Background

The Australian Competition and Consumer Commission (ACCC) has launched legal action today against global automobile heavyweight Volkswagen in the Federal Court on claims that Volkswagen and its subsidiaries engaged in misleading and deceptive conduct between 2011-2015. The ACCC alleges that the German car manufacturer made several false representations regarding vehicle emissions on a range of its models through installing and concealing software in their vehicles which reduced emissions during emissions testing.

The consumer watchdog maintains that Volkswagen lied to consumers by ‘not disclosing the existence and operation’ of such software which was able to change the operational system of the exhaust gas emission during testing and on-road circumstances. In October last year, Volkswagen confirmed that they had sold over 90,000 vehicles in Australia that were fitted with the operational software. The admission led to the vehicles being recalled.

Rod Sims, the Chairman of the ACCC stated, “These allegations involve extraordinary conduct of a serious and deliberate nature by a global corporation and its Australian subsidiary misleading consumers and the Australian public.”

The legal perspective

Under Australian Consumer Law, misleading and deceptive conduct is expressly forbidden and perpetrators face heavy fines and penalties if found guilty. Section 18 of the Competition and Consumer Act 2010 states that it is illegal for a business to engage in conduct that is likely to mislead or deceive and businesses may be held liable for damage suffered by a consumer, even if they did not intend to mislead or deceive them.

In Volkswagen’s case, the ACCC alleges that the company made misleading and deceptive representations regarding their vehicles, advertising them as environmentally friendly and producing low emissions on-road. If the Federal Court finds the allegations against Volkswagen true, it could potentially result in the highest recorded penalty under the Australian Consumer Law.

Accountability of foreign corporations

The ACCC’s decision to pursue foreign corporation Volkswagen and its subsidiaries reinforces the ACCC’s stance on misleading and deceptive conduct by Australian and foreign corporations alike. The move marks the growing social attitude that international entities and corporations should be held accountable for their practices in countries they trade and conduct business activities in. The ethical concerns illustrated in this case denote the need for subsidiaries of foreign companies to be aware of the legal standards they are held to in another country.

As reinforced by Simms, “We expect higher standards of behaviour from all companies that supply to Australian consumers.”

In conclusion

It is crucial that businesses are aware of what constitutes misleading and deceptive conduct in the operation of their business. Learning from the case of Volkswagen, business owners should analyse and review their advertising and product placement practices as they could be held liable even if they did not intend to mislead or deceive them.

If you would like to know more about misleading or deceptive conduct or have experienced an example of misleading or deceptive conduct, LawPath recommends getting in touch with an business lawyer.

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Jennifer Wang

Jennifer is a Paralegal, working in our content team, which aims to provide free legal guides to facilitate public access to legal resources. With a keen interest in media and IP law, her research focuses on the evolving role of the law to navigate new and emerging information platforms.