Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Volkswagen “Dieselgate” sparks host of monopolization, trade regulation claims, (Oct 8, 2015)

By Greg Hammond, J.D.

Volkswagen has violated the Sherman Act, the Racketeer Influenced and Corrupt Organizations Act (RICO), as well as California and Virginia false advertising, consumer protection, and state unfair trade practices laws through a conspiracy to deceive consumers and state and federal government agencies concerning the efficiency of its clean diesel passenger cars, according to a complaint filed by consumers in the federal district court in Alexandria, Virginia (Bourn v. Volkswagen AG, October 6, 2015).

The consumers claim that between 2009 and September 2015, Volkswagen aggressively marketed its Clean Diesel Turbocharged Direct Injection (TDI) light passenger vehicles as environmentally-friendly, fuel-efficient, powerful, and reasonably priced. The U.S. Environmental Protection Agency (EPA) and California Air Resources Board (CARB), however, notified Volkswagen that it violated federal and state laws and regulations by using a “defeat device,” software designed to circumvent emission test procedures established by the EPA and by CARB. According to the complaint, the defeat device detects when the car is undergoing emissions testing, passing those tests with “flying colors.” While these vehicles are operating under normal driving conditions, however, they shift off the emissions control systems, allowing the cars to emit 10 to 40 times the allowable amount of pollutants. Volkswagen has admitted to installing the defeat devices in 11 million diesel vehicles sold around the world, including nearly 500,000 in the United States.

The complaint asserts monopolization and attempted monopolization claims, alleging that Volkswagen has monopoly power in the clean diesel car market and that, through its anticompetitive use of the defeat device and deceptive advertising, Volkswagen has willfully acquired and/or maintained a monopoly of the clean diesel car market. This violation harmed competition, according to the complaint, because the purchase or lease price of the class vehicles was higher than it would have been in a competitive market; the supply and selection of products was lower than it would have been in a competitive market; innovation was stifled; and the number and effectiveness of competitors in the market has been diminished by unlawful means.

The consumers also allege that Volkswagen violated the RICO Act by engaging in a common course of conduct and conspiracy with the common purpose of defrauding consumers into purchasing TDI light passenger vehicles at artificially inflated prices. In addition, the complaint alleges claims for violations of California’s Unfair Competition Law, Consumers Legal Remedies Act, and False Advertising Law; the Virginia Consumer Protection Act; and the Magnuson-Moss Warranty Act, as well as claims for unjust enrichment.

The plaintiffs seek to represent a class of “all persons and entities who purchased or leased a Class Vehicle from a Volkswagen Authorized Dealer in the United States.” Further, the consumers seek: (1) the appointment of an independent external compliance monitor to ensure compliance with state and federal environmental laws; (2) an order requiring Volkswagen to pay a portion of annual net profits into a fund to be distributed to non-profit organizations to monitor, educate, and/or remediate the environmental effects of vehicular diesel fuel emissions; (3) judgment in favor of the class and California and Virginia subclasses, including damages and trebled damages; (4) an injunction to prohibit Volkswagen from continuing to violate state and federal law; and (5) restitution or damages, pre- and post-judgment interest, reasonable attorney fees, and costs.

The case number is 1:15-cv-01295-LO-MSN.

Attorneys: Bernard J. DiMuro (DiMuro Ginsberg PC), Michael D. Hausfeld (Hausfeld LLP), and Lesley E. Weaver (Block & Leviton LLP) for Maria Bourn.

Companies: Volkswagen AG; Volkswagen of America Group, Inc.; Volkswagen of America, Inc.; Audi of America, LLC; Audi AG

News: Advertising Antitrust ConsumerProtection RICO StateUnfairTradePractices