Justice Dept. Investigates California Emissions Pact That Embarrassed Trump

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 over one of the president’s most significant rollbacks of climate regulations.

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 emissions standards stricter than those being sought by the White House. 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 deal with California, on the grounds that the agreement could potentially limit consumer choice, those people said. The Justice Department declined to comment on the investigation, which was reported by The Wall Street Journal.

The investigation comes amid a battle over the Trump administration’s effort to drastically roll back Obama-era rules intended to reduce emissions from cars and light trucks that contribute to global warming, a rollback that 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 a clear signal that the administration intends to increase the pressure on California, top lawyers from the Environmental Protection Agency and the Transportation Department on Friday sent a letter of rebuke to Mary D. Nichols, the state’s senior 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.

The letter asserts that California is overstepping its authority under the Clean Air Act, which allows it to write statewide air pollution rules, by attempting to set fuel economy standards and to influence regulations nationwide. Those powers, the letter says, are “squarely vested” with Congress.

An E.P.A. spokesman referred questions about the investigation to the Justice Department.

Gov. Gavin Newsom of California said in a statement his state would “remain undeterred.”

“The Trump administration has been attempting and failing to bully car companies for months now,” Governor Newsom said. “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.”

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If the Justice Department decides to take action against the car companies as a result of the investigation, antitrust experts said, its lawyers would most likely argue that, by agreeing to a tougher standard than federal law requires, the companies could end up imposing a more expensive range of cars for sale nationwide.

“That anticompetitive theory relies on the idea that it is improper to agree to do more than what is required by the federal government,” said Nicholas S. Bryner, a professor at Louisiana State University who specializes in environmental law.

“Given that California has the legal authority to create emissions rules that are stricter than federal rules, this case doesn’t make any sense,” Mr. Bryner said. “From an environmental perspective, this move seems designed to intimidate California and the automakers that signed onto the deal.”

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

“These are four car companies standing in the way of something the president wants to do,” said Richard Revesz, a professor of environmental law at New York University. “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.

Myron Ebell, who led the administration’s E.P.A. transition team and who now heads 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.

The investigation appears to have already had an effect. Another auto 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. Some of their peers have been more cautious, saying they fear retribution from an unpredictable administration.

The Trump administration’s plan would have immense climate effects. 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.’”

Honda, Ford and BMW confirmed that they had been contacted in the matter by the Justice Department and said they were cooperating. Volkswagen declined to comment.

A BMW spokesman, Mathias Schmidt, said in an email the company was looking forward to explaining the California agreement’s “benefits to consumers and the environment.”

Katie Benner and Jack Ewing contributed reporting.

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