Mercedes Loses EU Court Case Over ‘Defeat Device’ System in Cars

Stephanie Bodoni, Bloomberg News

The Mercedes-Benz trident logo sits on display outside the automaker's showroom, operated by Daimler AG, in Munich, Germany, on Tuesday, July 7, 2020. Daimler Chief Executive Officer Ola Kallenius said the maker of Mercedes-Benz cars and the industry as a whole face painful cutbacks to overcome the economic fallout of the Covid-19 pandemic. Photographer: Andreas Gebert/Bloomberg , Bloomberg

(Bloomberg) -- Mercedes-Benz Group AG suffered a setback in a dispute at the European Union’s top court over its duty to compensate owners of cars equipped with illegal computer technology that overrides anti-pollution systems in order to protect components at low temperatures.

In a suit referred from a court in Germany, the owner of a Mercedes car equipped with a so-called defeat device, complained that the vehicle violated rules regulating the emissions of pollutant gases. The case stems from a series of clashes from the aftermath of the diesel scandal that’s roiled carmakers in Germany.

People who bought a car “equipped with an unlawful defeat device” have “a right to compensation from the car manufacturer where that device has caused damage to that purchaser,” the EU Court of Justice ruled on Tuesday. “EU law protects, in addition to public interests, the specific interests of the individual purchaser of a motor vehicle.”

The EU’s top court in 2020 issued a key ruling in a dispute following from the diesel scandal that had engulfed Volkswagen AG, which said the use of so-called defeat devices — which helped the automaker bypass diesel engine pollution tests — can’t be justified under the bloc’s rules. The ruling raised questions for carmakers more broadly about the use of other software, because engine functions known as thermal windows — that lower pollution controls when temperatures are low to protect components — are used across the industry.

The EU court “clearly stressed that this is only about the damage actually suffered by a purchaser,” Mercedes said in an emailed statement. “Plus, there must be an illegal defeat device, which is disputed in the present case.”

Mercedes said its cars “that were or are affected by a recall can continue to be used without restriction on a permanent basis after appropriate software updates.” It said “it remains to be seen” how local courts will apply ruling’s guidance on national laws.

The court said on Tuesday that EU nations are “required” to ensure that people who bought such a car have “a right to compensation from the manufacturer of that vehicle and that “national legislation cannot make it impossible or excessively difficult for the purchaser to obtain adequate compensation for the damage caused to him or her.”

Last year, EU judges in another case, involving VW, clarified that there’s no exemption from regulations for the use of software that changes pollutant gas emissions in cars based on the outside temperature. While VW insists its use of so-called thermal windows is in line with the law, the ruling opened the door to possible lawsuits for compensation over sales contracts for affected cars.

The case is: C‑100/21, QB v. Mercedes-Benz Group AG, formerly Daimler AG.

--With assistance from Karin Matussek.

(Updates with Mercedes response from fifth paragraph)