High Court Dismisses Volkswagen’s $125 Million ‘Dieselgate’ Penalty Appeal

The High Court has dismissed Volkswagen’s application for special leave to appeal the $125 million penalty ordered by the Federal Court in December 2019 for making false representations about compliance with Australia’s diesel emissions standards.

“The High Court’s decision means the record $125 million penalty imposed by the Federal Court stands,” Australian Competition and Consumer Commission (ACCC) Chair Rod Sims said.

“This penalty reflects the seriousness of Volkswagen’s conduct and is a massive reminder for all businesses to take their obligations under the Australian Consumer Law seriously and not mislead in pursuit of profit.”

“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,” Sims said.

“What made it particularly egregious in this case is that if Volkswagen had told the truth, these vehicles would not have been legally allowed to be sold in Australia. Their conduct showed complete disregard for Australia’s vehicle import regulations, which are designed to protect consumers.”

According to the ACCC, the penalty is the highest ever imposed for breaches of the Australian Consumer Law, and two and a half times more than the next highest penalty.

“This case signals to large companies that penalties for egregious conduct which breaches the Australian Consumer Law can now reach very significant sums and potentially make a big impact on their bottom line,” Sims said.

The ACCC said Volkswagen admitted in 2019 that it had made false or misleading representations when importing more than 57,000 diesel vehicles into Australia between 2011 and 2015, and when listing those vehicles on the Australian Government’s Green Vehicle Guide website. It failed to disclose the vehicles were fitted with a ‘two mode’ software, which caused them to operate in one mode for the purposes of nitrogen oxide (NOx) emissions testing and another when being driven. If tested in that second mode, the vehicles would have breached Australian emissions standards.

Action against Volkswagen commenced in 2016, with the Federal Court ordering the company to pay $125 million in penalties, after it declared by consent that Volkswagen breached the Australian Consumer Law in December 2019.

The ACCC said Volkswagen appealed the penalty order to the Full Court of the Federal Court in 2020 but the appeal was dismissed in April 2021. The company filed an application for special leave to appeal to the High Court in May 2021 and proposed that, if special leave was granted, to seek orders to set aside the $125 million penalty and replace it with a penalty of $75 million, which had been jointly put to the Federal Court at first instance by Volkswagen and the ACCC.