Diesel Scandal

Germany’s 10-Percent Solution

Joyce Ertel Hulbert
VW’s customers in the US are angry too, but at least they have the law on their side. Picture source: AP.

Cries are growing louder in Germany about the need to compensate consumers for the diesel fraud debacle, but proponents are running into a big obstacle: German law doesn’t really do much to protect consumers.

Ideas such as an across-the-board compensation to diesel car buyers of 10 percent of the new-car price or opening up the possibility of a class-action suit all founder on the reality that German law would have to be changed and that won’t be easy.

Take a class-action suit, for instance. Long since a reality in the United States, this type of legal action, which seeks legal recourse for whole groups of people without each having to sue individually, is not possible in Germany and has met with political opposition in the past. Only now, in the wake of the diesel emissions scandal and possible collusion among automakers, are politicians beginning to countenance such an action.

Under current law, the evidentiary burden for individual complaints is quite heavy, especially since the question for diesel car owners is what might have been if only the emissions were as low as claimed. Even harder is the case that the consumers might have considered a different innovative option had they known the truth.

“In order for consumers to get back the money they deserve, an amount for damages must be presumed in antitrust infractions”

Klaus Müller, Executive Director, Federation of German Consumer Organizations

The possibility of class-action suits has been blocked in the current parliament by the Christian Social Union, the Bavarian wing of Chancellor Angela Merkel’s Christian Democratic party. Transportation Minister Alexander Dobrindt is himself a member of the CSU.

But the head of the CSU, Bavarian Prime Minister Horst Seehofer, declared over the weekend that he would be open to such a procedure in this case, given the gravity of the offense by the automakers.

The notion of an across-the-board compensation for diesel car buyers runs into similar legal problems. Under current law, fines in antitrust cases cannot be used to compensate victims but flow into the government’s general budget coffers. Consumer advocates and the Green Party have urged a change in the law to permit individual damages to be paid.

“In order for consumers to get back the money they deserve, an amount for damages must be presumed in antitrust infractions,” says Klaus Müller, executive director of the Federation of German Consumer Organizations.

But this, too, would require new legislation, and the amendments to the law against restricting competition (GWB) passed in March failed to include such consumer protections. Moreover, legal experts have previously argued that diverting government funds to a specific purpose in this manner would subvert the general budget principle that all funds must be available for all expenses as determined by government policy.

The entire debate about consumer protection, in fact, stands in the shadow of the pending parliamentary elections in September. There will be no substantive legislation ahead of that vote, and even though Ms. Merkel is likely to gain a new term as chancellor, it is uncertain which parties will form the governing coalition and what their policies will be.

As a result, political sniping has accompanied the debate about consumer protection. Justice Minister Heiko Maas, a Social Democratic member in the current grand coalition government and a proponent of class-action suits, found Mr. Seehofer’s about-face on the issue just days before the planned “Diesel Summit” to be “scurrilous.”

The hastily convened summit this week will bring government officials and automakers together to discuss how to respond to the diesel emissions cheating scandal and the subsequent charges of collusion among the carmakers. But as the debate on consumer compensation has shown, finding solutions is easier said than done.

 

Dietmar Neuerer in Berlin reported this story for Handelsblatt. Darrell Delamaide in Washington, DC adapted this story into English for Handelsblatt Global. To contact the author: neuerer@handelsblatt.com

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