South Korea's Fair Trade Commission fined Mercedes-Benz's German headquarters and Mercedes-Benz Korea 11.24 billion won for selling vehicles while omitting information on the maker of electric vehicle battery cells. It also filed a criminal complaint against the two entities with prosecutors.

The FTC said on March 10 that Mercedes-Benz's German headquarters and Mercedes-Benz Korea did not reflect the actual battery cell maker in sales guidelines during the sale of EQE and EQS models in June 2023. The FTC said the vehicles used battery cells made by China's Farasis, but the sales guidelines stated them as if they were fitted with CATL battery cells.

Farasis is a company with a record of a large-scale recall in China in March 2021 over a battery fire risk, shortly before EQE was launched in South Korea. The FTC said the vehicles sold in South Korea with those battery cells were EQE and EQS.

The FTC said it concluded Mercedes-Benz failed to state the use of Farasis battery cells in sales guidelines despite knowing about it. It said the guidelines also included phrases about CATL such as "reasons (Mercedes-Benz) selected CATL", "the industry's top technology" and "No. 1 in global market share". It also said the guidelines instructed dealers to explain the superiority of CATL battery cells if consumers asked questions.

The FTC concluded that Mercedes-Benz used deception to unfairly induce a competitor's customers to trade with it and said it violated the Monopoly Regulation and Fair Trade Act.

The omission continued until the day before Mercedes-Benz disclosed battery cell makers by model on Aug. 13, 2024. Mercedes-Benz disclosed the battery cell makers by model earlier that month after controversy grew over a fire involving an electric vehicle parked in an underground apartment garage in Cheongna, Incheon, on Aug. 1.

The FTC said about 3,000 Mercedes-Benz vehicles using Farasis cells were sold during the period, with related revenue estimated at about 281.0 billion won.

The FTC said it calculated the fine by applying the maximum surcharge rate set by law, citing the battery cell maker information as highly relevant to people's lives and safety.

The current law allows fines of up to 4 percent of related revenue for unfair trade practices, including unfair customer inducement. The fine is the third-largest among cases sanctioning customer inducement by deception. It is the highest level in terms of the surcharge rate applied.

Hwang Won-cheol (황원철), a standing commissioner who deliberated the case at the FTC's full panel meeting, said, "This measure is the first case sanctioning an act in which an automobile maker and seller deceived consumers by omitting and concealing information on the maker of electric vehicle battery cells."

The FTC decision is expected to serve as a basis for consumers to seek damages from Mercedes-Benz. More than 90 consumer complaints were filed with the FTC asserting they bought vehicles believing CATL battery cells were used. The FTC said it found that after the battery information disclosure, sales of models fitted with Farasis cells fell sharply compared with models fitted with CATL cells.

In a survey Mercedes-Benz Korea conducted of dealers during the drafting of the sales guidelines, about one-third of respondents chose battery cell maker information as the most important factor.

The FTC said Mercedes-Benz Korea reported key contents of the sales guidelines in advance to the German headquarters. It also said there were indications that the German headquarters requested supplementation of battery-related content or selected the guidelines as a best practice and introduced and disseminated them to other countries. Based on this, it concluded the German headquarters was also directly or indirectly involved in the conduct.

Mercedes-Benz Korea said in a statement, "We have cooperated faithfully with the relevant authorities since the early stages of the investigation and respect the FTC's full panel decision, but do not agree with its 판단." It added, "We have provided correct and accurate information to the media and customers, and will state our position according to legal procedures, including filing an administrative lawsuit."

[ Yonhap News Agency ]