The Full Federal Court today dismissed an appeal by Volkswagen AG against the penalties handed down earlier for making false representations about compliance with Australian diesel emissions standards.

In dismissing the appeal, the Full Court upheld the $125 million penalty imposed by the Federal Court, and held that the $125 million penalty was not excessive, let alone manifestly excessive.

$125 million is the highest penalty ever handed down for breaches of the Australian Consumer Law. Its about five times the previous highest penalty, and that reflects just how egregious Volkswagens conduct was, ACCC Chair Rod Sims said.

This record penalty increases the signal to large corporations that they could face massive penalties for misleading consumers about their products.

The Federal Court imposed penalties of $125 million in December 2019, and Volkswagen appealed this decision, seeking orders that the Court instead impose the $75 million penalty amount which had been jointly put to the Court by Volkswagen and the ACCC.

The penalties relate to conduct covered by the previous Australian Consumer Law (ACL) penalty regime, which specified a maximum penalty of $1.1 million per contravention. Since then, legislative amendments have come into effect, and the maximum penalty for each contravention of certain ACL provisions is now the higher of $10 million, three times the profit or benefit obtained or, if this cannot be determined, 10 per cent of the companys annual Australian sales turnover.

Given the now much higher penalties available, any large company deceiving its customers as badly in the future is at risk of much higher penalties than those delivered today, Mr Sims said.

Volkswagen admitted to making false representations when seeking to import more than 57,000 diesel vehicles between 2011 and 2015, and when listing those vehicles on the Australian Governments Green Vehicle Guide website. Volkswagen did not disclose that the vehicles were fitted with two mode software, which caused them to operate in one mode for the purposes of emissions testing and another when being driven. If tested in that second mode, the vehicles would have breached Australian emissions standards.

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.

The ACCC was prepared to settle its proceedings against Volkswagen because it considered that the proposed penalty of $75 million was significant and appropriate in the circumstances which included Volkswagens admission of liability. However, this is ultimately a decision for the Court to make.

Background

In August 2016, the ACCC filed proceedings in the Federal Court in Sydney against Volkswagen Aktiengesellschaft and its Australian subsidiary, Volkswagen Australia (VGA), in relation to emissions claims.

On 7 March 2017, the ACCC 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.

In December 2019, the Court imposed penalties of $125 million, which Volkswagen appealed in February 2020.