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Volkswagen to spend up to $14.7 billion for deceiving customers about diesel vehicle emissions

Tuesday, June 28, 2016 - 07:00
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In two related settlements, one with the United States and the State of California, and one with the U.S. Federal Trade Commission (FTC), German automaker Volkswagen AG and related entities have agreed to spend up to $14.7 billion to settle allegations of cheating emissions tests and deceiving customers. Volkswagen will offer consumers a buyback and lease termination for nearly 500,000 model year 2009-2015 2.0 liter diesel vehicles sold or leased in the U.S., and spend up to $10.03 billion to compensate consumers under the program. In addition, the companies will spend $4.7 billion to mitigate the pollution from these cars and invest in green vehicle technology.

The settlements partially resolve allegations by the Environmental Protection Agency (EPA), as well as the California Attorney General's Office and the California Air Resources Board (CARB) under the Clean Air Act, California Health and Safety Code, and California's Unfair Competition Laws, relating to the vehicles' use of "defeat devices" to cheat emissions tests.  The settlements also resolve claims by the FTC that Volkswagen violated the FTC Act through the deceptive and unfair advertising and sale of its "clean diesel" vehicles. The settlements do not resolve pending claims for civil penalties or any claims concerning 3.0 liter diesel vehicles.  Nor do they address any potential criminal liability.

The affected vehicles include 2009 through 2015 Volkswagen TDI diesel models of Jettas, Passats, Golfs and Beetles as well as the TDI Audi A3.

"Today's announcement shows the high cost of violating our consumer protection and environmental laws," said FTC Chairwoman Edith Ramirez. "Just as importantly, consumers who were cheated by Volkswagen's deceptive advertising campaign will be able to get full and fair compensation, not only for the lost or diminished value of their car but also for the other harms that VW caused them."

"By duping the regulators, Volkswagen turned nearly half a million American drivers into unwitting accomplices in an unprecedented assault on our atmosphere," said Deputy Attorney General Sally Q. Yates.  "This partial settlement marks a significant first step towards holding Volkswagen accountable for what was a breach of its legal duties and a breach of the public's trust.  And while this announcement is an important step forward, let me be clear, it is by no means the last.  We will continue to follow the facts wherever they go."

"Today's settlement restores clean air protections that Volkswagen so blatantly violated," said EPA Administrator Gina McCarthy. "And it secures billions of dollars in investments to make our air and our auto industry even cleaner for generations of Americans to come. This agreement shows that EPA is committed to upholding standards to protect public health, enforce the law, and to find innovative ways to protect clean air."

According to the civil complaint against Volkswagen filed by the Justice Department on behalf of EPA on January 4, 2016, Volkswagen allegedly equipped its 2.0 liter diesel vehicles with illegal software that detects when the car is being tested for compliance with EPA or California emissions standards and turns on full emissions controls only during that testing process. During normal driving conditions, the software renders certain emission control systems inoperative, greatly increasing emissions. This is known as a "defeat device."  Use of the defeat device results in cars that meet emissions standards in the laboratory, but emit harmful NOx at levels up to 40 times EPA-compliant levels during normal on-road driving conditions.  The Clean Air Act requires manufacturers to certify to EPA that vehicles will meet federal emission standards.  Vehicles with defeat devices cannot be certified.

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