judgment

Italian Competition Authority v. Volkswagen Aktiengesellschaft and Volkswagen Group Italia S.p.A - judgment

Litigation

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Filing Year For Action

In 2015, the Italian Competition Authority ("ICA") started an investigation against Volkswagen Group Italia S.p.A. and Volkswagen Aktiengesellschaft ("VWGI" and "VWAG" and together "Volkswagen") for alleged unfair commercial practices and breach of the Italian Consumers Code. The investigation on Volkswagen was trigged by consumer associations' allegations of false declarations made by Volkswagen when marketing its EA 189 diesel vehicles in relation to (i) the level of polluting emissions of such vehicles (Volkswagen were accused to have installed the so-called defeat device to falsify the result of the emission tests) and to (ii) their specific green features. In 2016, the ICA's investigation ended: the ICA found Volkswagen liable for unfair commercial practices and for breach of articles 20, 21 and 23 of the Italian Consumers Code, as Volkswagen failed to describe the positive environmental impacts of their EA 189 diesel vehicles in a clear, truthful, accurate, and unambiguous way. Because of such breach, the ICA issued a fine of € 5 million. In 2016, Volkswagen appealed the decision issued by the ICA before the Regional Administrative Court of Lazio, seeking the annulment of the € 5 million fine. 

With a decision issued in May 2019, the Regional Administrative Court of Lazio rejected Volkswagen's appeal confirming the ICA decision and the fine of € 5 million. The Administrative Court held that Volkswagen's green claims were misleading for the fact that, on one hand, Volkswagen emphasized its care for the environment, and, on the other hand, he installed in the marketed diesel vehicles a defeat device to falsify the result of the emission tests.

In 2019, Volkswagen appealed the Regional Administrative Court of Lazio's decision before the Supreme Administrative Court (Consiglio di Stato). 

Beside challenging the decision on the merits, Volkswagen raised a procedural objection: in June 2018, before that Regional Administrative Court of Lazio delivered its judgment, the public prosecutor’s office of Brunswick, before which the case had been brought in Germany, imposed a fine of €1 billion on Volkswagen, in accordance with the Act on Regulatory Offences (Ordnungswidrigkeitengesetz). That fine penalised negligent breach of the duty of supervision in the activities of undertaking, in particular as regards the development of the software for the illegal defeat device and its installation in 10.7 million diesel vehicles marketed worldwide (700,000 of which were sold in Italy). The decision of that German public prosecutor’s office became final on 13 June 2018, since Volkswagen waived its right to challenge it and, moreover, paid the fine prescribed therein.
Therefore, Volkswagen (both the German and the Italian entity) argued before the Italian court that they do no longer need to pay the fine imposed by the Italian Competition authority because the principle ne bis in idem expressed in Article 50 of the Charter of Fundamental Rights of the European Union applies.
 
The Supreme Administrative Court referred the issue to the European court of Justice (ECJ), which on 14 September 2023 rendered its judgement. The ECJ found that, although Article 50 of the Charter of Fundamental Rights of the European Union applies to sanction of administrative nature (such as those imposed by the Italian Competition Authority), the local Court needs to verify whether the facts examined in both cases are "identical".
 
In that respect, the ECJ stated that the relaxation of supervision of the activities of an organisation established in Germany, to which the German decision relates, is conduct that is distinct from the marketing in Italy of vehicles fitted with an illegal defeat device for the purposes of Regulation No 715/2007 and from the dissemination of misleading advertising in that Member State, to which the decision at issue relates.
In addition, the mere fact that an authority of a Member State refers – in a decision finding an infringement of EU law and of the corresponding provisions of the law of that Member State – to a factual element relating to the territory of another Member State is insufficient to support the inference that that factual element gave rise to the proceedings or was found by that authority to be one of the constituent elements of that infringement.
 
Therefore, it will be up to the Italian Supreme Administrative Court to ascertain whether the German authority has actually ruled on the same factual elements the Italian authority is considering.
