Justice Dept. Opens Antitrust Inquiry Into Automakers’ Emissions Pact With California

Source: By Hiroko Tabuchi and Coral Davenport, New York Times • Posted: Sunday, September 8, 2019

The Justice Department has opened an antitrust inquiry into the four major automakers that struck a deal with California this year to reduce automobile emissions, according to people familiar with the matter, escalating a standoff between President Trump, California and the auto industry over one of his most significant rollbacks of climate regulations.

The Trump administration is moving to drastically roll back Obama-era rules designed to reduce car emissions that contribute to global warming, an effort major automakers have publicly opposed. The administration is also considering a plan to revoke California’s legal authority to enforce stricter greenhouse gas emissions rules within its state borders, putting the two sides on a collision course.

In July, four automakers — Ford Motor Company, Volkswagen of America, Honda and BMW — announced that they had reached an agreement with California to stick with standards slightly less stringent than the Obama-era rules but that would nevertheless require automakers to significantly improve the fuel economy of their vehicles. The announcement came as an embarrassment for the Trump administration, which assailed the move as a “P.R. stunt.”

Now, the Justice Department is investigating whether the four automakers violated federal antitrust laws by reaching a side deal to follow California’s stricter rules, those people said. The Justice Department declined to comment on the investigation, which was initially reported by The Wall Street Journal.

Top lawyers from the Environmental Protection Agency and the Transportation Department on Friday sent a letter to Mary Nichols, California’s top clean air official, saying, “The purpose of this letter is to put California on notice” that its deal with automakers “appears to be inconsistent with federal law.”

Legal experts and people close to the Trump administration said the investigation was meant as a show of force for companies that have displeased the president.

“The antitrust statutes give the government quite a lot of power to threaten companies with anticollusion charges, and they’re going to go ahead and use it,” said Myron Ebell, who heads the energy program at the Competitive Enterprise Institute, an industry-funded research organization, and who led the administration’s transition at the E.P.A. “It’s really the threat that matters. In many cases, it’s a shot across the bow to get the attention of corporations.”

Richard Revesz, a professor of environmental law at New York University, said he saw the case as an unprecedented effort to use the Justice Department to intimidate or punish companies that had angered the president.

Mr. Revesz noted that a Justice Department investigation into the deal was atypical because the agreement between California and the auto companies is, so far, largely an agreement in principle that has not yet been signed or legally formalized.

“It is extremely unusual for a prosecutor to investigate a deal that hasn’t even been signed,” Mr. Revesz said.

“These are four car companies standing in the way of something the president wants to do,” Mr. Revesz said. “Now the enormous prosecutorial power of the federal government is brought to bear against them. This should make any large companies very nervous.”

The investigation already appears to be having that effect. Another company, Mercedes-Benz, had been poised to join the California agreement. But after the German government learned of the federal investigation into the other companies that had signed on, it warned Mercedes not to join, according to a person familiar with the matter who spoke anonymously about it because of the sensitivity of the negotiations.

Under the agreement, the four automakers, which account for about 30 percent of the United States’ auto market, would be required to reach an average fleetwide fuel economy of 51 miles per gallon by 2026, a slightly looser standard than the 54.5 miles per gallon by 2025 set forth by the Obama administration.

In comparison, the Trump administration’s plan would roll back those standards to about 37 miles per gallon.

Honda, Ford and BMW confirmed they had been contacted on the matter by the Justice Department, and said they were cooperating. Volkswagen declined to comment.