Court orders Volkswagen to pay record $125 million in penalties

20 December 2019

The Federal Court has ordered Volkswagen AG to pay $125 million in penalties, after it declared by consent that Volkswagen breached the Australian Consumer Law by making false representations about compliance with Australian diesel emissions standards.

The $125 million that Volkswagen has been ordered to pay is the highest total penalty order ever made by the Court for contraventions of the Australian Consumer Law.

Volkswagen admitted that, when it sought approval to supply and import more than 57,000 vehicles into Australia between 2011 and 2015, it did not disclose to the Australian Government the existence of ‘Two Mode’ software. 

Volkswagen admitted that when switched to ‘Mode 1’ for the purposes of emissions testing, the software caused its vehicles to produce lower nitrogen oxide (NOx) emissions, but that when driven in on road conditions, the vehicles switched to ‘Mode 2’ and produced higher NOx emissions.

“Volkswagen’s conduct was blatant and deliberate,” ACCC Chair Rod Sims said.

“This penalty reflects a trend of ever higher penalties for breaches of Australian consumer law,” Mr Sims said.

“The previous highest penalties of $10 million for Coles, Ford and Telstra were recently overtaken by penalties of $12 million against We Buy Houses and then penalties of $26 million ordered against vocational training provider Empower Institute.”

“Today’s $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 later last year, maximum penalties are now the higher of $10 million, three times the profit or benefit obtained or, if this cannot be determined, 10 per cent of turnover,” Mr Sims said.

“Essentially, Volkswagen’s software made its diesel cars, utes and vans operate in two modes. One that was designed to test well and another that operated when the vehicle was actually being used and which produced higher emissions. This was concealed from Australian regulators and the tens of thousands of Australian consumers driving these vehicles.”

Volkswagen engineers designed the Two Mode software in 2006 and it was kept secret until it was discovered in 2015.

All new motor vehicles supplied or imported into Australia must comply with Australian standards for exhaust emissions.

“If the affected Volkswagen vehicles had been tested while operating in the mode Australians were driving in, they would have exceeded the NOx emissions limits allowed in Australia.”

Volkswagen also admitted that it made false representations when applying for the vehicles to be published on the Government’s Green Vehicle Guide website.

“Volkswagen vehicles would not have obtained the ratings that they did on the Green Vehicle Guide website if the Government had been made aware of the effect of Two Mode software on the emissions testing results,” Mr Sims said.

“Volkswagen’s conduct undermined the integrity and functioning of Australia’s vehicle import regulations which are designed to protect consumers,” Mr Sims said.

Notes to editors

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

The ACCC’s proceedings against Audi AG, which is owned by Volkswagen, and its Australian subsidiary Audi Australia Pty Ltd, have been discontinued as part of the resolution of these matters. 

The regulatory framework for emissions control standards in Australia, and the Green Vehicle Guide website, are administered by the Department of Infrastructure, Transport, Cities and Regional Development.

The Green Vehicle Guide provides consumers with ratings for the environmental performance and fuel consumption of vehicles sold in Australia, based on data submitted by the vehicle manufacturer.

The ACCC’s proceedings against Volkswagen are separate to the class actions conducted by Maurice Blackburn and Bannister Law. Consumers seeking information on the settlement reached between the class actions and Volkswagen should contact those law firms.

Background

The ACCC initiated proceedings against Volkswagen in September 2016, and against Audi in March 2017.

In December 2016, Volkswagen provided a software update in Australia that removed the two mode software, leaving the vehicles to operate in one mode at all times.

The Volkswagen branded vehicles relevant to these court orders are:

  • Amarok 2.0 litre – 2011 to 2012
  • Caddy 1.6 and 2.0 litre – 2010 to 2015
  • Eos 2.0 litre – 2009 to 2014
  • Golf 1.6 and 2.0 litre – 2009 to 2013
  • Jetta 1.6 and 2.0 litre – 2009 to 2015
  • Passat 2.0 litre – 2008 to 2015
  • Passat CC 2.0 litre – 2008 to 2012
  • Polo 1.6 litre – 2009 to 2014
  • Tiguan 2.0 litre – 2008 to 2015
  • CC 2.0 litre – 2011 to 2015
Release number: 
250/19
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