Australian Competition and Consumer Commission v Volkswagen Aktiengesellschaft

The Australian Competition and Consumer Commission (ACCC) filed against Volkswagen Aktiengesellschaft (VWAG) regarding misleading conduct in relation to the emission control systems of its diesel vehicles sold in Australia. VWAG admitted that its "Relevant Vehicles" contained "Two Mode Software" that caused the exhaust gas recirculation system to operate differently during emissions testing compared to normal driving conditions, leading to lower NOx emissions during testing. The ACCC initiated proceedings, and a settlement was proposed with VWAG agreeing to pay a pecuniary penalty of $75 million. However, Justice Foster of the Federal Court deemed this penalty manifestly inadequate for specific and general deterrence, citing the deliberate and dishonest nature of the conduct, the deception of regulatory authorities and consumers, and the pursuit of profit. Consequently, Justice Foster imposed a higher penalty of $125 million. VWAG appealed this decision, but the Full Court of the Federal Court dismissed the appeal, finding that the primary judge's exercise of discretion did not miscarry and the imposed penalty was not excessive. The Full Court affirmed the principles guiding the determination of agreed penalties, emphasizing that the court must be persuaded that the penalty is appropriate and is not bound by the parties' agreement.