Justice Dept. Investigates California Emissions Pact That Embarrassed Trump

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

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 the president’s most significant rollbacks of climate regulations.

The Trump administration is moving to drastically roll back Obama-era rules designed to reduce emissions from cars and light trucks 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 in principle with California on 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 that could potentially limit the range of cars in some markets, those people said. The Justice Department declined to comment on the investigation, which was initially reported by The Wall Street Journal.

In a clear signal that the administration intends to press the matter aggressively, top lawyers from the Environmental Protection Agency and the Transportation Department on Friday sent a letter of rebuke to Mary Nichols, California’s top clean air official. “The purpose of this letter is to put California on notice” that its deal with automakers “appears to be inconsistent with federal law,” the letter read.

When contacted for comment, an E.P.A. spokesman referred questions about the investigation to the Justice Department.

“The Trump Administration has been attempting and failing to bully car companies for months now,” Gavin Newsom, the governor of California, said in a statement. “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.”

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

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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.

“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.”

He said the Justice Department investigation was surprising because the agreement between California and the auto companies 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.

Ankur Kapoor, an antitrust expert at the law firm Constantine Cannon, said it was also unusual for the federal government to investigate a matter involving competition among companies that is overseen by a state. “If it’s a state matter, actively supervised by a state, it should be immune from federal antitrust laws,” he said.

Myron Ebell, who led the administration’s E.P.A. transition team and who now leads the energy program at the Competitive Enterprise Institute, an industry-funded research organization, said antitrust laws were often used as a “shot across the bow to get the attention of corporations.”

“The antitrust statutes give the government quite a lot of power to threaten companies with anticollusion charges,” Mr. Ebell said, “and they’re going to go ahead and use it.”

The investigation appears to have already had an 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.

The original Obama-era standards would have required automakers to roughly double the fuel economy of their new cars, pickup trucks and SUVs by 2025. That would have meant manufacturing vehicles that would average roughly 54 miles per gallon.

The agreement reached between California and the four automakers, which account for about 30 percent of the United States auto market, allows for slightly lower fuel economy, requiring an average fleetwide fuel economy of 51 miles per gallon by 2026. California has legal authority under the Clean Air Act to write air pollution rules that go beyond the federal government’s.

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

Automakers had feared that the rift would split the domestic market — with California and the 13 other states that follow its lead enforcing one set of standards, and the rest of the country following the more lenient federal standards — resulting in a messy patchwork of regulations requiring two separate lineups of vehicles.

To avert that outcome, the four automakers entered secretive negotiations with California to agree on standards that would apply to vehicles sold nationwide. But some of their peers have been more cautious, saying they fear retribution from an unpredictable and vindictive administration.

The Trump administration’s plan would have immense climate impacts. Assuming that the plan is finalized and survives the expected legal challenges, cars and trucks in the United States would emit an extra 321 million to 931 million metric tons of carbon dioxide into the atmosphere between now and 2035 as a result of the weaker rules, according to an analysis by the research firm Rhodium Group.

“The motivation for the antitrust suit is to prevent car companies from voluntarily fighting climate change by limiting pollution,” said Ann Carlson, a professor of environmental law at the U.C.L.A. School of Law. “So it’s hard to call the D.O.J. position ‘in the interest of consumers.’”




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