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ACCC takes action against Audi over diesel emission claims

THE Australian Competition and Consumer Commission has instituted proceedings in the Federal Court against German company Audi Aktiengesellschaft (Audi AG), its Australian subsidiary Audi Australia Pty Ltd (Audi Australia), and their owner, German company Volkswagen Aktiengesellschaft (VWAG).

The ACCC alleges that Audi AG and Audi Australia engaged in misleading or deceptive conduct, made false or misleading representations and engaged in conduct liable to mislead the public in relation to certain diesel vehicle emission claims, and that VWAG was knowingly concerned in this conduct.

The ACCC alleges that between 2011 and 2015:

  • Audi AG engaged in misleading conduct by not disclosing the existence and operation of ‘defeat’ software in certain Audi branded vehicles. The software caused the vehicles to produce lower nitrogen oxide (NOx) emissions when subject to test conditions in a laboratory than during normal on-road driving conditions.
  • Both Audi AG and Audi Australia engaged in misleading conduct by representing that the vehicles complied with all applicable regulatory requirements for road vehicles in Australia when, because of the defeat software, that was not the case.
  • Using information provided by Audi AG, Audi Australia marketed the vehicles in Australia as being environmentally friendly, producing low emissions and complying with stringent European standards when this was not the case under normal driving conditions.
  • VWAG designed and supplied the engines and defeat software to Audi AG for installation in the affected vehicles.

“Consumers expect that there is some relationship between the performance of the car as set out in the sales brochure and their day to day on-road use. We allege that the installation of software which allows the vehicle to meet testing standards but then causes the vehicles to operate differently on the road, and associated representations about the vehicle and its performance, breach the Australian Consumer Law,” ACCC Chairman Rod Sims said.

The ACCC is seeking declarations, pecuniary penalties, corrective advertising, orders relating to the future use of findings of fact and costs.

Skoda-branded vehicles are also affected by the Volkswagen diesel emissions issue. The ACCC has decided not to pursue further action against Volkswagen (which owns the Skoda brand in Australia) at this time in relation to these Skoda vehicles, noting the lower volume of sales in Australia, the continuing class actions seeking damages for affected consumers and the proceedings which the ACCC has already commenced against Volkswagen in respect of Volkswagen and, now, Audi vehicles.

The Audi branded vehicles covered by these proceedings are:

A1 3 Door – 2011 to 2013

A1 Sportback – 2012 to 2015

A3 Sportback – 2011 to 2013

A4 Allroad – 2012 to 2015

A4 Avant – 2011 to 2015

A4 Sedan – 2011 to 2015

A5 Cabriolet – 2012 to 2015

A5 Coupe – 2012 to 2015

A5 Sportback – 2012 to 2015

A6 Avant – 2012 to 2015

A6 Sedan – 2011 to 2015

Q3 SUV – 2012 to 2015

Q5 SUV – 2011 to 2015

TT Coupe – 2011 to 2014

The Australian Design Rules implement international standards that regulate the emission of NOx from motor vehicles. NOx can cause respiratory illnesses and is particularly harmful to vulnerable consumers such as the young, the elderly, and those with pre-existing respiratory conditions.

Background

Audi Australia has supplied more than 12,000 affected vehicles to Australian consumers.

These proceedings are in addition to the proceedings that the ACCC instituted on 1 September 2016 against VWAG and its Australian subsidiary, Volkswagen Group Australia Pty Ltd (VGA), and relate to the same alleged conduct.

The ACCC’s action against VWAG and private class actions seeking redress for consumers affected by this conduct are currently before the Federal Court.

In December 2016, VGA and Audi Australia announced the implementation of a recall designed to remediate the diesel vehicles affected by the emissions software issue. The recall involves a software update and in some cases, a minor hardware upgrade, for the affected vehicles. The recall is voluntary and if consumers choose not to have the recall update applied to their vehicle, they do not waive their legal rights under the Australian Consumer Law.

VWAG is the world’s second-largest car manufacturer by sales volume in the world. Audi AG and VGA are subsidiaries of VWAG. Audi Australia operates in Australia independently from VGA.

www.accc.gov.au

 

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Administrative change to ATO screening arrangements

THE screening of non-sensitive commercial real estate and internal reorganisation (restructure) foreign investment applications will be undertaken by the ATO from April 1, 2017.

This is an internal administrative change by the Australian Government and will not require any action by Foreign Investment Review Board (FIRB) applicants.

www.ato.gov.au

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ACCC denies authorisation for insurance companies to jointly set a cap on sales commissions

THE Australian Competition and Consumer Commission has issued a final determination denying authorisation to 16 insurance companies to agree to a cap of 20 per cent on commissions paid to car dealers who sell their add-on insurance products.

“The ACCC is denying authorisation because we believe this proposal is unlikely to change sales incentives or the quality of products, and consumers will still be sold products without being given adequate information or opportunity to make a considered decision,” ACCC Chairman Rod Sims said.

“While insurers would benefit from a cap at the expense of car dealers, this conduct is likely to lessen competition between insurers, including by creating greater opportunities for explicit or tacit collusion and greater shared knowledge between insurers of competitors’ costs.

“The ACCC is also concerned that these arrangements, if implemented, could significantly delay the development of more effective solutions to the problems that ASIC has identified,” Mr Sims said.

The ACCC published a draft determination in mid-February proposing to deny authorisation. Following the release of the draft determination the ACCC offered to extend the timeframe for consideration of the proposal to allow the insurers extra time to respond to the ACCC’s concerns. The insurers did not provide a submission in response to the draft determination.

Background

Add-on insurance products are products that may be sold at the time of purchasing a motor vehicle. The add-on insurance may be connected to finance associated with the motor vehicle such as consumer credit insurance, gap insurance, walk away insurance, and trauma insurance. Alternatively, it may relate to the vehicle itself, such as comprehensive insurance, extended warranty insurance, or tyre and rim insurance.

The Australian Securities and Investments Commission (ASIC) report, A market that is failing consumers: The sale of add-on insurance through car dealers, identifies issues such as a lack of price competition, poorly designed products, poor value for money relative to premiums, and a complex sales process that often does not disclose the total cost of the cover.

Further information about the application for authorisation is available on the ACCC Authorisations Register: Aioi Nissay Dowa Insurance Company Australia Pty Ltd & Ors - Authorisation - A91556 & A91557

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Urgent overhaul needed for foreign activist donations

THE Queensland Resources Council has backed a Federal Government report calling for a ban on foreign-funded donations to activist groups.

One of the recommendations in the report on foreign donations, tabled in Federal Parliament today, was to extend a foreign donations ban to all other political activist groups. This would include preventing foreign funds being channelled through organisations engaging in political activities that were not subject to regulation under current laws.

QRC Chief Executive Ian Macfarlane said it was high time that donations to the anti-development activists were put under the microscope in line with other politically-motivated groups.

“Funding from overseas donors to these groups is disrupting and delaying job creating projects in Queensland, while providing a sophisticated tax reduction scheme to their personal wealth,” Mr Macfarlane said.

“Our country must stop foreign groups interfering in our resources development projects that have undergone immense scientific and social scrutiny before being approved by democratically elected governments in Australia.

“It seems ridiculous that someone living in Manhattan can be the financial backers of green activist tactics that hold up a project in Moranbah and cost Queenslanders job opportunities.”

www.qrc.org.au

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ABA walking both sides of the street on ASBFEO loan contract reform

AUSTRALIAN Small Business and Family Enterprise Ombudsman (ASBFEO) Kate Carnell has refuted claims made by the Australian Bankers’ Association’s (ABA) chief executive Steven Münchenberg that eliminating all non-monetary covenants from small business loans under $5 million would raise the risk of lending to small business, saying the ABA – and the banks – are contradicting themselves in arguing against the reform.

“On the one hand the banks say they rarely use non-financial default clauses, but on the other, they say to remove them would increase risk for the banks.  If you don’t use them, how on earth could it possibly increase the banks’ risk to get rid of the clauses?” Ms Carnell said.

“It is disingenuous to say that removing these clauses would drive up the cost of borrowing for small businesses, given the banks already take into account a higher level of risk in their small business loan costs.

“You can’t have it both ways; you can’t have a loan agreement that moves all the risk to the borrower, while also imposing a higher interest rate on small business customers.

“Over the last few days we’ve seen banks commit to implementing this measure in varying degrees, yet here we have the ABA claiming the sky will fall in if our recommendation is adopted,” she said.

During today’s House Economics Committee hearing, Westpac executives said they’re committed to removing non-monetary covenants from all small business loans under $1 million (secured against property), with the view to extending this to most loans under $3 million (total loan facility).

ANZ include – but don’t apply – non-financial default clauses in loans under $1 million and now say they’re going to consider the future use – but not removal – of such terms in agreements for loans of up to $3 million (total loan facility); CBA has committed to removing non-monetary default terms from agreements for loans up to $1 million, and may raise this to $3 million (total loan facility) with carve-outs; while NAB say they’re opposed to the removal of non-monetary covenants.

“Aside from NAB, these are all steps in the right direction, and we’re listening to what the banks are saying on carve-outs, but fundamentally non-financial default clauses must be removed from small business contracts under $5 million if we’re to ensure all small businesses are safeguarded against what can be the devastating impacts of these clauses,” Ms Carnell said.

www.asbfeo.gov.au

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