Volkswagen ordered to pay record $125 million in penalties

After Volkswagen declared by consent that it breached the Australian Consumer Law by making false representations about compliance with Australian diesel emissions standards, the Federal Court ordered it pay multiple millions in penalties for their contraventions.

KEY TAKE OUTS:

• Volkswagen failed to follow Australian standards and breached Australian Consumer Law.
• Volkswagen admitted it made false representations to the Australian Government.
• The ACCC issued penalties of $125 million to Volkswagen for their conduct.

Volkswagen made admissions that, when approval was sought to supply and import more than 57,000 vehicles into Australia between 2011 and 2015, it failed to disclose the existence of ‘Two Mode’ software to the Australian Government.

The European vehicle entity admitted to the Federal Court that when it switched to ‘Mode 1’ for the purposes of emissions testing, the software caused its vehicles to produce lower nitrogen oxide (NOx) emissions, but when driven on road conditions, the vehicles converted to ‘Mode 2’ and produced higher NOx emissions.

ACCC Chair, Rod Sims said that “Volkswagen’s conduct was blatant and deliberate … $125 million in penalties were imposed under the old penalty regime of up to $1.1 million per breach. Under laws that came into effect [late 2018], maximum penalties are now the higher of $10 million, three times the profit or benefit obtained, or if this cannot be determined, 10 percent of turnover.”

A deliberate concealment of the two modes within Volkswagen’s software resulted in the vehicle being designed to test well but operate entirely differently producing higher emissions. This was hidden from the tens of thousands of Australian consumers driving Volkswagen vehicles.

Volkswagen failed to comply with Australian standards for exhaust emissions. Their “conduct undermined the integrity and functioning of Australia’s vehicle import regulations which are designed to protect consumers,” Mr Sims said.

These orders were made against Volkswagen AG being a German company. No orders were made against its Australian subsidiary, Volkswagen Group Australia Pty Ltd.