VW's U.S. arm sued by FTC over 'clean diesel' ads

WASHINGTON -- The U.S. Federal Trade Commission today filed suit against Volkswagen Group of America for falsely advertising that hundreds of thousands of diesel vehicles were environmentally friendly, when they were secretly emitting excess pollution.

The FTC filed suit in U.S. District Court in San Francisco, saying that U.S. consumers suffered "billions of dollars in injury" as a result of the deception.

VW has admitted to using “defeat device” software that allowed 580,000 diesel vehicles built since 2009 to emit up to 40 times legally allowable pollution.

The FTC is seeking a court order requiring Volkswagen to compensate U.S. consumers who bought a polluting vehicle and an injunction to prevent future similar conduct by Volkswagen.

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VW spokeswoman Jeannine Ginivan said the automaker has received the FTC complaint and "continues to cooperate" with all U.S. regulators. "Our most important priority is to find a solution to the diesel emissions matter," Ginivan said.

The suit adds to the mountain of litigation facing VW in the wake of its emissions cheating scandal, including more than 500 civil lawsuits filed against VW stemming from the emissions scandal by consumers, along with some by U.S. states. The Justice Department sued VW in January, seeking up to $46 billion for violating environmental laws.

Last week, a federal judge set an April 21 deadline for VW to announce how it will remedy the vehicles.

The FTC said VW's claims "that the cars were low-emission, environmentally friendly, met emissions standards and would maintain a high resale value" were false. It said the vehicles involved sold for an average price of approximately $28,000.

"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," FTC Chairwoman Edith Ramirez said in a statement.

The FTC said VW promoted its "clean" cars through a high-profile marketing campaign that cost tens of millions of dollars and included Super Bowl ads, online social media campaigns and print advertising.

The complaint catalogs many of those ads, which ran from 2008 through late last year, many of which were aimed at “progressive” and “environmentally conscious” consumers.

“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 FTC said. “According to Volkswagen USA, such consumers understood purchasing an eco-conscious vehicle as part of being ‘responsible.’”

Deception continued

The suit also says that VW continued to “deceptively market” the diesel vehicles even evidence began to emerge that its diesel vehicles exceeded U.S. limits on nitrogen oxide emissions, or NOx.

VW began talks with the EPA and California Air Resources Board in mid-2014 after West Virginia University released a study finding that a VW Passat and Jetta exceeded NOx limits by as much as 4,000 percent.

By October 2014, VW had “confirmed WVU’s excess emissions findings, but provided regulators with scientifically invalid explanations” for the excess NOx emissions, the suit said.

The talks eventually led to an emissions recall that failed to remedy the excess emissions. In discussing the proposed fix, according to the suit, a VW engineer said 3.0-liter, V-6 diesel engines used in VW, Porsche and Audi vehicles had “exactly the same issues, but not public yet … they have not been caught.”

As VW tried to explain the continued discrepancies, the EPA and CARB found VW’s answers “increasingly implausible.” The regulators eventually told VW it would refuse to certify VW’s 2016 model-year diesels until the discrepancies were resolved, and VW then admitted that its 2.0-liter diesels contained the defeat-device software, according to the suit.

Ongoing talks

VW remains in talks with the U.S. Environmental Protection Agency, California Air Resources Board and Justice Department over the terms of a settlement. U.S. District Judge Charles Breyer and lawyers for the government and VW said last Thursday that the sides had made "substantial progress" toward a settlement.

A settlement could include vehicle buybacks and cash incentives to repair the vehicles, along with environmental funds to address excess emissions. A central point of the contention is whether California and the EPA will accept a remedy that will address only part of the excess emissions.

VW has an ongoing internal investigation to determine who at the automaker knew of the diesel cheating.

In September, U.S. Sen. Bill Nelson, D-Fla., ranking member of the Commerce, Science and Transportation Committee, urged the FTC's Ramirez to investigate: “Volkswagen advertised their diesel cars as ‘clean diesel’ and as otherwise environmentally friendly. Yet, contrary to these express claims, Volkswagen’s and Audi’s diesel vehicles, by design, were neither clean nor environmentally friendly, and they failed to comply with federal environmental laws.

Ryan Beene and Reuters contributed to this report.