Antitrust Law Daily Wrap Up, TOP STORY: FTC sues VW over ‘clean diesel’ ads, (Mar 29, 2016)

By Jeffrey May, J.D.

Volkswagen Group of America, Inc. (VW) engaged in false advertising and unfair practices through an advertising campaign for “clean diesel” vehicles that contained “defeat devices” or illegal software designed to enable the vehicles to cheat emissions tests, according to a complaint filed today by the FTC in the federal district court in San Francisco. The agency alleged that the auto maker misrepresented that these Audi and VW vehicles were environmentally friendly, had low emissions, complied with state and federal emissions standards, and retained high resale values (FTC v. Volkswagen Group of America, Inc., FTC File No. 162 3006, Civil Action No. 3:16-cv-01534).

Between late 2008 and late 2015, VW distributed more than 550,000 “Defeat Device Vehicles” (DDVs) to U.S. consumers, the agency alleged. During that time, VW became the largest seller of light-duty diesel vehicles in the United States. According to the FTC, the so-called DDVs "have contributed—and will continue to contribute—to environmental and human health harms including smog, acid rain, water quality deterioration, childhood asthma, adult respiratory ailments, and premature death."

VW's representations that its “clean diesel” vehicles had higher resale values versus comparable gasoline vehicles were challenged on the ground that the DDVs will suffer a significant reduction in their resale value compared with similar vehicles because they contain defeat devices. VW sells Volkswagen and Audi vehicles through approximately 1,000 dealers and independent distributors throughout the United States. The complaint also alleged that the car company provided dealers and distributors with the means and instrumentalities for the commission of deceptive acts or practices.

The FTC is seeking injunctive relief, as well as compensation for consumers and disgorgement of ill-gotten monies.

“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,” said FTC Chairwoman Edith Ramirez in announcing the suit. “Our lawsuit seeks compensation for the consumers who bought affected cars based on Volkswagen’s deceptive and unfair practices.”

Other ongoing challenges. The FTC’s complaint follows a civil suit brought by the Department of Justice, on behalf of the Environmental Protection Agency (EPA) in January. The complaint alleged that VW’s illegal defeat devices caused emissions to exceed EPA standards, resulting in harmful air pollution. VW was charged with violating the Clean Air Act. The Justice Department sought injunctive relief and civil penalties.

Volkswagen also has seen a wave of class action lawsuits filed by consumers and dealers over the emissions controversy. The private suits have been centralized in the Northern District of California for pretrial proceedings.

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