ESG Enforcement Tracker

Key facts:

In March 2021, the DOJ, EPA and CARB resolved a civil enforcement case against Daimler AG and Mercedes-Benz USA, LLC (together, Daimler). The settlement was entered by the US District Court for the District of Columbia in March 2021 and resolved alleged violations of the Clean Air Act and California law associated with emissions cheating.

The Clean Air Act and federal regulations require vehicle manufacturers to apply for and receive a certificate of conformity from the EPA before selling a new model year vehicle in the United States. As part of the application process, manufacturers must demonstrate through testing that a vehicle meets applicable emissions standards and disclose to EPA all auxiliary emission control devices (AECDs) devices installed in the vehicle. A certificate of conformity covers only those new motor vehicles that conform in all material respects to the design specifications in the manufacturer’s application. In addition, it is a violation of the Clean Air Act to manufacture, sell, offer to sell, or install defeat devices. Therefore, selling vehicles that contain undisclosed AECDs and/or defeat devices would amount to a violation of the Clean Air Act.

The settlement addressed allegations made by the DOJ (on behalf of EPA) and CARB that, from 2009 to 2016, Daimler manufactured, imported, and sold more than 250,000 diesel Sprinter vans and passenger cars with undisclosed AECDs and defeat devices programmed into the vehicles’ complex emissions control software. Such devices cause vehicles to produce compliant results during emissions testing, but when not running a test, the vehicles’ emissions controls perform differently, and less effectively, resulting in an increase in NOx emissions above compliant levels.

As part of the settlement, Daimler agreed to implement a recall and repair program to remove the defeat devices from the affected vehicles, offer an extended warranty on repaired vehicles, and pay a civil penalty of US$875 million. Daimler also agreed to implement a program to mitigate excess pollution from these vehicles.