US sues Volkswagen for deceptive ‘clean diesel’ campaign

WASHINGTON, DC, USA (UPDATED) – The US government filed suit against Volkswagen Tuesday, March 29, charging it duped American consumers with “clean diesel” marketing, deepening the emissions-cheating scandal that has rocked the German auto giant.  

 

The Federal Trade Commission announced it is seeking a federal court order requiring Volkswagen to compensate consumers who bought or leased more than 550,000 VW and Audi vehicles secretly outfitted with illegal pollution-cheating devices between late 2008 and late 2015.

 

In a complaint filed in federal court, the FTC alleged that during this 7-year period, Volkswagen, the world’s second-largest automaker, deceived consumers by making false claims that the cars were low-emission, environmentally friendly, met emissions standards, and would maintain a high resale value.

 

The FTC calculated that the affected cars sold for an average price of approximately $28,000.

 

If the German automaker is ordered to buy back all the affected cars based on the sale price, it would have to pay more than $15 billion, although this scenario appears unlikely.

 

“For years Volkswagen’s ads touted the company’s ‘Clean Diesel’ cars even though it now appears Volkswagen rigged the cars with devices designed to defeat emissions tests,” FTC Chairwoman Edith Ramirez said in a statement.

 

“Our lawsuit seeks compensation for the consumers who bought affected cars based on Volkswagen’s deceptive and unfair practices.”

 

Volkswagen Group of America, the company’s US arm, said it had received the complaint and “continues to cooperate with all relevant US regulators, including the Federal Trade Commission.”

 

“Our most important priority is to find a solution to the diesel emissions matter and earn back the trust of our customers and dealers as we build a better company,” it said in an email.

 

Volkswagen has been engulfed in a growing scandal since US regulators announced in September that the automaker had installed undisclosed software known as “defeat devices” to cap the output of nitrogen oxides (NOx) below US legal limits during emissions tests by regulators.

 

When the vehicles are in actual use, however, the software allows them to spew poisonous gases well above the permitted levels, giving the cars better acceleration and fuel economy.

 

The FTC said Volkswagen’s promotional materials repeatedly claimed that the vehicles have lower emissions than gasoline cars, and reduce NOx emission by 90%.

 

In fact, the FTC’s complaint said, they emit up to 40 times the legal limit of NOx, a dangerous pollutant that contributes to environmental harms and respiratory ailments.

‘Dieselgate’

Volkswagen has acknowledged it had installed emissions-cheating software in 11 million diesel cars worldwide.

In addition to still-unquantifiable regulatory fines from several countries, VW is facing a slew of lawsuits from angry owners of the diesel cars – notably in the United States and Germany – and from shareholders seeking damages for the massive loss in the value of their stocks since September.

The US cases have been consolidated in a federal court in San Francisco under Judge Charles Breyer. Breyer has given Volkswagen until April 21 to come up with a plan to fix some 600,000 cars outfitted with the emissions-cheating software or get them off the roads.

Volkswagen must provide a detailed plan including timing, cars involved, and payments to consumers by the deadline to avoid a trial, he said.

German media reported Tuesday that Volkswagen could forego a dividend payment to shareholders for 2015 in the wake of the scandal. The automaker – due to publish annual results on April 28 – has set aside more than $6.8 billion (6 billion euros) to cover the potential costs.

The scandal’s impact has been particularly harsh in the United States where the company wanted to promote “clean diesel” as a pitch to broaden its market share.

Since the emergence of the scandal, dubbed “Dieselgate,” Volkswagen’s US sales have been falling.

In its complaint Tuesday, the FTC noted that Volkswagen, in a mailer to customers, had attacked diesel rivals such as hybrids powered by gasoline and electricity, saying: “Hybrids? They’re so last year…”

The FTC said Volkswagen’s deceptive practices violate competition rules, and it is seeking an injunction to prevent the company from continuing them.

“Absent injunctive relief by this Court, Defendant is likely to continue to injure consumers, reap unjust enrichment, and harm the public interest,” the complaint said. – Jean-Louis Doublet, AFP / Rappler.com