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Australian court hits Volkswagen with record emissions fine

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Via Financial Times

An Australian court has ordered Volkswagen to pay a record fine for breaking consumer law by making false representations about the compliance of its vehicles with diesel emissions standards. 

The A$125m ($86m) fine ordered by the Federal Court on Friday represents the largest-ever penalty ordered by an Australian court for contraventions of consumer law investigated by the competition watchdog. 

“Dieselgate” has cost the German carmaker more than $30bn after it was revealed in 2015 that Volkswagen had installed software on its cars that deceived diesel emissions tests. 

“Volkswagen’s conduct was blatant and deliberate,” said Rod Sims, chair of the Australian Competition and Consumer Commission. “This penalty reflects a trend of ever higher penalties for breaches of Australian consumer law.” 

The Australian court judgment following an investigation by the ACCC, which negotiated an earlier A$75m settlement with Volkswagen in relation to the scandal.

But in an unusual development the agreed settlement was thrown out by the Federal Court in October. Judge Lindsay Foster suggested it was an insufficient penalty given the “scale, impact and deliberateness” of the company’s misconduct, according to media reports. 

Mr Sims told the Financial Times that the regulator was happy with the higher penalty awarded by the court, even though it had argued in favour of the initial A$75m negotiated settlement with Volkswagen. 

“We stuck in complete good faith to the settlement,” he said. “But of course we are delighted with the court’s decision because we think penalties in Australia need to be much higher.” 

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Volkswagen said it was considering whether to appeal against the court’s decision, saying it “firmly believes” that the A$75m penalty “was a fair amount”.

The company admitted to the court that when it sought approval to supply and import more than 57,000 vehicles into Australia between 2011 and 2015, it did not disclose to the Australian government the existence of dual-mode software. 

The carmaker admitted that when switched to “mode 1” for the purposes of emissions testing, the software caused its vehicles to produce lower nitrogen oxide emissions. But when driven in on-road conditions, the vehicles switched to “mode 2” and produced higher nitrogen oxide emissions. 

Volkswagen has faced a torrent of legal actions from global regulators and consumers related to the “Dieselgate” scandal.

This includes a case sought by 90,000 British consumers, which alleges that the company made cars that failed to comply with EU legislation and artificially lowered emissions of nitrogen oxide during testing by fitting a device on its cars. Volkswagen denies wrongdoing and is defending the case. 

In September, Volkswagen, Audi and Skoda agreed to settle a class-action lawsuit brought by Australian car owners for A$87m to A$127m. The settlement, which does not include an admission of liability, requires approval by the Federal Court.

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