Autoline This Week #2616 - The Only Book About Every Automotive Law

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This is AutoLine This Week, the show that gets you inside

the global automotive industry.

AutoLine This Week partnered with the Consulate General

of Canada in Detroit to produce this episode.

Hi, I'm John McElroy and welcome to AutoLine This Week.

You know, I've always thought that the automotive industry

might be one of the most regulated industries in the world.

I had no idea.

That's what we're going to be talking about today,

the laws and regulations that affect the automotive industry.

My time boring right now, but believe me,

you're going to find this fascinating.

And I've got two experts who have just written a book

about automotive law that are joining me on today's program,

including Kevin McDonald and Carl Hockhammer.

And thanks for being here, you guys.

You have written a book called Automotive Law 101.

And just so the audience understands

what kind of regulations and laws we're talking about,

there are chapters devoted to laws

that regulate engineering and distribution,

marketing and advertising, sales, finance,

customer data privacy, warranty, product liability,

how to raise capital, and there's some new ones coming

as well as new technology comes into the industry.

So Kevin, let me just start with you.

Why did you write this book?

Sure.

Thanks for having us on the show, John.

We're thrilled to be here.

The way we approached this subject

was to think about the life cycle of an automobile,

from creation in your mind to all the way at the end.

And so we wanted to make it simple enough,

Automotive Law 101, 101 answers to commonly asked questions,

but structured around what do you have to think about

if you're engineering a car?

What do you have to think about if you are producing it?

If you're then distributing it or importing it

and then selling it to the dealer

and then financing it at the dealer

and then repairing the vehicle and after sales activity

and then how do you provide the funding

for all of that on the capital market?

So that's roughly the way we structured the chapters,

as you mentioned.

And one of the reasons that drove us to this

is that we saw throughout the course of our career

a lot of questions coming at us

that seemed to kind of be perhaps repetitive over the years

as we have new people coming to the industry,

even executives coming to us

who may not have the background that we have.

And so instead of just saying to someone,

hey, what's NITSA?

We'll go to the website and find out.

We wanted to position where NITSA might fit in, for example,

in the life cycle of a vehicle or the CFPB or EPA.

And so on that way, when someone has a question,

they can get it answered quickly in a page and a half,

but they can also see where that particular question fits

in the life cycle of that vehicle.

Carl, how'd you get involved in it?

Well, so Kevin and I have worked together

for many, many years.

And Kevin and I teach some classes

on consumer protection law, automotive law,

and we're both very interested in these things

and we talk about it all the time.

And so Kevin asked me to work with him

on co-authoring the book, which I was thrilled to do.

From our perspective in writing the book,

we were trying not to make it super hyper technical

from a legal perspective.

The intended audience is regular people,

not necessarily a lawyer.

And the other thing that is important,

I think in looking at what we did in the book,

we very specifically tried to avoid

what I call supply chain contracting matters,

where an OEM goes out and contracts with the supplier

to design, manufacture, and supply a part.

A lot of what we are really kind of focused on in our book

is looking at the automotive industry

from the consumer perspective.

These are all the things that go into

how a car is manufactured, sold, financed, serviced,

really to the consumer.

So we tried to make this very digestible

and frankly relevant to sort of the regular person.

Yeah, but the scope of what you've covered here

is extraordinary.

There's so many different topics, so many different laws,

so many different questions that you all address.

Kevin, how did you collect all this different information

about the law?

A lot of it, John, is based on questions

that we've gotten over the years in our careers.

Carl and I have been at this 50 years plus,

if you add up our time together.

And we've seen some questions just kind of pop up,

as I mentioned earlier.

As people come to us, John, whether they're out of college

or grad school, if they're new into the company,

or as I said, if they're laterals

and they may have experience in the tech industry,

but not automotive, or often in my cases,

where we have senior executives from Germany

who are absolute experts in their area,

but they come over to the company

and they have no idea what a lemon law is,

or they have no idea how recalls are governed

or what does fair lending mean.

And so I've taken notes over the years

on how I can prepare presentations

both internally and externally.

And when you look back over your career,

you think there seems to be some repetitive patterns here.

And so I wanted to kind of structure that

in a way for a broader audience

who may be interested in these subjects

or may want to know about these subjects

in a way that they can quickly go

and get their question answered,

but then also see how that fits in,

again, to that overall life cycle of the vehicle.

Because everything kind of fits together

when you take that 30,000 foot view

and look down over that regulatory landscape

that is, as you mentioned, very, very complicated.

But Carl, you must have had a checklist.

And I read all the different chapters that you had.

You guys must have been going back and forth

for trying to figure out if you had missed something or not.

Oh yeah, I mean, honestly,

Kevin is the one who took the lead on coming up

with the 101 frequently asked questions here.

But what we were trying to do

in organizing the way that the chapters relate,

as we tried to kind of put it in this topical areas,

because a lot of this stuff

kind of overlaps and intersects in very surprising ways.

And so because, frankly, in the US,

we tend to legislate and regulate

in reaction to problems in the marketplace,

it becomes complicated.

There's no like one overarching law

or set of regulations that really govern any of this.

And so, again, looking at this,

we were, Kevin and I were just trying to think about,

what are the types of questions

that we have heard over the years?

We certainly miss some things.

It would be just an encyclopedia

if you tried to cover absolutely everything and in depth.

But again, the intention is to provide an overview

of kind of the complexity of it and a starting point

for people who have interest in a particular topic.

We try not to oversight the book

with legal citations and things,

but frankly, what we provided, we think,

is enough that if somebody's interested in this,

they've got a little bit of a roadmap

to just start Googling, if nothing else.

Carl, how long did it take you to put the book together?

We're doing this sort of in our spare time.

I think it took, what, Kevin, a year and a half or so?

I think it was about a year and a half, John.

We kind of tended to be the pandemic project.

As we were grounded and not flying as much

and we wanted to be active in automotive things

outside of work, this kind of lended itself to that.

And so it was a perfect sort of project

to do in the home study.

Right.

Even so, I mean, there's colleagues of mine

in the media who have written books

and they usually take like a three month hiatus

from work to be able to go work on it.

So it's amazing that you guys have put this together

in only a year and a half.

But one of the nice things about being in a law firm

is we have summer law students,

typically a law student,

who's between their second and third year of law school,

and they come and work at a firm like mine.

It was really sort of, it was a paid internship.

And I had two summer associates

who were very interested in this

and agreed to help Chase Yarber and Quacy,

who he was referenced in the preface.

And both of them, you know,

really built on what Kevin and I put together

and, you know, did some additional detailed research,

citations and things like that.

So we did have some help,

which was very much appreciated.

Yeah, but still, Kevin,

this is not a cut and paste kind of a book.

You didn't just find copies of laws and paste them in.

I mean, you're interpreting things.

You're putting things in context,

different topics in context and the like.

How did you go through all that?

Well, one of the things that we looked at,

and Carl and I would talk about these issues

from time to time was, okay,

well, here's the black letter law,

and how have we seen it over our careers?

Where have we seen it play out

either with Carl and his clients or mine

and my clients over the years?

So if you take an entry on, say, warranty law,

well, what are some of the famous cases in warranty law,

or how have we seen it play out recently

in contracts that we've governed or what have you?

Obviously not disclosing confidential information,

but there's general principles that you can take, John,

to kind of summarize in a page or two

what we're talking about.

And that was also something we were very insistent on.

We didn't want to make this overly complex

because the topic itself is so broad,

but a lot of the entries lend themselves

to at least a page or a page and a half of brief explanation

that we think will answer some of the questions

hopefully a lot that people might have

just to satisfy their curiosity.

And there are enough end notes in it

that if somebody wants to drill down deeper,

they can certainly do that.

But the principal point of the book

was really to just kind of answer those first level questions

that people may have if they're just trying to figure out

where they are in the question that they have

and how that fits into where the vehicle is, frankly.

And that was kind of how we wanted to anchor it.

How does this fit into what the consumer might see

from the vehicle life cycle?

Yeah, you're right.

There's plenty of footnotes and end notes

to each chapter in this.

But Carl, you're a lawyer.

One of the things that so impressed me about this book

is it's highly readable.

You didn't degenerate into legalese as a lawyer.

How'd you avoid the temptation to do that?

Well, I'll be honest with you,

that's kind of one of the things that I pride myself on.

And Kevin is excellent at this too.

We spend most of our time in our professional lives

working with non-lawyers.

And a lot of what we are doing is,

I would say, to some degree translating.

We're taking these legal concepts,

these regulatory concepts,

and we're trying to turn it into plain English

to advise our clients, talk to our executives about, you know.

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Why we should do something or not do something

or what our options are or what the risks are.

And so over 25 years of practice,

both Kevin and I frankly have gotten pretty good at that,

we think.

And I think that's what you see in the writing.

Yes, it's very easy to write

a highly technical sort of legal memo.

It's very difficult to take a highly technical legal memo

and distill it into a page and a half of prose

that's intended to be readily understandable by anybody.

And yeah, it's frankly kind of fun to do that.

It's a little, you're writing at this level of detail

is not something we always do in the normal day-to-day course.

If you look up, if you Google Kevin, for example,

Kevin is a prolific author, he's written books and articles

on a myriad of legal topics

for a myriad of legal audiences.

Frankly, for Kevin, it's fun.

For me, it's fun too,

but I think it's a lot of fun for Kevin.

I'm not gonna call it bedtime reading,

but anybody can read this book and it's interesting.

I mean, it gets you engaged in all that.

So kudos to you guys on how y'all did that.

Well, John, it might be bedtime reading

depending on your interests, right?

I mean, depends on the chapter.

Kevin, let's give the audience a little bit of an example.

One thing that caught my attention

as I was going through it

is the difference between puffery and false advertising.

And you guys cited the example

of Ford using the claim built Ford tough

and they got sued over it.

So just give us a little bit of the background

between puffery and false advertising.

Sure, and this is the type of example

that comes out of the automotive industry.

And this is also a larger principle,

which is kind of interesting, John,

that you picked that one because there's many of them.

And these types of issues,

although you can find lots of automotive applications of it,

they have larger implications

for the overall legal community.

So in this particular example,

it really is indicative or illustrative

of the difference between a dealer saying

or a company saying what their opinion of a product is

versus what they're trying to stand behind

when it comes to an affirmation of a particular fact

of the quality or feature of a product.

And the law is very generous toward the former

as opposed to the latter.

In other words, you can give your opinion all the time

and say, hey, this is the best car

that I've ever got on my lot here.

You can take it for a spin at,

you'll love it, it's the greatest car ever.

And you're not gonna be held to account

for creating a warranty or a false representation.

But if you get a little more specific

and you drill down on that

and give something along the lines of say,

well, this vehicle went through 101 inspection

in the past every single one.

And here's the safety features that it does.

And then you can't deliver on that.

Well, that's moving out of puffery

and into types of descriptions and declarations of fact

that the law will kind of come down on you

if you can't deliver.

Yeah, and Carl, let me ask you this.

I mean, looking for an opinion or your thoughts on it,

you guys get into dealerships and the like.

Now we're seeing EV startups like Tesla

pulling an end run around the dealer franchise laws.

How do you think that's going to turn out?

I think, well, I think that's a big question

in terms of how that's gonna turn out.

Because frankly, it's really coming down

to becoming a political issue.

All states have statutes, franchise statutes

that protect the dealer franchise from the manufacturer.

And that has been the result of,

I would say, depending on your view

on historical bad conduct

where the dealers needed protection from the manufacturers

to protect their franchise.

And now you've got dealers who are very protective

of their franchise rights.

And you have, especially these new auto companies

that are looking at a way to, I would say,

have more control over, I would say, the consumer experience.

And so there's a tension.

And I mean, you saw that with the fights that Tesla's had

at various states throughout the country

to be able to market directly.

There's obviously news that comes out with Ford.

It has made some statements about how

the dealer relationships may change,

not necessarily go away.

So I think we're gonna have to see.

But from my perspective as the lawyer advising clients

who operate in that space,

I mean, these are issues that are very much at the forefront

and need to be taken into consideration all the time.

So they remain, they may be old laws,

but they remain very relevant,

which is something you can say about

a lot of the topics that we covered in the book.

Kevin, yeah, pick that up.

Here's Ford really wanting to change

the way it sells electric cars.

And it's got dealers deeply worried.

Ford says it's still going to use its dealers,

but where do you think this is going?

Well, we actually talk a little bit about this

in our book, John, on dealer franchise laws.

And one of the things that we also tried to do

was bring in an international perspective.

And in our discussion about dealer franchise laws

internationally, the experience of manufacturer owned

dealerships in Europe, as you may recall,

didn't bode so well when the manufacturers tried

to own and run dealers, principally because

that dealerships when they're run by manufacturer reps,

didn't produce as much entrepreneurship

as independently owned franchise dealers.

That was the experience that was in, I believe,

in the 90s, where there was some forays

into directly owned dealerships.

What we're talking about now is a little bit different,

because we're not talking about dealerships

owned by manufacturers, but rather manufacturers

selling directly without any dealership.

And so this is new territory.

And as Carl mentioned, this has turned

into a political issue, but I looked at it more

from the financial perspective of how this worked

in the past to see whether that made sense financially.

And when it came to manufacturers owning dealers,

financially, it didn't really work out well,

at least in Europe.

And so we're in new territory here, as Carl mentioned,

with a lot of the EV and new auto startups.

It just remains to be seen, frankly, over the long term,

whether that is the best viable model

for manufacturers or not.

It's still unclear.

You know, speaking of EVs,

there's also autonomous vehicles coming.

There's over-the-year updates.

You guys cite a number of future or new technologies

that are coming that are probably going to precipitate

even more laws.

Carl, are you gonna have to write a follow-up

to this book in a couple of years?

Quite possibly, quite possibly.

But I think what we are seeing from a legal

and in a particular regulatory perspective

on autonomous vehicles and EVs and things like that

is it's not so much new laws and regulations,

but the regulators are trying to take

the existing laws and regulations

and sort of expand the concepts

and adapt them to these newer applications.

And so my guess is you're not gonna see

major ground-breaking change,

but it'll be much more sort of incremental

and it'll be consistent with where we've been

kind of historically.

But it is very interesting because it does create,

automotive law and regulation

is very different than the laws and regulations

that apply to your traditional software company,

for example.

And that's also part of what we do with our clients

is as they're looking to enter into the automotive space

that they need to understand how highly regulated it is.

And that's surprising for some people, I would say.

Again, we've got the book and we can,

here you go, take a look at this,

this is the world that you're living in now.

John, there may be a need to combine automotive law

with aviation law if you think about flying cars, right?

Because if you really wanna look into the future

and if we think we're gonna have a Jetsons one day,

that's really where you've got a lot of legal maneuvering

to sort through when it comes to flying through airspace

and parking in airspace and parking in cities

and who's got rights to park the flying car

where they want to and so on.

We didn't touch on that in this book,

but that could be the follow-up.

Yeah, well, it sounds like you're setting up a battle

between the FAA and NHTSA.

Who's going to write the regulations for these things?

Right, right.

And of course, the states and the local ordinances

and all of that, they're all gonna have a say as well.

So you've got the federal, you've got the state,

you've got the local and probably one or two

of them are missing.

Yeah, it's extraordinary.

Carl, is the automotive industry

the most heavily regulated industry out there?

I don't know if I would say

it's necessarily the most heavily regulated,

but it is very heavily regulated.

I mean, if you think about it,

so this is an interesting thing about this,

I'm sort of a history buff, kind of a history nerd.

And so, looking at this whole situation

from a consumer perspective,

consumer protection perspective,

in the US, our consumer protection regulations

started showing up, laws and regulations

started showing up with state laws

and regulations around food.

And milk purity laws and things like that.

Then very quickly thereafter,

we ended up with a regulation

around drugs and pharmaceuticals.

Again, public safety.

And you've always had highly,

well, not always, but we have a highly regulated

financial services industry as well.

Again, all of this is coming out of situations

where there has been either macroeconomic harm

or significant harm to people.

And then as automotive automobiles became much more prevalent

in the early 20th century, they're dangerous.

They're expensive.

And we started seeing a lot of really

consumer protection legislation there.

So yeah, I think food, drugs, financial services,

automotive, healthcare,

any of these economic sectors

where there is a high risk of harm to people,

they're very highly regulated.

So yeah, it is a highly regulated industry.

Kevin, your thought, is it too regulated?

I mean, is this a burden or is it worth it

because it's protecting consumers?

It's good for lawyers, John.

But yeah, look, it is highly regulated.

Auto and auto finance are both highly regulated industries.

Are they the most regulated?

I don't know, but I'd certainly put it up there.

What's interesting, just as an anecdote

and Carl, the history buff will know this,

you may know this, John, in the late 50s and early 60s,

the House of Representatives and the US Senate

held hearings and had bills before them

that they didn't act on

that would have divested General Motors from GMAC

because there was so much concern and also

would have prohibited any automaker

from having a captive finance company.

And this goes back to the 50s.

And that shows you the concern

that at least the federal regulators had going way back.

And that's continued.

I mean, we've had a number of congressional hearings

over the years into all kinds of auto things,

not just related to auto and auto finance or anti-trust.

Think of the Ford Firestone, think of the Pinto hearings,

think of the Corvair hearings, think of,

I mean, on and on you can go.

So I would absolutely put auto and auto finance

certainly in the top industries that are highly regulated.

It'd be very interesting to find a dollar amount

that you could apply to all the laws and regulations.

It's gotta be a big number.

Well, we were talking earlier, right?

If there's 30,000 parts for the car,

I would say there's 30,000 laws applying to each car,

roughly speaking.

And I've never quantified what that would be,

it'd be a big, big number for sure.

Yeah, so as I said, the book is called Automotive Law 101

where can you find it?

What does it cost?

Carl, you wanna tackle that?

So it is out there on Amazon and I'll be honest with you,

I don't recall if Tom had what the list price of it is,

but it is available on Amazon.

Yeah, I think that's our privilege.

Yeah, also through the publisher,

Lawyers and Judges Publishing,

it's also directly available through the publisher as well.

And it's $73.

$73, I gotta tell you, that price might shock somebody

who was thinking about it.

But I gotta tell you, I am so glad I've got a copy

of this book because it's going to be

in a very valuable resource for me.

As I report on things, it's just so easily written,

it's well indexed, it's going to be easy for me

to find any topics.

But Kevin, what's next for you guys?

Like I said, are you contemplating the idea

of a second book or no?

No, I think we're looking at a different one

where we look at the biggest automotive legal cases

in the history of the automotive industry

and their impact, not just on the auto industry,

but in the legal history itself.

So what were some of the biggest cases to come out of auto

that have an impact across the board

and in all sectors of society?

That's kind of, I think, the next project.

Oh, that sounds fascinating.

So Carl, are you going to start with the Selden patent?

Wait a second.

Actually, that is one of my articles that I have a draft of.

And again, what we're trying to do here

is we're trying to do a similar sort of approach.

We're trying to make this very accessible

and sort of relevant to people.

I mean, each of these articles is, you know,

2000 words or so, so they're pretty short.

With pictures at this point.

Just so the audience knows, Selden is a guy

who patented the automobile back around

at the turn of the 20th century

and forced every automaker to pay him a royalty

on every vehicle that they made

until Henry Ford came around and said,

the heck with that, I'm not paying you a penny,

Selden sued and the way Ford was able to settle the suit

was he forced Selden to build his car

according to his patent and it didn't work.

I mean, I'm giving you the shorthand here, right?

And the judge threw it out of court.

Yeah, that's a very interesting case.

And we're real quick here.

I need a quick one, Antony.

Oh, it's just, it's an early case of sort of what they call

a non-practicing entity in the IP world.

So it's very important to patent law in the US as well.

Gotcha.

Can't wait till the next one comes out.

I think you guys have got a terrific topic there,

but Kevin McDonald, Carl Hockheimer,

thank you so much for coming on today's show.

Thank you for having us.

AutoLine this week partnered with the Consulate General

of Canada in Detroit to produce this episode.

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Autoline This Week #2616 - The Only Book About Every Automotive Law

NHTSA

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autonomous vehicles

EVs

Ford Pinto

Chevrolet Corvair

Automotive Law

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