Korea fines Volkswagen $31.9 million for false ads

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Korea fines Volkswagen $31.9 million for false ads

Korea’s antitrust agency slapped Volkswagen with a record 37.3 billion won ($31.9 million) fine for false advertising on its emissions and said it will file criminal charges against five of the German automaker’s former and current executives.

The Fair Trade Commission on Wednesday said it has fined Volkswagen Korea and its affiliate Audi for fabricating gas emissions results on its diesel cars. In addition, five executives, including former heads of Korean operations, were reported to the prosecutors’ office.

The executives are Audi Korea former CEOs Andre Konsbruck and Trevor Hill; head of Audi’s overseas sales Terence Bryce Johnsson, former Volkswagen Korea CEO Park Dong-hoon; and current Audi Volkswagen Korea CEO Johannes Thammer. If found guilty, the executives could face two years in prison and fines of up to 150 million won.

The penalty is heavier than those imposed by other countries that fined the German automaker. Italy fined it 5 million euro ($5.36 million), Brazil fined VW 2.8 billion won and Taiwan slapped them with a 180 million won fine. The U.S. levied the heaviest fine on Volkswagen Group, after a court found in favor of consumers in October and ordered compensation amounting to $14.7 billion or roughly 17 trillion won.

The Korean antitrust agency said its heavy fine was largely because Korean consumers were suckered into buying a vehicle they believed was energy efficient and environmentally friendly after claims the automaker made in ads. The German automaker achieved a high reputation and dominated the market share in diesel-fueled imported vehicles while it was difficult to verify its claims.

As a result, the German automaker saw sales of its diesel-fueled vehicle surge more than 15 times. However, since the issue was raised in September 2015 sales have plummeted.

The FTC, however, said it has lowered the penalty since its earlier review as the TV and newspaper ads didn’t stress its emissions performance. It applied a 1 percent fine on the 4.4 trillion won revenue the automaker made. The FTC could have sought a fine of 2 percent of the automaker’s revenue if it strongly factored in the emissions claims, or up to 88 billion won.

“When we decide the level of penalty we also look into the impact that [the false advertisement] has made,” said Jang Duck-jin, head of the FTC’s consumer policy bureau. “But we have found that the commercials advertised on TV were mostly focused on images and didn’t include detailed explanations of the false claims it made.”

Audi Volkswagen Korea is accused of selling cars whose car emissions results were fabricated to appear to meet environmental regulations on cars sold between December 2012 and November 2015.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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