FTC Sues Volkswagen Over Deceptive ‘Clean Diesel' Marketing

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By Patrick Ambrosio

March 29 — The Federal Trade Commission filed a lawsuit in federal district court against Volkswagen Group of America, alleging violations of federal law related to the automaker's marketing of its TDI “Clean Diesel” vehicles.

The lawsuit, filed March 29 in the U.S. District Court for the Northern District of California, alleged that the automaker falsely advertised its diesel vehicles as having low emissions, being environmentally friendly and having a high resale value.

The complaint, which highlighted television commercials and product placement that promoted Volkswagen's diesels, raised four distinct alleged violations of the Federal Trade Commission Act, including deceptive representation and a deceptive failure to disclose that the vehicles were equipped with illegal technology that enabled them to pass emissions tests despite emitting more pollution than allowed, which adversely affected their resale value.

Volkswagen already is facing a multibillion-dollar lawsuit filed by the U.S. Justice Department, as well as hundreds of consumer lawsuits and lawsuits brought by five states under state consumer protection laws. Negotiations between Volkswagen and regulators continue over a plan to address about 580,000 vehicles in the U.S. that do not comply with emissions standards .

Filing a complaint provides the FTC with a “seat at the table” for the negotiation of any potential settlement with Volkswagen, said Michael Weinstein, chairman of the White Collar Defense & Investigations Department at Cole Schotz P.C.

“Otherwise, the FTC could have been essentially frozen out of any type of government negotiation and resolution,” Weinstein told Bloomberg BNA.

While Volkswagen faces billions in maximum fines under the Clean Air Act, the Federal Trade Commission Act does not give the FTC the authority to assess civil penalties for violations.

‘Clean Diesel' Ads Cited

FTC Chairwoman Edith Ramirez said the lawsuit aims to obtain compensation for consumers who bought Volkswagen, Audi and Porsche brand diesels based on “deceptive and unfair practices.”

“For years Volkswagen’s ads touted the company’s ‘Clean Diesel' cars, even though it now appears Volkswagen rigged the cars with devices designed to defeat emissions tests,” Ramirez said in a statement.

The complaint cites a range of promotional activities that Volkswagen undertook to promote its diesel vehicles, including a television advertisement that aired during Super Bowl XLIV in 2010, print advertisements that touted the low emissions of Volkswagen diesels, and an arrangement that saw actress and Goop founder Gwyneth Paltrow arrive at a movie premiere in an Audi diesel vehicle.

The FTC said in its complaint that consumers have suffered billions of dollars in injury because they purchased or leased vehicles that were substantially different from the vehicles they thought they had purchased. The complaint asked the court for “injunctive and such other relief” that the court thinks is appropriate to halt and address violations of federal consumer protection law.

Weinstein of Cole Schotz said those consumer protection claims could be addressed in a variety of ways through a settlement, including creating a pool of funds for reimbursing Volkswagen customers or providing a credit for the purchase or lease of a new vehicle.

Volkswagen Touts Cooperation

Volkswagen of America spokeswoman Jeannine Ginivan said in a March 29 statement that the automaker continues to cooperate with U.S. regulators, including the FTC.

“Our most important priority is to find a solution to the diesel emissions matter and earn back the trust of our customers and dealers as we build a better company,” Ginivan said.

Volkswagen last November began offering diesel owners a “goodwill package” consisting of a $500 prepaid debit card; a $500 dealership credit; and three years of free, 24-hour roadside assistance. In addition, Volkswagen retained attorney Kenneth Feinberg, administrator of the Sept. 11 and BP Deepwater Horizon victim compensation funds, to establish and run a claims resolution program for diesel owners.

To contact the reporter on this story: Patrick Ambrosio in Washington at pambrosio@bna.com

To contact the editor responsible for this story: Larry Pearl at lpearl@bna.com

For More Information

The complaint in is available at http://src.bna.com/dF6.