant trade increases that will also result in the automotive aftermarket. To illustrate, there are close to 350 million vehicle registrations in Europe, accounting for 34.4 percent of global vehicle registrations. That is significantly more than the 288 million vehicles registered in the U.S., Canada and Mexico. More than 16 million new cars are registered in Europe each year. As these vehicles age, they will need parts and services. In 2011 alone, U.S. parts exports to Europe totaled more than $3 billion, while European parts imports into the U.S. totaled $8.3 billion. The expected increase in motor vehicle trade across the Atlantic will also result in similar increases in trade for motor vehicle products. In other words, the automotive aftermarket stands to benefit significantly from the TTIP.
AAIA is working with FIGIEFA (Fédération Internationale des Grossistes Importateurs et Exportateurs en Fournitures Automobiles), our counterpart aftermarket association in Europe, to identify specific regulations where failure to harmonize will undermine the TTIP’s objectives. As negotiations progress, we will participate in the process by sharing our negotiating priorities with U.S. negotiators and key representatives serving on the various congressional committees of jurisdiction. We are also monitoring other ongoing trade negotiations, including the Trans-Pacific Partnership, to try to ensure that the disciplines do not differ significantly from one agreement to another in a way that makes global commerce more challenging for our members. We welcome input and perspective from members on the impact of the TTIP and other trade deals and key regulatory concerns that should be addressed during negotiations.