Justice Department Issues Civil Subpoenas to Auto Makers in California Emissions Pact Probe

Source: By Brent Kendall and Ben Foldy, Wall Street Journal • Posted: Monday, November 11, 2019

Subpoenas indicate a dialogue between the car makers and DOJ hasn’t resolved the antitrust probe, which some Democrats see as politically motivated

Honda Motor Co., along with Ford Motor Co., BMW AG and Volkswagen AG, have been issued civil subpoenas in connection with the pact they reached with California on tailpipe emissions; new Honda cars displayed a California sales lot. Photo: Justin Sullivan/Getty Images

The Justice Department has issued civil subpoenas to four auto makers that reached a tailpipe emissions deal this summer with the state of California, according to people familiar with the matter, the latest development in a federal antitrust investigation that has generated political controversy.

The subpoenas come on the heels of initial discussions between the department’s antitrust division and Ford Motor Co.F 0.44% , Honda Motor Co.HMC 0.97% , BMW AGBMW -0.01% and Volkswagen AGVOW 0.08%regarding a July agreement between the auto makers and the California Air Resources Board on fuel efficiency standards. The California framework is at odds with the Trump administration’s regulatory approach.

Mary Nichols, chairwoman of the California Air Resources Board, has said the state worked individually with the auto makers and that all parties were mindful of not violating antitrust laws.

The subpoenas, called civil investigative demands, are an indication that the initial dialogue between the auto makers and the Justice Department hasn’t fully resolved the matter. But the department’s formal demands also give the companies a mechanism to provide information that could clear them from suspicion.

The subpoenas essentially ask the auto makers whether they engaged in collusive behavior, but they don’t make demands for documents, according to one of the people familiar with the matter.

News of the antitrust inquiry, reported by The Wall Street Journal in September, sparked strong political reactions because the Trump administration is locked in a battle with California over emissions policy for greenhouse gases.

Democrats have criticized the probe and questioned whether the Justice Department was using it to further the administration’s political aims. They said there was nothing wrong with companies together lobbying the California government on policy.

The Justice Department’s top antitrust official, Makan Delrahim, in Senate testimony in September said the probe wasn’t political, describing the investigation as a fact-finding mission. He said companies can’t cooperate among themselves, even to advance socially laudable goals.

BMW and Honda said they are cooperating with the department. Spokesmen for Ford, Volkswagen and the Justice Department declined to comment.

Mr. Trump has been trying to roll back a set of stringent targets for reducing emissions first agreed to by the Obama administration, California and most major auto makers in 2012. Those goals would require auto makers to achieve roughly 5% annual increases in fleetwide fuel efficiency through mid-decade, taking into account both increases in gas mileage and reduced emissions.

Auto makers lobbied the administration to relax those targets, arguing that consumers’ preferences for trucks and SUVs made meeting them while turning a profit unrealistic.

But the Trump administration’s proposal to freeze the goals at their current levels and remove California’s regulatory authority startled even the car makers. Companies worried that legal challenges could leave them unsure of which targets would ultimately prevail— and potentially require building cars to two different standards in the meantime.

Ford, Honda, Volkswagen and BMW came to terms with California in July in hopes of sidestepping that uncertainty, people familiar with the companies’ thinking said. Under the framework of the deal, the companies would meet annual emission improvement targets of 3.7% and not challenge California’s authority to set its own standards.

The administration is now planning to set annual targets at 1.5%, people familiar with the rule-making process say.

The issue has split the industry. Last week, other auto makers including General Motors Co. , Fiat Chrysler Automobiles NV and Toyota Motor Corp. intervened in a lawsuit to defend a Trump administration effort to revoke California’s ability to set its own emissions standards. Administration officials had made calls to at least one of the auto makers to encourage the intervention, a person familiar with the calls said.

Write to Brent Kendall at brent.kendall@wsj.com and Ben Foldy at Ben.Foldy@wsj.com