A number of brands teased consumers this year for April Fool’s Day, with Tiffany & Co. pretending to replace its world-famous Robin’s Egg Blue hue with a new yellow “house color;” Lego teasing some “Smart Bricks” technology, a nod to the unpleasant experience of stepping on its plastic bricks in bare feet; cheese company Velveeta announcing a skincare collection; and vegetable company Green Giant revealing a “collaboration” with marshmallow candy brand Peeps. At the same time, Volkswagen played a trick of its own, asserting in a statement that it would rebrand to “Voltswagen of America.” Volkswagen’s stunt – which came a couple of days before April 1 – is unlike the previously mentioned ones, though, in that it has landed the American arm of the German automaker in court.
On the heels of media reports that Volkswagen’s rebranding announcement – which “drew massive media coverage,” per Reuters – was merely “a marketing stunt aimed at drawing attention to the company’s electric vehicle plans,” and an attempt to “have some humor” and “to celebrate our profound focus on electrification,” according to Volkswagen Group of America, Inc. (“VWoA”) CEO Scott Keogh, the car company’s American subsidiary has been hit with a class action lawsuit over the stunt. As Rosen Law Firm announced on Friday, as first reported by Law360, it has filed a class action lawsuit on behalf of purchasers of the securities of Volkswagen AG between March 29, 2021 and March 30, 2021, seeking to seeks to “recover damages for Volkswagen investors under the federal securities laws.”
According to the complaint, which was filed in a California federal court on Friday and names VW shareholder Gerald Montag as the lead plaintiff, Volkswagen is on the hook for making “false and/or misleading statements and/or fail[ing] to disclose” that “(1) ‘Volkswagen’ was never going to be used by the Volkswagen, VWoA or on any relevant vehicle; (2) Volkswagen, VWoA, and their spokespeople purposefully misled reporters regarding the now-purported ‘joke’ and/or ‘promotion;’ and (3) as a result, [their] public statements and statements to journalists were materially false and/or misleading at all relevant times.”
As a result of the news of headline-making rebrand that would never come to be, Montag claims that Volkswagen caused the shares in its Frankfurt Stock Exchange-traded parent company Volkswagen Group to rise artificially. As Reuters reported on Thursday, “At least one analyst wrote a research note praising the name change, [while] VW’s preferred shares, common shares and ADRs rose on the day of the phony name announcement.” In a subsequently-released note, Morgan Stanley stated that “the stock market clearly seemed to like [the name change] with VW shares up around 5 percent after the false announcement.” The note went on to assert that “it is an interesting commentary on the state of the industry that such a communication, which VW admitted was meant to be a joke, was taken so seriously.”
Montag argues in the complaint that “when the true details entered the market,” the company’s share price fell, thereby, causing “investors to suffer damages.”
More than merely a target of a class action case, Volkswagen is also coming under the microscope of the U.S. Securities and Exchange Commission (“SEC”), with Reuters revealing on Thursday that the government agency “has opened an inquiry into the U.S. unit of Volkswagen’s AG over the marketing stunt,” although neither Volkswagen nor the SEC have confirmed the probe.
The case is Montag v. Volkswagen AG et al, 2:21-cv-03678 (C.D.Cal.)