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Recently a vintage racing/CZ friend posted the following query here:

Hey Terry, Correct me if I'm wrong because I'm not totally sure, but hasn't Calif banned 2 stroke sales there or is planning on doing so?

Now this friend is pretty active in the vintage scene and has been around motorcycles for a long time, so while I thought he was incorrect I took his query seriously. A quick Google search turned up all sorts of claims, questions, wild assertions, and misinformation with very little real truth. I located a California government site, the California Department of Boating and Waterways, which had clear language dispelling the myth (see my original response for details), but the CDBW is all about boats, not motorcycles or ATVs. So clearly a more diligent search was called for.

I spent the time to find and read the actual California Air Resources Board (CARB) regulations concerning Off Highway Recreational Vehicles — meaning all motorcycles and ATVs. What I found was what I thought I would find, which I will discuss below. But aside from merely satisfying my own curiosity and answering my friend's question, I was really concerned with how widely gross mischaracterizations of the law are spread across the internet and taken as common knowledge. After all, if this impression exists among long-time enthusiasts, it's clear we have a disconnect between "common knowledge" and fact. The past, present and future of two-stroke technology seems mired in Fear, Uncertainty, and Doubt (FUD).

So let's start with the facts, at least as I have been able to identify them. The following is a direct quote from the CARB OHRV regulations page:

The history of developing regulations for OHVs

To improve air quality in California, ARB saw clear and compelling reasons to adopt the off-highway recreational vehicle regulations. When the regulations were adopted in 1994, the Board concluded that with three years lead-time, manufacturers would be able to produce and sell in California a full range of OHVs meeting the new emission standards. It was anticipated that at first manufacturers would produce OHVs powered by cleaner four-stroke engines (this was the case in the 1980s with on-highway motorcycles) and that modified, cleaner two-stroke engines would later come into use. At the 1994 Board meeting, industry was, for the most part, in agreement with ARB's proposal. Industry and trade organization testimony centered on requests for a time extension for OHVs with engines 90cc and under, which the Board approved.

After the regulations were passed, however, OHV user groups and dealers began meeting with ARB staff and asking for more flexible regulations. These requests were made at a time when it was becoming apparent that OHV manufacturers were not providing a wide range and number of emission-compliant dirt bikes. Initially, there were less than 10 emission-compliant dirt bike models available, which resulted in potentially fewer sales and economic hardships for many dealers; particularly those dealers selling brands that had no compliant models. To address this problem, the Board approved amendments to the regulations that provided relief but still retained emission reductions.

And the following paragraph from the CDMV's OHRV Guidelines PDF:

Green Sticker

Year round use at all California OHRV riding areas.

Green stickers are issued to OHRVs certified by their manufacturer to meet the California OHRV emission standards (anti-pollution) and ALL 2002 model year and older OHRVs. OHRVs certified to meet emissions standards are identified by a label attached to the vehicle frame by the manufacturer.

Note that the only line that mentions two-stroke is the following, "...and that modified, cleaner two-stroke engines would later come into use." Assuming that CARB's representation of its history and regulations is accurate we can assume the following: California did not attempt to ban two-stroke technology in 1994, hasn't since, and is not now planning to ban two-stroke technology. In fact, you can still ride your old two-stroke anywhere you want. What you can't do is ride a new (2003 or later), non-compliant two-stroke anywhere you want.

This is not an endorsement of the CARB regulations. It's not any kind of statement about the regulations at all. This is not about whether the CARB rules were, are, or will be good, bad, or indifferent. It's a simple observation of fact in the face of a lot of misinformation. CARB's goal was to reduce emissions into the land, air, and water. Two-strokes of the era were — for the most part — dirty, oily, nasty, high-emissions engines. Those engines could not pass the new standards. But that is nowhere near a ban on the fundamental technology. So much for the facts of the matter. Now let's get to what may have happened.

Let me tell you all a story 'bout a man named Fud...

The following story is based on research, industry observations, and conversations with industry personnel – including an engineer and a motorcycle company president. Let's assume that a large, multi-national corporation (for simplicity we'll use a fictitious entity called Company H) manufactures everything from inexpensive lawn mowers and power generators to motorcycles and $40,000 SUVs. Every item in their massive product line is powered by a four-stroke motor. Every item, that is, except a small group of dirt bikes. The company has enormous investments and intellectual property in the development, marketing, and sales of four-stroke-driven products.

Company H is aware that certain proprietary methods, techniques, or technologies for lowering two-stroke emissions are either available or under development, some by their primary competitors. But Company H doesn't own any of the intellectual property (patents) associated with this improvement. Further, two-stroke engines do not fit the company's financial model — costing extra for development (since they can't leverage their vast institutional knowledge of four-strokes) — while generating lower margins in sales and service parts.

Company H is not alone. It is part of an oligopoly - a situation where there is only a small group of sellers for a product or service. According to Oligopoly Watch:

Oligopolies have been around as long as commerce has. The term denotes a situation where there are few sellers for a product or service. The members of an oligopoly change the nature of a free market. While they can't dictate price and availability like a monopoly can, they often turn into friendly competitors, since it is in all the members' interest to maintain a stable market and profitable prices.

The new oligopoly is made up of multinational corporations that have chosen specific product or service categories to dominate. In each category, over time, only two to four major players prosper. Starting a new company in that market segment is difficult, and the few that do succeed are often gobbled up or run out of business by the oligopolies.

We know from watching the actions of numerous oligopolies — in agriculture, mining, media, pharmaceuticals, book publishing, banking, defense, etc. — that they have common behavior patterns. Key (for this story) among those patterns is this: Oligopolies try to master three basic forces: shelf life, shelf space, and mind space.

Let's play company CEO

Assume that you are CEO of Company H. Your name is Mr. Fud-san. You don't want to make two-stroke motors. You have no economic incentive to make them. While they may be cheaper to operate and maintain for your customers, they generate less revenue for you. It's not in the best interest of your shareholders to spend money making two-stroke products. You already have everything you need to make very profitable (much more profitable than two-stroke) products using your own technology. From your perspective two-stroke motors are an unnecessary, low-margin nuisance. As CEO of Company H you are in a very good position. You are Number 1 in the motorcycle market. Another key principle of oligopolies is "Being #1 is great, being #2 is good, being #3 is difficult, being #4 or higher is a losing game." As Numero Uno you have the unique opportunity to quietly influence Nos. 2, 3, and 4. These folks know that if you put your mind to developing four-stroke race motors you will succeed, and they do not want to be unprepared. They know that, as No. 1, your marketing has great influence over the market and taking you on head-to-head just causes problems for everyone.

Even if they have new two-stroke technologies in the works you know they will follow No. 1, because another rule of oligopolies is "Members of oligopolies tend to converge." Whoever leads the market sets the tone for product, marketing and message for everyone else. It's all in their best interest. Now you have to start making some moves. You have to signal your friendly enemies and begin working on the mindspace of your market.

What should you do?

The 1994 CARB regulations have given you a fantastic launching point. You can leverage this to position your company as the "green" leader for years to come. How about creating uncertainty about the future of the two-stroke by announcing that you plan to completely phase out two-stroke motor production? That generates a lot of publicity and leads to obvious questions about why. You can now legitimately create doubt that two-strokes can meet emissions standards by pointing out how dirty they are. You can also answer that you have great, compliant four-stroke technology either on the market or under development. You can promote your four-stroke engines as cleaner and better for the environment. The fact that there are equally efficient, compliant two-stroke technologies available or under development is irrelevant. These products are not in your plans. They won't be on the market for a year or two, and you have a window of opportunity, the power, and the tools to erase them from the public consciousness.

Your marketing department goes to work pitching the "massive power" and ridability of these new four-strokes. Fear that two-strokes have no future becomes your ally. You put your copious money where your mouth is. You begin to pressure motorcycle governing bodies and rules committees to support you in this important, environmentally-friendly (and oh, by the way, very profitable) move. The rules and regulations and class structures grow more friendly to your technology every year. The tracks themselves begin to change as your preferred products overwhelm all others. You know you have to move quickly, because some of those two-stroke technologies might work out, and you don't control them. So you need to get control of the market's mindspace. You need to get products (yours and your friendly competitors') on the market so you can control shelf space, and you need to establish them early enough to control shelf life. This is important, because "Oligopolies watch their flanks, fearing disruption."

The last thing you want is for someone to disrupt your plan by selling an efficient, compliant, two-stroke. Soon the two-stroke disappears from race tracks. Race commentators drone on about how fast and powerful these "450Fs" are. It becomes "common knowledge" that two-strokes can't compete. It becomes common knowledge that two-strokes can't pass emissions standards. And it becomes common knowledge (at least outside California) that California has banned two-strokes. Even though each and every one of these things is 100% false.

Problem solved for Mr. Fud-san. R&D expenses are down, margins are up, shareholders are happy. Wall Street (and the Nikkei) are happy. Isn't it great to be the CEO of a multi-national corporation and No. 1 in your market? Everybody is happy except a small percentage of riders who pay attention and realize they've just been screwed. But the rest go blithely on their way buying your new four-stroke products. None of this is illegal, or even unethical (if you believe that multinational corporations have ethics.) It's all just part of how big businesses work. And how oligopolies work.

What's the moral of the story?

This story is fictional, but it is informed by research that I've done and conversations I've had with people in the industry who are in a position to know. The motorcycle industry in general, and MX in particular, is an oligopoly. This matters. The natural behavior of any and every oligopoly is to control the market, competition, and disruption. This is not the same thing as making money. Making money can be done in a free market. Oligopolies warp the free market. They maneuver and manipulate what we hear and think and "know" in their best interest. If there is one lesson I want to get across here it is that this is not a story of aberrant behavior. It is a story of predictable, observable, natural behavior. Which is why we must be constantly vigilant and skeptical anytime a market leader claims to be doing the "right thing". There is always an underlying motivation, and that always supercedes our best interest. In the end it always leads to less competition, increased prices, and less choice. Which is exactly what we've had in MX for the past 20 years.

I am not against four-strokes. I do not favor two-strokes. I just don't like having my choices reduced simply because it's in the best interests of some big corporation. I favor choice, competition, and variety, but these things are the bane of an oligopoly.

What might have prevented this little story? If, back in 1994, we had a riders' organization that actually protected and promoted the future of motorcycling, rather than the future of motorcycle manufacturers, things might have been different. If we were not so myopic in our own view of what matters, but rather looked at motorcycling as a whole and understood that we are both affected by and affect what happens in the broader motorcycling world, things might have been different. If we had been willing, as a group, to be more skeptical and less accepting of bold new graphics as a bribe, things might have been different.

But things were not different, and for the past 14 years we have willingly wallowed in this corporate mind game. It's been long in coming but, thankfully, we are beginning to see the fruits of a backlash against this myopic approach, and the FIM seems to have grown a pair of balls with their 2010 rules. I say full speed ahead and let's hope the US follows suit.