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Newsletter | November 2015, Issue 3
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Litigation
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How Kim & Chang Successfully Defended a Foreign Auto Maker in Lawsuits Over Fuel Economy
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Since last summer, we have been seeing Korean business news headlines on numerous car owners bringing suits against a foreign automobile manufacturer/importer, claiming misrepresentation/exaggeration of fuel efficiency rates on their automobiles. Korean courts have begun rendering decisions on these cases, dismissing all claims brought by the car owners, and ruling overwhelmingly in favor of the manufacturer/importer.
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Under Korean laws and regulations, before initiating the first sale of the automobiles, automobile manufacturers are required to file a fuel efficiency report with the relevant governmental authority. However, in this case, the government’s follow-up testing showed that the fuel efficiency rate for the cars manufactured by this foreign auto maker/importer was lower than what it had reported.
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When this finding became public through media reports, car owners filed civil lawsuits seeking compensation for damages from the alleged misrepresentation of the fuel efficiency rates. The car owners also sought damages for the additional fuel costs they allegedly incurred, as well as compensation for pain and suffering.
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At the court hearings, Kim & Chang, on behalf of the foreign auto maker/importer, argued and established the following:
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| (1) |
Auto manufacturers/importers have two ways of filing a fuel efficiency report:
| A. |
An auto manufacturer/importer may measure its own fuel efficiency rates and report the findings to the relevant authority; or
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| B. |
Alternatively, an auto manufacturer/importer may request a government-authorized testing institution to conduct the testing and report the findings on its behalf (as was the method used in this case).
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| (2) |
Auto manufacturers/importers are only responsible for fines when they report fuel efficiency rates that are different from the testing results obtained by the designated testing institution;
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If a designated testing institution is used, that institution, not the auto manufacturer/importer, selects the cars that will be tested;
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| (4) |
While the measurement method for fuel efficiency testing is provided under the relevant statute, in the measurement process, it is possible for some errors to occur;
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In this case, there were factors indicating that the results of the follow-up fuel testing were not reliable.
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| (6) |
However, even if it is shown that the fuel efficiency rate was incorrectly stated, there was no causal relationship between the consumers purchase of the automobiles in question.
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Based on the above, the courts dismissed the car owners’ claims in favor of the foreign manufacturer/importer.
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Kim & Chang engaged in in-depth analysis of the laws and regulations on fuel efficiency reporting and follow-up fuel testing scheme. In particular, we focused on the working-level procedures and technical reviews of the methods and variables for measuring fuel efficiency. It is expected that these recent decisions will have a substantial impact on similar lawsuits involving other auto manufacturers/importers that are currently pending.
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