The Hidden Costs of Labeling - March 9, 2020

Labels are used to convey brand identity and indicate a product. They often contain images that display a certain message about the product that delivers information about intended use of the product or performance of the product as it relates to the intended end user. Labels are intensely developed and often at great expense. They are sometimes so important that they’re copyrighted or trademarked to protect the brand integrity of the company that owns them. A prime example of this are the labels used on motor oil. The motor oil industry has developed its own way of doing this and the bar is intentionally set high with performance standard indicators that can be costly and challenging to qualify for. One of the groups that provides performance/quality indicators are the API (American Petroleum Institute) with their ILSAC starburst logo or the API doughnut. There is a lot involved that goes into the licensing process for an engine oil so that these logos can be included on the label of a motor oil.

How the API system came into common use is a long story that began in 1911 when the SAE developed a system that classified engine oils by viscosity. Recognizing the shortcomings of looking at viscosity alone, the SAE came out with additional standards for color, pour point, carbon residue, corrosion, and flash & fire point. After finding this additional required data cumbersome and unpopular, the SAE, by 1926, decided the only requirement remaining was viscosity. This remained in place until 1947 when API designated three types of motor oil categories: regular, premium and heavy duty. As the years have gone by, they improved and expanded the program to meet the changing warranty maintenance and lubrication requirements of the automotive industry and aftermarket. By 1993 the API, ASTM, and US, European, and Asian OE’s introduced improvements to the licensing process for engine oils to establish the quality expected of products being marketed in addition to improving consumer awareness of the recommended lubricants for new vehicles.

Using these logos indicates a marketer’s legal warranty, that the products meet the requirements and rules found in the licensing process. Under this program, licensed oils are tested to determine that their physical, chemical, and performance properties meet established requirements. Some of these tests are elemental analysis, viscosity at 100 degrees C., high-temperature high shear testing, cold cranking, pumpability, volatility, gelation, foaming, flash point and shear stability. There are fees that need to be paid to support what has become a costly system of licensing and approvals for each category of new engine oil that is developed. The recent CK-4 and FA-4 diesel engine oil category has cost the oil industry and aftermarket suppliers in excess of $300 million dollars to develop. Ultimately the end users of motor oils end up paying these fees and explains the rapid escalation of motor oil pricing for consumers and service organizations.

With regulation and overview now looming over the automatic transmission category of automotive lubricants (a segment of the market that up until now has escaped regulation and scrutiny to a great extent) it comes down to this; how do we as an industry, serve the needs of our lubricant manufacturers, the needs of the motoring public and the automotive service industry in general. This is done by implementing requirements driven by common need not the desire for a profit driven OEM policy at the expense of the public. To do this, and treat ATF as the functional fluid it is (as opposed to OE claims of exclusive use of a product they sell and control), will require debating and deciding on what tests to develop and defining test limits based on the different criteria that defines each type and category of transmission fluid required. Defining new oils while at the same time making sure older transmissions are well served by the same oils has already fostered division and differences in opinion among OEM’s. At the end of the day a lot of time and money will need to be spent in assuring the automotive aftermarket and consumers are protected by putting in place new rules and regulations that many would argue are not needed. In a study done by a large additive company looking at “cause of repair” statistics the cause of failure by improper fluid was less than 1% of transmission failures in 2016. This indicates that despite the claims of automotive OEM’s lobbying for “exclusive use” labeling and enforcement policies at the state level, the problem is not a major issue in the real world of aftermarket automatic transmission fluid and service practices.

The next question that comes to mind, is what the timetable might be for these regulation changing events to occur and who will fund and drive the process. The oil and additive companies have already expressed their opposition to more regulations, pointing out the expensive and time-consuming process that has been put in place for certifying and controlling engine motor oils. Why would they want more expense and delay to an already fiercely competitive market that revolves around transmission fluids based on OE requirements, availability and cost. With the OE special interests currently driving the process for more regulation and exclusive use provisions you can be sure the oil and additive companies will not be idly sitting by waiting for bureaucrats to “make the call” based on one input. Fortunately, or not (depending on your point of view), the process has started in California and will take a while to play out, but changes are coming. The proliferation of fluid types and categories for the three types of automatic transmissions now available has driven the need for product labels to clearly indicate the type and OE applications the fluid is appropriate for and to be clearly displayed on the label. The question is, will the new regulations serve the OE’s and the special interest groups, or will the car owning consumer and the automotive service sector’s needs be figured into the resulting rules. This is very important to the automotive aftermarket and the people that rely on options for quality cost-effective products and services.