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Volkswagen slapped with record fine of A$125M for emissions manipulation

An Australian federal court ordered Volkswagen AG to pay a record A$125 million in penalties for breaching the country's consumer law after it failed to disclose its diesel emissions manipulation software in more than 57,000 vehicles while seeking approval to supply and import the vehicles.

The Australian Competition and Consumer Commission, or ACCC, Chair Rod Sims said in a Dec. 20 statement announcing the decision that "Volkswagen's conduct was blatant and deliberate."

The German automaker admitted that its two-mode software caused lower nitrogen oxide emissions in "Mode 1" during testing, but the vehicles produced higher emissions when driven in on road conditions in "Mode 2," according to the ACCC's statement. The competition watchdog added that Volkswagen also admitted to falsifying representations of its vehicles for the government's green vehicle guide website.

"Volkswagen vehicles would not have obtained the ratings that they did on the green vehicle guide website if the government had been made aware of the effect of two-mode software on the emissions testing results," Sims said.

Talking about the record fine of A$125 million, Sims said the penalty was imposed under the old regime of up to A$1.1 million per breach. Meanwhile, under a new law that came into effect in 2018, maximum penalties are now "the higher than A$10 million, three times the profit or benefit obtained or, if this cannot be determined, 10 percent of turnover."

In an emailed statement to S&P Global Market Intelligence, a Volkswagen spokesperson said the automaker had agreed to an amount of A$75 million for settling the regulatory proceedings with the ACCC and is "reviewing the court's reasons for deviating from that amount." The company will determine whether to appeal the court's decision in the coming weeks.

The ACCC added that its proceedings against Volkswagen-owned Audi AG and Audi Australia Pty Ltd. were discontinued after resolution with the automaker. The current regulatory proceedings are also separate from the class-action lawsuits filed by consumers, it added.

Separately, the Australian Securities and Investments Commission, or ASIC, initiated civil penalty proceedings in a federal court against Volkswagen Financial Services Australia Pty Ltd. for over alleged failure of due diligence before handing out 49,380 loans to consumers between Dec. 20, 2013, and Dec. 15, 2016. ASIC imposed total maximum penalties of A$3.5 million on the automaker's unit.

The commission said the unit failed to make inquiries about and verifying borrowers' living expenses and did not assess the unsuitability of loan contracts for relevant customers against the National Credit Act.