Feds Launch Antitrust Probe of California’s Fuel-Efficiency Deal With Automakers

(AP Photo/Gerry Broome, File)

(CN) – The fight between California and the Trump administration over carbon emissions and fuel economy standards took another twist Friday, with the U.S. Department of Justice launching an antitrust probe into a deal struck by the Golden State and four automakers to boost fuel efficiency.

Ford, Honda, Volkswagen and BMW agreed to increase their fuel efficiency in vehicles for model years 2022 through 2025. But according to anonymous sources who spoke to The Wall Street Journal, the Justice Department is looking into whether the deal was the result of automakers negotiating with each other like a cartel rather than something compelled by a regulator.

A spokesman from Ford Motor Company confirmed the manufacturer has been made aware of the inquiry and pledged to cooperate. Honda also acknowledged it was aware of the investigation.

“Honda will work cooperatively with the Department of Justice with regard to the recent emissions agreement reached between the state of California and various automotive manufacturers, including Honda,” the company said in a statement.

The dispute stems from an Obama-era decision to increase fuel efficiency standards by 5%, a move decried as too onerous by the auto industry. Once President Donald Trump took office, he pledged to relax the standard – though many in the auto industry think the Trump administration has gone too far.

More importantly, automakers do not want to build one set of cars for California and another set for the rest of the country. California accounts for 12% of all cars on the road and has considerable market power.

California’s deal is less than the 5% increase demanded by Obama, instead opting for a 3.7% increase in fuel efficiency.

Meanwhile, California has explicit rights to set fuel efficiency standards thanks to waivers included in the Clean Air Act, signed into law decades ago by Richard Nixon. But in a letter sent Friday to California Air Resources Board chair Mary Nichols, counsel for the U.S. Environmental Protection Agency and the Department of Transportation said the state’s deal with the four automakers is illegal and should be rescinded immediately.

California Attorney General Xavier Becerra said the state is prepared to go to court to fight for the state’s right to establish its own standards.

Governor Gavin Newsom wasn’t amused by Friday’s news.

“The Trump administration has been attempting and failing to bully car companies for months now. We remain undeterred. California stands up to bullies and will keep fighting for stronger clean car protections that protect the health and safety of our children and families,” Newsom said in a statement.

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