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Saturday, 4 January 2020

Dieselgate: the Australian chapter of the saga ends

Australia's Federal Court has imposed a penalty of AU$125 million for Volkswagen AG's breach of section 29(1)(a) of the Australian Consumer Law, in that it failed to dislose the true nature of emission outputs when seeking importation approval for more than 57,000 vehicles. (Australian Competition and Consumer Commission v Volkswagen Aktiengesellschaft [2019] FCA 2166 (20 December 2019).

The penalty, by a factor of nearly five the highest ever imposed under the Law, was increased by the Federal Court, which took the view that the AU$75 million penalty imposed by consent of VW and the Australian Competition and Consumer Commission was "manifestly inadequate". Back in October, Foster J had said that the agreed penalty (plus AU$4 million costs) was "outrageous" and shouold have been "multiples of that amount" considering the scale of the wrongdoing (The Guardian, 16 October). In the judgment, he says that it did not meet the overriding objectives of imposing a penalty, namely specific and general deterrence.

The Guardian (20 December) reports that VW is (understandably) considering whether to appeal, saying that it believed the original agreed penalty was fair:
“Volkswagen AG firmly believes that the penalty of $75m agreed in principle with the Australian Competition and Consumer Commission to resolve the regulatory proceedings was a fair amount and is carefully reviewing the court’s reasons for deviating from that amount.” 
Nevertheless, it is substantially less than penalties imposed in other jurisdictions. In Germany the manufacturer was fined €1 billion, which equates to AU$1.6 billion. The Australian court could have gone as high as AU$520.3 million (so, about halfway to the German fine) because the law provided for a penalty of AU$1.1 per contravention. Under s.224(1) of the ACL, the court has to be satisfied that a settlement is appropriate having regard to all the relevant circumstances. The agreed penalty, noted the Judge (Foster J), was not supported by reasoning on either side, and VW was "more than capable" of paying a lot more.

Since Dieselgate broke, the penalties regime under the ACL has been toughened and more closely resembles what we have become accustomed to in the UK and EU. More information can be found (inter alia) from King & Wood Malleson's In Competition website, which is a main source of information for this posting.

An ACCC media release says that chair Rod Sims said Volkswagen AG’s conduct had been blatant and deliberate: but he made no mention of the $75m consent agreement.

Australian Securities and Investments Commission penalises VW Financial Services Australia

The Sydney Morning Herald reports that civil penalty proceedings have been brought against VW's financial services arm for breaches of consumer credit laws.

The breaches consist of failing to make reasonable inquiries or to verify borrowers' living expenses. Nearly 50,000 loan contracts are involved, and took place between 20 December 2013 and 15 December 2016.