Supervision Possible

U.S. Sues VW for 'Clean Diesel' Ads

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The top antitrust agency in the United States, the Federal Trade Commission, said on Tuesday it was suing Volkswagen for alleged false advertising in connection with its "clean diesel'' claims.
  • Why it matters

    Why it matters

    The new lawsuit by the U.S. antitrust agency will add to Volkswagen’s legal woes in the United States.

  • Facts

    Facts

    • The U.S. Federal Trade Commission voted unanimously on Tuesday to sue VW in U.S. Court for advertising its cars as “clean diesel.”
    • The suit to be filed in U.S. District Court in San Francisco will seek compensation from the owners and may place VW under government supervision for a period of up to 10 years.
    • The FTC is the lead U.S. agency charged with enforcing laws that prohibit false advertising.
  • Audio

    Audio

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The U.S. Federal Trade Commission on Tuesday voted unanimously to sue Volkswagen for alleged false advertising in connection with its ongoing Dieselgate emissions-rigging affair.

The commission, in a statement, said it voted 4-0 to pursue legal action against Wolfsburg-based VW for advertising that its cars used “clean diesel” technology.

“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 Edith Ramirez, the chairwoman of the federal trade commission, in a statement. “Our lawsuit seeks compensation for the consumers who bought affected cars based on Volkswagen’s deceptive and unfair practices.”

The FTC said it would seek a court order requiring Volkswagen to compensate American consumers who bought or leased an affected vehicle between late 2008 and late 2015, as well as an injunction to prevent Volkswagen from engaging in this type of conduct again.

In similar cases, the FTC has imposed “supervised compliance” on companies over a period of 10 years, which would add to the scrutiny and costs of business that VW will face in the United States.

According to the FTC’s complaint, Volkswagen promoted its supposedly “clean” cars through a high-profile marketing campaign that included Super Bowl ads, online social media campaigns, and print advertising, often targeting “environmentally-conscious” consumers.

The German automaker faces potentially billions of dollars in fines in the United States after admitting it equipped 580,000 cars sold in America with software that faked compliance with U.S. emissions tests. Since admitting the deception, VW and the U.S. Environmental Protection Agency have been at loggerheads over a recall and solution for affected auto buyers.

The EPA rejected VW’s initial proposal to recall and repair the affected autos, saying it lacked critical detail. The U.S. Justice Department is also investigating whether VW senior executives ordered the deception.

Volkswagen has repeatedly denied that the deception was ordered from above and has attributed the fraud to the work of a few mid-level rogue engineers.

The Federal Trade Commission is responsible for enforcing antitrust statutes that are meant to protect U.S. consumers from deceptive and illegal advertising practices.

VW last September admitted that its own cheating software had falsified diesel emissions tests on up to 11 million of its cars around the world.

The Federal Trade Commission said it would file suit in U.S. District Court in San Francisco.

The costs of the deception are beginning to weigh on Volkswagen, an iconic member of Germany’s industrial base and one of its largest private employers.

On Tuesday, Volkswagen signalled it may cancel its dividend this year, which would be the first time the automaker has stiffed shareholders in years, as it prepares to pay up to €30 billion ($33.3 billion) in fines in the United States.

According to German news agency DPA, a VW supervisory board member said it is likely the automaker will suspend its dividend as it awaits fines in the United States.

Although the supervisory board, which sets the dividend and hires and fires the chief executive, has not made a final decision on its dividend, “there is no indication that anyone can hope for even a cent (as a dividend),” DPA cited the supervisory board member, who was not named, as saying.

Volkswagen paid €2.3 billion in dividends to shareholders last year, which equated to €4.86 per preferred share. The automaker’s biggest single shareholder is Porsche Automobil Holding, with a 52 percent stake owned by the Porsche and Piëch families, followed by the state of Lower Saxony, which owns 20 percent.

Suspending the dividend, if that comes to be, will be the most concrete expense so far from the Dieselgate scandal.

The automaker hasn’t suspended its dividend in recent memory. The last time it reduced an annual dividend payment was in 2009 in the wake of the global financial crisis.

A VW spokesman told the news agency: “On April 28, when the annual press conference takes place, we will announce our annual figures in further detail.”

Whether the carmaker pays a dividend will depend on how high the fines are in the United States, DPA reported, citing the supervisory board member.

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