Volkswagen hit with record $125 million penalty over ‘Dieselgate’ scandal

Volkswagen has been ordered to pay a record $125 million in penalties related to the “Dieselgate” emissions cheating scandal.

The Federal Court has ordered Volkswagen to pay a record $125 million in penalties related to the “Dieselgate” emissions cheating scandal.

It’s the largest ever fine for breaches of Australian Consumer Law – dwarfing the previous record of $26 million against training college Empower Institute – and comes under new laws that dramatically increase penalties.

Separately, Australia’s financial watchdog has announced it is taking Volkswagen to court for allegedly breaching responsible lending laws in writing car loans.

The Volkswagen penalty relates to false representations made about its compliance with Australian diesel admissions standards. In 2015, the German automaker was busted deliberately cheating emissions tests by programming its vehicles with a secret operating mode for the purposes of testing.

The Australian Competition and Consumer Commission took action 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.

In the case, Volkswagen admitted it did not disclose the existence of the “two mode” software to the Australian government when it sought to import more than 57,000 vehicles from 2011 to 2015.

“Volkswagen’s conduct was blatant and deliberate,” ACCC chairman Rod Sims said in a statement on Friday.

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.

“Essentially, Volkswagen’s software made its diesel cars, utes and vans operate in two modes,” Mr Sims said. “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.”

German prosecutors searched Volkswagen’s offices earlier this month over the long-running “Dieselgate” emissions cheating scandal. Picture: Thomas Kienzle/AFP

Had the Volkswagen vehicles been tested while operating in the actual driving mode, they would have exceeded Australia’s allowed nitrogen oxide emissions limits.

Volkswagen also admitted 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 the penalty “reflects a trend of ever higher penalties for breaches of Australian Consumer Law”.

“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,” he said.

“Today’s $125 million in penalties were imposed under the old penalty regimen of up to $1.1 million per breach. Under laws that came into effect late 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.”

The court order was made against German company Volkswagen AG. No orders were made against Australian subsidiary Volkswagen Group Australia Pty Ltd. As part of the resolution, the ACCC’s case against Volkswagen subsidiary Audi AG and Audi Australia Pty Ltd has been dropped.

In September, Volkswagen agreed to pay up to $127 million to Australian consumers to settle a class action brought by Maurice Blackburn.

The Volkswagen-branded vehicles relevant to the 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)