California's Auto Industry Reforms: Progress Marred by Corporate Carve-Outs

The Legislative Landscape

California lawmakers have enacted significant changes to the state’s automotive consumer protection framework, creating what appears to be a paradoxical approach to consumer rights. On one hand, Governor Gavin Newsom signed Senate Bill 766, establishing a groundbreaking policy that allows used car buyers to return vehicles within three days for a full refund if the purchase price is under $50,000. This legislation, championed by Senator Ben Allen after his personal experience with deceptive dealership practices, also mandates greater transparency in advertising, requires disclosure of full financing costs, and prohibits charging for useless add-ons like oil changes for electric vehicles.

Simultaneously, the governor signed Senate Bill 26, which allows automobile manufacturers to opt out of recent changes to California’s landmark lemon law. This creates a troubling two-tiered system where consumer protections vary depending on which automaker they choose. The lemon law changes themselves were controversial, having been hastily passed in 2024 to reduce the time frame for lawsuits from the vehicle’s warranty period to just six years and placing more burden on consumers to initiate claims.

The Political Context

These legislative changes occur against a backdrop of intense lobbying from automobile companies, dealers, and consumer groups. The California New Car Dealers Association, represented by President Brian Maas, expressed frustration over Newsom’s veto of their bill that would have increased document-processing fees. Meanwhile, consumer advocate Rosemary Shahan of Consumers for Auto Reliability and Safety celebrated the used car return policy as “historic” for making cars more affordable.

The political dimension extends beyond state borders, with Senator Allen noting that California’s Democratic-controlled Legislature will likely push back against national Republican efforts to thwart Newsom’s goal of having 100% of new cars sold in California be zero-emission by 2035. This clean energy commitment remains a priority for the state despite federal opposition.

The Dangerous Precedent of Corporate Opt-Outs

The most alarming aspect of these reforms is the creation of a system where corporations can choose which consumer protection laws they wish to follow. This fundamentally undermines the principle of equal protection under the law—a cornerstone of our democratic system. When automakers like Ford and GM can opt into weakened lemon law protections while companies like Toyota and Honda remain under different rules, we create a marketplace where consumer rights depend on corporate preference rather than legal principle.

This corporate carve-out represents a slippery slope that could extend to other industries and other rights. If we allow businesses to opt out of consumer protection laws, what prevents future erosion of environmental regulations, labor protections, or safety standards? The very concept of law becomes negotiable, subject to corporate influence and lobbying power rather than serving as the bedrock of a fair society.

The Transparency Paradox

While the new used car regulations rightly demand greater transparency from dealerships—requiring actual prices instead of unrealistic advertised prices and full disclosure of financing costs—the lemon law opt-out provision creates opacity in consumer rights. Buyers now face a confusing landscape where their legal protections vary by brand, potentially without their knowledge or understanding. This information asymmetry favors corporations over consumers, undermining the very transparency that other aspects of the legislation seek to promote.

True consumer protection requires not only transparency in pricing but also clarity in legal rights. Consumers deserve to know what protections they’re entitled to regardless of which company they patronize. The current patchwork approach creates unnecessary complexity and disadvantages those without legal expertise or resources to navigate these varying protections.

The Lobbying Influence Problem

The Digital Democracy database reveals that the California New Car Dealers Association has donated at least $3 million to legislators since 2015. While political contributions are legal, the appearance of influence peddling undermines public trust in the legislative process. When industries can effectively purchase favorable legislation or exemptions, democracy suffers.

Brian Maas’s frustration with Newsom’s veto of the document fee increase—despite the governor having just signed new requirements for dealers—highlights the complex interplay between regulation and industry compensation. However, the solution cannot be allowing corporations to buy their way out of consumer protections. We must strengthen our campaign finance laws and ethical standards to ensure legislation serves the public interest rather than corporate donors.

The Human Cost of Weakened Protections

Behind every lemon law case is a human story—a family struggling with a defective vehicle that represents their second-largest investment after their home. These are working people who depend on reliable transportation for their livelihoods, children’s education, and medical care. Reducing their legal protections and making it harder to seek recourse represents a direct attack on economic security and mobility.

The argument that courts were “clogged” with lemon law lawsuits misses the point: if automakers are producing defective vehicles at such scale that they overwhelm the court system, the solution should be improved manufacturing quality, not reduced accountability. Shifting the burden to consumers to initiate claims while shortening the time frame for legal action disproportionately harms those least able to advocate for themselves.

The Path Forward

California must reconsider this bifurcated approach to consumer protection. While the used car return policy represents genuine progress, the lemon law opt-out provision undermines the very concept of equal justice under law. Legislators should:

1. Repeal the opt-out provision and apply consumer protections equally across all automakers
2. Strengthen rather than weaken lemon law protections
3. Implement stricter lobbying and campaign finance reforms
4. Ensure that any future consumer protection legislation maintains consistent standards across industries

Democracy depends on laws that apply equally to all, not corporate-friendly carve-outs that create unequal justice. California has long been a leader in consumer protection—it must not abandon that role for the convenience of powerful industries. The rights of everyday consumers must prevail over corporate interests, ensuring that our legal system remains a shield for the vulnerable rather than a weapon for the powerful.

Our commitment to democracy, freedom, and liberty requires vigilance against any erosion of consumer rights. When corporations can choose which laws to follow, we risk creating a society where power determines privilege rather than principle determining protection. California must lead not only in environmental standards but also in upholding the fundamental rights of all consumers equally under the law.