The U.S. Department of Justice has opened an anti-trust inquiry into four automakers’ agreement to abide by California’s stricter emission standards rather than the Trump administration’s proposal to ease federal fuel-economy regulations.
The Wall Street Journal first reported the investigation Friday.
In July, Ford, Honda, Volkswagen and BMW agreed with the California Air Resources Board to improve their fleet averages by 3.7% each year. While that was less than Obama administration standards that would have required each manufacturer to improve their fleet average from about 37 miles per gallon today to more than 50 mpg by 2025, the four companies rejected a Trump administration proposal to freeze the current standard (37 mpg) through 2026.
The automakers also agreed to comply with California’s regulations limiting greenhouse gas emissions, principally carbon. That’s important because 13 other states have pledged to implement California’s standards. Together those 14 states account for about one-third of the U.S. new-vehicle market.
Industry leaders want to avoid separate regulations for those states and a different set of rules for the other 36 states, effectively creating two separate markets.
Separate rules would force manufacturers to calibrate their production and mix of vehicles in the California and 13 states differently from what they sell in states following the federal standards. That would add costs and could hurt profitability.
While cutting a deal with California was unusual, the four companies issued a statement in July saying the California regulations “will provide our companies much-needed regulatory certainty by allowing us to meet both federal and statement requirements with a single national fleet, avoiding a patchwork of regulations while continuing to ensure meaningful greenhouse gas emission reductions.”
The Wall Street Journal reported that the Justice Department sent letters to each of the four companies, telling them it is investigating whether they “violated federal competition law by agreeing with each other to follow tailpipe emission standards beyond those proposed by the Trump administration.”
In a separate letter, lawyers for the U.S. Department of Transportation and the Environmental Protection Agency urged Mary Nichols, chairman of the California Air Resources Board, “disassociate her agency from the agreement” with Ford, Honda, Volkswagen and BMW.
The letter also states that the agreement violates federal law because only the federal government has authority to set fuel economy standards.
Ford responded with an e-mail statement acknowledging that it received a letter from the Justice Department and it will cooperate with the investigation.
Volkswagen declined to comment other than to say it is in regular contact with U.S. government officials.
The auto industry began lobbying Trump immediately after his nomination to relax the Obama-era standards on the grounds that consumer preferences were shifting away from smaller to larger, heavier and less fuel-efficient pickup trucks and sport-utility vehicles.
In addition to pushing for less stringent mileage standards, the Trump administration is trying to take away California’s authority to limit emissions of greenhouse gases.
