Volkswagen’s 4-year-old diesel cheating scandal may be just getting started.
The latest wrinkle: A federal court in Australia has levied the country’s largest consumer protection fine ever—US$86 million—against VW Group in Germany for misleading customers after cheating on emission tests for its diesel-powered cars.
That amount may seem tiny when compared with the $30 billion in costs VW has racked up since 2015 in the form of fines, owner compensation, vehicle buybacks and environmental restitution payments.
But consider the Australian fine in terms of the number of cars covered. Bloomberg News reports that the penalty applies to only about 57,000 VW diesels imported between 2011 and 2015. That works out to a staggering $1.5 million per vehicle.
Australia’s consumer watchdog commission blasts VW’s conduct as “blatant and deliberate” behavior that defrauded consumers. VW says it may appeal, claiming it had already worked out a deal with Australian officials to settle the matter for US$52 million.
But the fine is ominous in either case, given the mounting wave of consumer fraud complaints.
The Consumer Fraud Angle
The VW scandal began in September 2015. That’s when the company was caught rigging its diesels to switch on certain pollution controls when a vehicle was being tested but dial them back under real-world driving conditions. VW admitted selling 10 million such cars worldwide.
Most of the company’s penalties to date have involved violations of national pollution regulations. But another genre of class action-type lawsuits—claims of consumer fraud—is on the rise.
Such lawsuits are underway in Europe in such markets as Germany, the Czech Republic and the U.K. They cover hundreds of thousands of owners who say their vehicles lost resale value because their engines weren’t as clean-running as VW claimed.
The British lawsuit, which represents more than 90,000 VW diesel owners, claims the company is guilty of an “obvious cheat.” In Germany, VW has resisted settling a group lawsuit on behalf of 470,000 customers who assert the scandal has inflicted economic harm. VW contends that free software tweaks it has offered have made such cars cleaner without harming performance or resale value.
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