Trump Administration Says Carmakers’ California Pact Is Illegal

Sept. 6, 2019
The Justice Department claims that the informal 'pact' made between automakers to meet California's emissions standards is a breach of antitrust law.

The Trump administration has launched a multipronged legal assault on California’s agreement with four carmakers on tailpipe emissions that was reached in defiance of a federal plan to ease national standards.

Lawyers from the Transportation Department and Environmental Protection Agency sent a letter to California’s top air-pollution regulator, warning the state to abandon its pact with the automakers and that any state actions to further the compromise “appear to be unlawful and invalid.”

Separately, the Justice Department has opened an antitrust probe into the deal, in which four automakers reached a pact on compromise tailpipe emissions with California, defying federal regulators, according to a person familiar with the matter.

The actions come as automakers have urged the Trump administration to moderate its rollback of emissions levels, arguing that a battle with California over the state’s regulatory powers would leave the industry with uncertainty over the critical standards for years.

At issue is a pact the California Air Resources Board announced in July between the Ford Motor Co., Honda Motor Co., BMW AG and Volkswagen AG on tailpipe greenhouse gas emissions regulations that the Trump administration has targeted to be eased.

“We have received a letter from the Department of Justice and will cooperate with respect to any inquiry,” Ford said Friday in an emailed statement.

“It raises a red flag as to whether this is a valid exercise of antitrust laws or an effort advance the Trump administration’s policies to roll back environmental protections, and if so that would be an abuse of DOJ‘s power,” said Barbara McQuade, a law professor at the University of Michigan and former U.S. attorney in Detroit.

In a letter sent to CARB on Friday, lawyers for the EPA and DOT said that the state’s plans overstep the state’s authority, by intruding on the federal government’s power to set fuel economy and tailpipe emission standards.

“We recognize California’s disagreements with the federal government’s policy proposals in this area, but those policy disagreements cannot justify CARB’s pursuit of a regulatory approach that would violate federal law,” they said.

Automakers also want to avoid splitting the market with two different standards -- a federal mileage requirement in most states versus more stringent rules in more than a dozen states that adhere to California’s standards and account for more than a third of U.S. auto sales.

California officials didn’t immediately respond to a request for comment.

“We are in regular contact with U.S. authorities on a number of matters, but do not comment on specific private communications we may or may not receive,” Volkswagen said in a statement.

Separately, the Trump administration is preparing a plan to formally strip California’s authority to set auto efficiency regulations that are tougher than the federal government’s, even while agencies continue finalizing a rollback of national standards, according to people familiar with the matter.

The four carmakers from the U.S., Europe and Japan agreed with California’s clean-air regulator to boost the fuel efficiency of autos sold in the U.S through 2026, defying a Trump administration proposal to ease mileage requirements enacted during the Obama administration.

The deal requires annual reductions in tailpipe greenhouse gas emissions each year from model years 2022 through 2026.

In a joint statement at the time, the automakers said the pact with California “will provide our companies much-needed regulatory certainty by allowing us to meet both federal and state requirements with a single national fleet, avoiding a patchwork of regulations while continuing to ensure meaningful greenhouse gas emissions reductions.”

California said the agreement is open to all automakers. The Wall Street Journal previously reported the antitrust probe.

Ford shares were unchanged as of 11 a.m. in New York, after initially dropping on the Dow Jones report. Volkswagen and BMW shares were little changed in Germany.

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