Mercedes-Benz faces regulatory sanctions from South Korea's Fair Trade Commission after concealing that its electric vehicles contained battery cells previously recalled for fire risks.
The FTC announced Wednesday it imposed fines totaling 11.24 billion won ($7.8 million) on Mercedes-Benz AG in Germany and its Korean distributor Mercedes-Benz Korea. The commission found both companies deceived consumers by hiding and omitting battery cell information.
The FTC also referred both entities to prosecutors, determining that closer examination of responsibility and circumstances surrounding the deception was necessary.
According to the FTC investigation, Mercedes-Benz equipped its EQE and EQS electric models with battery cells from Chinese manufacturer Farasis starting in June 2023. However, the company omitted this from sales guidelines and indicated the vehicles used CATL battery cells instead.
Farasis had conducted a major recall in China in March 2021—just before the EQE launched in Korea—due to battery fire risks. The EQE and EQS are the only electric vehicles sold in Korea equipped with Farasis batteries.
The FTC determined that both Mercedes-Benz Korea and German headquarters knew about the Farasis batteries but deliberately excluded this information from sales guidelines. Instead, the guidelines emphasized CATL's excellence with phrases such as "why Mercedes-Benz chose CATL," "industry-leading technology," and "world's No. 1 market share."
Dealers were also instructed to emphasize CATL battery advantages when responding to consumer inquiries about battery cell manufacturers.
As a result, Korean dealers—unaware that Farasis batteries were actually installed—told consumers the vehicles used CATL batteries. Consumers purchased vehicles based on this information, the FTC found.
The commission concluded these actions violated the Monopoly Regulation and Fair Trade Act by using deception to lure competitors' customers.
The deceptive practices continued until August 13, 2024—one day before the company disclosed battery cell manufacturers by model. Mercedes-Benz released the information only after controversy erupted following an August 1 fire involving a Mercedes electric vehicle with Farasis batteries in an apartment parking garage in Cheongna, Incheon.
Approximately 3,000 Mercedes electric vehicles sold in Korea contained Farasis battery cells, representing about 281 billion won in sales, according to the FTC.
Current fair trade law allows fines up to 4% of relevant sales for unfair trade practices including improper customer inducement. The FTC applied the maximum legal rate, citing that battery cell manufacturer information directly affects public safety and lives.
"This marks the first case sanctioning automobile manufacturers and sellers for deceiving consumers by hiding or omitting electric vehicle battery cell manufacturer information," said Hwang Won-chul, standing commissioner of the FTC.
The FTC decision may provide grounds for consumer damage claims against Mercedes-Benz. More than 90 consumer complaints have been filed with the commission from buyers who believed their vehicles contained CATL batteries.
In a survey Mercedes-Benz Korea conducted with dealers while preparing sales guidelines, approximately one-third of respondents said battery cell manufacturer information was the most important factor in vehicle purchases. CATL ranked first globally in battery cell market share as of 2024 and is considered superior to Farasis in market share, technology, and brand recognition.
The FTC found that Mercedes-Benz Korea reported key sales guideline contents to German headquarters in advance. German headquarters was directly and indirectly involved in the violations by requesting battery-related content additions and selecting the guidelines as a best practice to share with other countries.