Why is it so difficult for Europeans to receive compensation after Dieselgate

Why is it so difficult for Europeans to receive compensation after Dieselgate

There hasn’t been much progress made for European consumers in the more than one year since the Dieselgate Scandal that exposed Volkswagen and other automakers cheating on emissions tests.

Many people don’t know how or if they will receive compensation. Sadiq Khan, the Mayor of London, has asked Volkswagen to reimburse PS2.5 million for the gas emissions that have affected residents in London.

A powerful diesel lobby

The national carmakers have consistently lobbied the EU and the federal authorities in order to gain trust and deal with the reality that most cars exceed legal emission limits when driving under real conditions. In 2014, the car industry spent over EUR18 million lobbying on EU issues.

Since the first EU regulations were introduced in 2007, lobbyists from Volkswagen, Daimler, and BMW, as well as VDA, ACEA, and the German and European Automobile Associations, have been preventing the implementation of modern car testing methods and limitations.

Since 2012, the European Commission promised new onroad testing, but this was blocked by industry. After the scandal in October 2015. car makers weakened EU emission limits and deferred the introduction of new test methods.

Was aware that defeat devices could be used many years before the scandal. The matter was not investigated because only national authorities could test cars under the fragmented regulatory system of the EU.

Protection of national interests

The Transport Ministry in Germany was well aware of the cheating five years prior to the Volkswagen scandal. The investigation found that the majority of carmakers used defeat devices. However, the decision was made to not fine any manufacturers as long as they voluntarily recalled their vehicles.

The German authorities contacted Fiat-Chrysler to ask about the use of defeat devices. The Italian government claimed that it had conducted tests that found no evidence of Fiat cheating. It reminded Germany to take responsibility for Italian automakers. In August 2016, the Italian Competition Authority was the first European authority to fine Volkswagen EUR5,000,000 due to misleading advertising.

In September 2016, Germany brought the matter before the EU, which returned the investigation to Italian authorities. This dispute has not been resolved, but it shows the difficulty of transparency when national authorities and their information are influenced.

Greenpeace protesters in Wolfsburg, Germany in 2015. Fabian Bimmer/Reuters

The patchwork system for collective redress

The results of consumer advocacy in the EU and US are not the result of national lobbying. The fragmented nature of the consumer redress system (also known by the term class action) within the EU is the main reason for this.

Only 16 of the 28 EU member states have collective redress laws. The differences between these laws make it difficult to bring pan-European class actions before a court.

Prior attempts to establish a European Collective Redress System failed because of the different legal traditions of countries and fear of an influx of US-style litigation. The consumer is already at a disadvantage when taking on a large multinational. Limiting class actions to national boundaries will make it even more difficult for the consumer to take action.

Class actions in the US largely addressed the scandal. This country is known for its litigation tradition. The district court in San Francisco approved the first settlement in October 2016. US consumers have two options: sell their cars or repair them and receive compensation between US$5,000 and US$10,000. VW had also given consumers a US$1,000 gift as a “goodwill” gesture.

Altroconsumo, an Italian consumer group, brought a class action against Volkswagen in September 2014. This was long before the scandal erupted. Was accepted in 2015 and 2016 after appeal. These actions are still ongoing. These actions require only EUR 500 per vehicle, and Volkswagen has stated that it does not intend to give any additional “goodwill” gifts to European consumers.

Similar suits have been filed in other European countries, and the European Consumer Organisation coordinates them. The lack of EU-wide regulations means that, even if consumers receive compensation in some countries, those who do not have collective redress will be left out.

The system is weakened by these holes, which make it harder for consumers to put pressure on manufacturers to do more than the minimum. This pressure is crucial when national authorities refuse to enforce sanctions.

Look ahead

What are the prospects for compensation of consumers in the EU? The progress is slow despite the pressure of the European Commission and non-governmental organizations.

Volkswagen has recently taken a first, belated step to create an action plan in order to better inform EU customers and accelerate the repair process. Volkswagen’s website will only contain information that US customers have received since the beginning. There are currently no plans for compensation to EU consumers.

The scandal has been a catalyst for increased transparency, and it has raised awareness about the need for collective EU-wide redress.

This can only be good in an opaque system, dominated by lobbying from industry, and fragmented regulations.

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