Would companies follow a law if there was no real sanction a regulator could levy? We have seen this issue play out in Europe in the aftermath of the Volkswagen emission-testing scandal. It turns out that as part of its response to admitted it was manipulating these findings, VW also tested the emissions results from its competitors to try and spread around the blame. At the end of the day VW decided not to go forward with the plan of attack. Yet the research the company did demonstrated that other manufacturers cars did not have the same emissions releases on the highway that they did in testing.
One of the clear reasons is that EU Commission which oversees this issue only has the right to set the standard for acceptable levels of emissions but not the right to enforce the standard. This goes to each member state for enforcement by national authorities. The problem is the national authorities lack of independence and lack of incentives to enforce rules laid down by Brussels. Put another way, why would a German regulator want to fine the single largest industry employer in the country for breaching a regulation set by the EU. (Answer: It wouldn’t).
