Mercedes-Benz USA and its parent company, Daimler AG, have agreed to pay $149.6 million to settle emissions-related allegations brought by a coalition of U.S. states and territories, which claim the automaker used hidden software in diesel vehicles to bypass emissions rules while marketing them as environmentally friendly; the settlement follows years of investigations that found certain vehicles emitted far higher pollution during real-world driving than during official tests, and it is intended to hold the company accountable, offer relief to affected vehicle owners, and reinforce compliance with emissions standards.
Allegations of hidden software and excess pollution
The allegations focus on diesel passenger cars and vans sold between 2008 and 2016. During this period, Mercedes-Benz allegedly installed special software devices in more than 211,000 vehicles across the United States. These software systems reportedly detected when a vehicle was undergoing an official emissions test.
During testing, the software activated full emissions controls. As a result, the vehicles appeared to meet legal pollution limits. However, once the testing ended and normal driving began, the software allegedly reduced the effectiveness of these controls. Because of this change, the vehicles emitted much higher levels of nitrogen oxides during everyday use.
Nitrogen oxides pose serious risks to public health. These gases can irritate the lungs, worsen breathing problems, and contribute to smog. They also play a role in reducing overall air quality, especially in cities and densely populated areas.
The states claimed that Mercedes-Benz used this software because it struggled to meet key design and performance goals. These goals included fuel efficiency and engine performance while also complying with strict emissions laws. Instead of redesigning the vehicles to meet all requirements, the automaker allegedly relied on software to manage test conditions differently from real-world driving.
Furthermore, the states alleged that the automaker did not disclose the presence of these devices to regulators or consumers. At the same time, Mercedes-Benz marketed the vehicles as clean, efficient, and compliant with environmental standards. According to the coalition, this approach misled buyers and undermined emissions enforcement efforts.
Financial terms and consumer relief under the settlement
Under the settlement, Mercedes-Benz will pay $120 million directly to the participating states and territories. In addition, the agreement includes another $29 million payment. However, this additional amount is currently suspended and may be waived if the automaker completes a required consumer relief program.
This relief program targets approximately 40,000 vehicles that remained unrepaired or were still on the road as of August 1, 2023. These vehicles allegedly still contained the software devices described in the case. To address this issue, the settlement provides clear steps for vehicle owners.
Owners of eligible vehicles can receive $2,000 per vehicle. To qualify, they must install approved emissions modification software provided by the automaker. This software aims to bring the vehicles closer to compliance with emissions standards during real-world driving. Along with the payment, owners will also receive an extended warranty. This warranty offers added protection and reassurance after the modification.
In addition to financial compensation, the settlement imposes strict compliance requirements on the automaker. Mercedes-Benz must meet ongoing reporting obligations. These reports allow authorities to monitor compliance and ensure transparency. Moreover, the company must avoid any unfair or deceptive marketing or sales practices related to diesel vehicles.
The settlement includes a large group of legal authorities. A total of fifty attorneys general participated, including those from the District of Columbia and Puerto Rico. California did not join this specific coalition, as it had already reached earlier agreements related to similar allegations.
Broader context of emissions enforcement and accountability
This settlement builds on previous enforcement actions involving Mercedes-Benz. In 2020, the automaker and its parent company agreed to pay $1.5 billion to the U.S. government and California regulators. That earlier agreement also addressed emissions cheating allegations and required vehicle repairs and other corrective measures.
The current multistate settlement reflects continued efforts by states to protect air quality and public health. Diesel emissions remain a major concern because of their impact on respiratory health and the environment. Therefore, regulators continue to closely examine how automakers design, test, and market diesel vehicles.
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This case also fits into a broader pattern across the auto industry. Other manufacturers have faced major penalties for similar conduct. For example, Volkswagen paid $2.8 billion to settle a criminal case related to emissions cheating. These cases have increased scrutiny of emissions testing practices and software use in modern vehicles.
For consumers, the settlement highlights the importance of accurate information. Many buyers rely on claims about fuel efficiency and environmental performance when choosing a vehicle. When real-world emissions differ from advertised standards, trust suffers.
Through this agreement, the states aim to address past conduct while reinforcing existing emissions laws. The settlement combines financial penalties, consumer compensation, and strict compliance rules. Together, these measures seek to ensure that vehicles on the road meet pollution limits and that marketing claims reflect real performance.
A spokesperson for the automaker did not offer immediate comment following the announcement. Nonetheless, the settlement formally resolves the multistate allegations and sets enforceable terms for compliance going forward.
