FTC sues Volkswagen, says “Clean Diesel” advertising was deceptive [Updated]

Trade commission asks for an injunctive relief to make customers whole.

Megan Geuss – Mar 29, 2016 4:07 PM | 107

The Federal Trade Commission (FTC) sued Volkswagen Group of America (VGoA) on Tuesday, alleging that VGoA deceived American consumers with its “Clean Diesel” ad campaign. The FTC charged that "Super Bowl ads, online social media campaigns, and print advertising,” targeted environmentally conscious consumers, when in reality, Volkswagen’s Jettas, Passats, Golfs, and other diesel vehicles were the opposite of environmentally conscious.

Volkswagen Group was charged with a Notice of Violation from the Environmental Protection Agency (EPA) in September, alleging that the automaker had installed so-called defeat devices, or illegal software, on its 2009-2015 diesel cars that made them emit up to 40 times the amount of nitrogen oxide (NO_x) as is legally allowed under normal driving conditions. The cars had been certified by the EPA because during EPA lab tests, VW’s software would sense that the car was being tested in a lab and let the emissions control system work properly under those conditions.

Volkswagen later admitted that up to 11 million diesel vehicles were equipped with the software, prompting investigations in the US and Europe. The Department of Justice sued VW Group in January, and the company has been in ongoing negotiations with the EPA and California’s air regulator to find a fix for the cars that would put them in compliance with the Clean Air Act.

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This latest complaint from the FTC does not specify how much the commission is seeking, but in a press release the commission notes that VGoA had sold or leased more than 550,000 diesel vehicles for an average price of $28,000, "based on false claims that the cars were low-emission, environmentally friendly, met emissions standards and would maintain a high resale value." (This complaint does not include the handful of diesel Porsches on which Volkswagen AG, the umbrella company above VGoA, also installed defeat devices, but it does include Audis sold through VGoA.) A press release from the FTC states that it will seek compensation for VGoA customers.

In addition, the FTC is asking for an injunction against VGoA. In a complaint filed in the Northern California District Court (PDF), the FTC writes, "Consumers have suffered and will continue to suffer substantial injury as a result of Defendant Volkswagen USA’s violations of the FTC Act. In addition, Defendant has been unjustly enriched as a result of its unlawful acts or practices. Absent injunctive relief by this Court, Defendant is likely to continue to injure consumers, reap unjust enrichment, and harm the public interest."

In its press release, the FTC added that Volkswagen's "Clean Diesel" campaign claimed that its diesel cars "reduce nitrogen oxides (NOx) emissions by 90 percent and have fewer such emissions than gasoline cars,” the FTC wrote.

The commission's complaint alleges that "Volkswagen USA’s marketers studied their targets’ psychology, concluding that such consumers 'rationalize themselves out of their aspirations and justify buying lesser cars under the guise of being responsible.'" The complaint listed a variety of ads which it considered deceptive, including an ad in which a Volkswagen and a non-Volkswagen diesel vehicle were given "the coffee filter test," where a white coffee filter is placed on the cars' exhaust pipes, and after running the cars the Volkswagen's filter came out clean and the other car's filter looked dirty. The FTC writes: "The tester then proposes making coffee with the filters, commenting: 'Traditional diesel coffee, it’s got the extra kick. It’s got the carbon monoxide, the sulfur oxide... Ready for some sooty emissions, diesel particulates... ?'"

The FTC also cites collaborations with The Nature Conservancy as well as "strategic product placement" involving actress Gwyneth Paltrow, who arrived at the Hollywood premiere of Iron Man III in a diesel Audi, as elements of deceptive marketing.

In addition, the commission is faulting VGoA for promising its customers that the diesel vehicles would have good resale value. "In training dealers and distributors to sell and lease DDVs [Defeat Device Vehicles], Volkswagen USA encouraged dealers to highlight the durability and high resale value of TDIs," the complaint reads. "Training materials and fact sheets for dealers stress that TDIs have a higher resale versus gasoline vehicles (noting a $3,800 resale difference at 48,000 miles and a $3,000 difference at 60,000 miles)."

This turned out also to be false, the FTC claims, because after the news of the illegal software broke, affected vehicles have suffered dramatic loss in value.

In an e-mail to Ars, Jeannine Ginnivan, the Senior Manager for Corporate and Internal Communications at VGoA, responded with a statement, "Volkswagen has received the complaint and continues to cooperate with all relevant US regulators, including the Federal Trade Commission. 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."

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