Volkswagen slammed with record $125 million penalty

Volkswagen slammed with record $125 million penalty

German car manufacturer Volkswagen has been ordered to pay $125 million in penalties by the Australian Federal Court after breaching consumer law by making false or misleading representations.

Volkswagen's $125 million fine is the largest total penalty order ever made by the Federal Court for contraventions of Consumer Law.

The penalty follows Volkswagen's admission that it lied about its compliance with Australian diesel emissions standards.

The admissions revolved around the car manufacturer's 'Two Mode' software included in more than 57,000 vehicles imported into Australia between 2011 and 2015.

Volkswagen admitted that when switched to 'Mode 1' for the purposes of emissions testing, the software caused its vehicles to produce lower nitrogen oxide (NOx) emissions, but that when driven in on road conditions, the vehicles switched to 'Mode 2' and produced higher NOx emissions.

"Essentially, Volkswagen's software made its diesel cars, utes and vans operate in two modes," says Australian Competition and Consumer Commission (ACCC) chair Rod Sims.

"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."

If the vehicles were tested in 'Mode 2' they would have exceeded the NOx emissions limits allowed in Australia.

Sims says the record penalty is appropriate in the circumstances.

"Volkswagen's conduct was blatant and deliberate," says Sims.

"This penalty reflects a trend of ever higher penalties for breaches of Australian consumer law."

The $125 million penalty dwarfs previous record fines. The previous highest penalties of $10 million for Coles, Ford and Telstra were recently overtaken by a $12 million fine against We Buy Houses, which was then smashed by a $26 million fine against Empower Institute.

"Today's $125 million in penalties were imposed under the old penalty regime of up to $1.1 million per breach. Under laws that came into effect later 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," says Sims.

"Volkswagen's conduct undermined the integrity and functioning of Australia's vehicle import regulations which are designed to protect consumers," says Sims.

The ACCC's proceedings against Audi AG, which is owned by Volkswagen, and its Australian subsidiary Audi Australia Pty Ltd, have now been discontinued as part of the resolution of the Volkswagen case.

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