Auto Industry Faces Stepped-Up Scrutiny by State AGs

State attorneys general (AGs) have been diligent in their regulation of the auto industry. In the past decade, they’ve investigated the alleged use of devices for concealing emissions, the manipulation of design testing data, the concealment of known safety issues and the misrepresentation of mileage and fuel-economy ratings.

Multistate coalitions have reached resolutions with eight of the 10 largest automobile manufacturers, as well as parts manufacturers along the supply chain.

Over the next decade, as electric vehicles increase in numbers and manufacturers compete to earn a greater share of the market, we expect state AGs to continue to closely scrutinize the industry. Although the specific focus of each investigation may vary, we expect states to use prior resolutions as a roadmap to investigate and seek settlements related to technological enhancements.

A review of recent state AG settlements reveals key takeaways and points to “hot” areas of investigation in the future.

Investigations Focus on Consumer Harm

State AGs are responsible for protecting consumers and have the authority to do so under state laws that allow actions against alleged unfair and deceptive practices.

In prior resolutions, each investigation focused on whether the company’s advertisements or communications misled consumers regarding vehicle performance and safety, or whether a company failed to warn consumers of an issue.

Nearly all resolutions permanently prohibited the automobile manufacturer from future violations of state consumer-protection laws related to the vehicles manufactured, marketed and sold in the U.S.

Investigations Arise Due to Increased Public Scrutiny

State AGs may be more likely to pursue investigations that are perceived to be of state or national importance (especially around vehicle safety or an environmental issue) and impact a large number of consumers. State AGs often become engaged after the consumer-protection issue has become “hot” through litigation or other regulatory action, despite prior resolutions by NHTSA, the EPA, Federal Trade Commission and the Department of Justice.

There is a general trend toward state AGs reaching beyond their state’s borders when – as the AGs see it – the federal government has neglected its enforcement obligations.

State AGs also will act if they receive complaints from consumers. Consumer complaints are likely to crop up in multiple states, suggesting a greater potential for an eventual multistate action. We have seen media scrutiny spark multistate investigations.

Certain States Take the Lead, Others File Separate Actions

Recent multistate scrutiny of the industry has involved the same states. Thus, a multistate investigation may follow a predictable path, and the group may defer to certain experienced thought leaders – even if they do not come from the official “lead” state.

While states traditionally cooperate to take action against a market leader to send a message, some states act alone and often deputize outside counsel to litigate the matter. Arizona has sued automobile manufacturers separately, including filings against Volkswagen and Mercedes-Benz.

State AGs Will Be Patient

State AGs bide their time and often conduct extremely thorough investigations. This can establish a natural point of leverage for a company seeking to put an issue behind them.

Even without bringing a suit, state AGs have significant investigatory powers and many of the automobile industry resolutions with multiple states remained confidential investigations until the consent decree was announced.

State AGs likely will become more active in the following areas:

Consumer protection claims arising from driver assistance/automated vehicle technologies

NHTSA has opened an investigation into this issue, and we expect state AGs to begin to focus on this technology and the alleged improper marketing of driver-assistance technologies. State AGs may also draw upon the NTSB’s recent findings in investigating accidents involving these technologies.

Performance-related claims from electric-vehicle powertrains

As the first generation of electric vehicles approach the end of their initial battery life, we predict state AGs will evaluate whether consumer relief is warranted. Importantly, monetary penalties are available to the state AGs even if the automobile manufacturer did not know but should have known of the product performance issue.

Infotainment/connectivity-related claims

Multiple class actions have been filed already and significant media publicity or a perceived failure to provide consumer relief could prompt state AGs to initiate their own investigations. 

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Supply-chain challenges have led many automakers to remove functions or disable functions on new vehicles. We expect state AGs to investigate consumer complaints and the adequacy of consumer compensation for vehicles affected by these decisions.

The lessons learned from the past decade of state AG investigations will inform the next several years of action as state AGs react to the changing industry.

– with Bonnie Gill, a member of Troutman Pepper’s State Attorneys General Practice Group

Chris Carlson (pictured, above left) represents clients in regulatory, civil and criminal investigations and litigation at Troutman Pepper in Chicago. He employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general, with an emphasis on state consumer protection laws.

Patrick Cleary