The High Court has dismissed Volkswagen AG’s application for special leave to appeal the $125 million penalty ordered by the Federal Court in December 2019 for making false representations about compliance with Australia’s diesel emissions standards.
The ACCC’s case was originally brought against Volkswagen in 2016. The Federal Court ordered Volkswagen to pay $125 million in penalties, after it declared by consent that Volkswagen breached the Australian Consumer Law in December 2019.
Volkswagen appealed this penalty order to the Full Court of the Federal Court in 2020. Volkswagen’s appeal was dismissed in April 2021. Volkswagen filed an application for special leave to appeal to the High Court in May 2021.
“The High Court’s decision today means the record $125 million penalty imposed by the Federal Court stands,” ACCC Chair Rod Sims said.
“This penalty reflects the seriousness of Volkswagen’s conduct and is a massive reminder for all businesses to take their obligations under the Australian Consumer Law seriously, and not mislead in pursuit of profit.”
“Volkswagen misled consumers and regulators about whether the diesel vehicles complied with environmental standards. It deprived consumers who may have deliberately sought to buy a low emissions vehicle, of the ability to make an informed decision,” Mr Sims said.
“What made it particularly egregious in this case is that if Volkswagen had told the truth, these vehicles would not have been legally allowed to be sold in Australia. Their conduct showed complete disregard for Australia’s vehicle import regulations, which are designed to protect consumers.”
Volkswagen admitted in 2019 that it had made false or misleading representations when importing more than 57,000 diesel vehicles into Australia between 2011 and 2015, and when listing those vehicles on the Australian Government’s Green Vehicle Guide website. It failed to disclose that the vehicles were fitted with a ‘two mode’ software, which caused them to operate in one mode for the purposes of nitrogen oxide (NOx) emissions testing and another when being driven. If tested in that second mode, the vehicles would have breached Australian emissions standards.
The $125 million penalty is the highest ever imposed for breaches of the Australian Consumer Law, and two and a half times more than the next highest penalty.
“This case signals to large companies that penalties for egregious conduct which breaches the Australian Consumer Law can now reach very significant sums, and potentially make a big impact on their bottom line,” Mr Sims said.
Volkswagen sought special leave to appeal it to the High Court and proposed if special leave was granted to seek orders to set aside the $125 million penalty and replace it with a penalty of $75 million, which had been jointly put to the Federal Court at first instance by Volkswagen and the ACCC.
Background
On 7 March 2017, the ACCC also filed proceedings in the Federal Court in Sydney against Audi AG, Audi Australia and their German parent company VWAG in relation to similar conduct. These proceedings were discontinued later as part of the Volkswagen settlement, as the contraventions were narrower than the allegations in the original case filed by the ACCC.
The $75 million penalty jointly proposed by the ACCC and Volkswagen in 2019 would also have been the largest penalty ever imposed for breach of the Australian Consumer Law.
Note
Volkswagen’s conduct occurred prior to the increase of penalties for a breach of the Australian Consumer Law in 2018. The maximum penalty at the time of the conduct was $1.1 million per breach.
The maximum penalties currently for a breach of the Australian Consumer Law for corporations, are the greater of:
- $10 000 000,
- three times the value of the benefit received, or
- 10% of annual turnover in preceding 12 months, if the Court cannot determine the benefit obtained from the offence.
