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Now the FTC Is Suing Volkswagen, Too

VW shares plunge after carmaker admits cheating in emissions tesVW shares plunge after carmaker admits cheating in emissions tes
The old wives' tales about 'dirty diesel' were true after all.Photograph by Patrick Pleul — picture-alliance/AP

The U.S. Federal Trade Commission filed suit Tuesday against Volkswagen AG 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 (click here to read the FTC’s filing) saying that U.S. consumers suffered “billions of dollars in injury” as a result of the deception.

VW has admitted to using undeclared software that allowed 580,000 diesel vehicles built since 2009 to emit up to 40 times legally allowable pollution. (Click here to read Fortune’s in-depth investigation into the VW diesel scandal).

The Justice Department sued VW for up to $46 billion in January for violating environmental laws, and VW faces more than 500 civil lawsuits related to excess emissions, along with suits from some U.S. states. Last week, a federal judge set an April 21 deadline for VW to remedy the vehicles, extending an original deadline by nearly a month.

If VW and the Environmental Protection Agency and California Air Resource Board aren’t able to agree on a technical fix for the cars in question by then, analysts say VW may have to buy over 100,000 of them back (the problem affects VW’s smaller cars worst of all, as there is no space to fit the technology that would render them compliant with U.S. law).

The FTC’s case is a painful reminder of how VW misled the public, appealing to largely middle-class sensitivities about the environment. The filing cites slogans from past ad campaigns such as “Diesel. It’s no longer a dirty word” and debunking “old wives’ tales” about diesel’s supposed dirtiness.

VW spokeswoman Jeannine Ginivan said the automaker has received the FTC complaint and “continues to cooperate” with all U.S. regulators.

The latest suit threatens to add to the already sizeable financial penalties that VW is facing. The company’s stock underperformed the broader German market badly Tuesday after reports over the long Easter weekend that it may have to cancel its dividend to conserve cash ahead of the rulings coming its way.

False advertising is also a line of inquiry being pursued by other criminal investigations into VW in Europe, notably in its home market of Germany.