Australia's consumer watchdog has started legal action in the Federal Court against German carmaker Volkswagen and its Australian subsidiary accusing it of misleading claims about diesel vehicle emissions.
The Australian Competition and Consumer Commission (ACCC) alleges that Volkswagen breached Australia's consumer laws by concealing software in their vehicles to cheat emissions testing, and misleading consumers about the vehicles' compliance with standards and emission levels during on-road conditions.
"Consumers rightly expect that their vehicle's emissions would operate as advertised during their day-to-day use and we allege that this was not the case with more than 57,000 vehicles sold in Australia by Volkswagen over a five-year period," ACCC chairman Rod Sims said on Thursday.
"These allegations involve extraordinary conduct of a serious and deliberate nature by a global corporation and its Australian subsidiary misleading consumers and the Australian public. We expect higher standards of behaviour from all companies that supply to Australian consumers."
Volkswagen, which is already defending itself against private class actions over the emissions issue, is recalling affected vehicles for a software update.
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Volkswagen Australia on Thursday said it was reviewing the ACCC's claims.
But, it said: "Volkswagen Group Australia does not think that the court action announced today by the Australian Competition and Consumer Commission provides any practical benefit to consumers because software solutions affected by the voluntary recall are expected soon".
The ACCC says the alleged misleading conduct took place between 2011 and 2015.
The consumer watchdog claims Volkswagen installed "defeat software" that controlled the operation of a vehicle's exhaust gas circulation system.
The software allegedly caused the vehicles to emit less nitrogen oxide when tested in a laboratory but switched to a different mode under on-road conditions, resulting in higher nitrogen oxide emissions.
The ACCC claims Volkswagen and its Australian subsidiary misled consumers by representing that the vehicles complied with Australia and European standards, when they did not.
Furthermore, it alleges that Volkswagen marketed vehicles in Australia as being environmentally friendly, clean-burning, low-emission and compliant with stringent European standards when under normal driving conditions when they were not.
The ACCC is seeking penalties against Volkswagen and wants the carmaker to undertake corrective advertising.
An ACCC spokesperson said the potential penalty was $1.1 million for each contravention of Australian consumer law, but did not specify the number of possible contraventions.
