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German Car Giants Face EU Probe Into Suspected Collusion

Sept. 18, 2018
Collusion may have prevented less-polluting cars, EU says.

Germany’s beleaguered car industry faces another regulatory tangle, as the European Union opened a probe into Volkswagen AG, Daimler AG and BMW AG over suspected collusion that could have delayed clean-emissions technology for cars.

The investigation, which could lead to heavy fines, focuses on joint technical talks to develop selective catalytic reduction systems to reduce nitrogen-oxides emissions from diesel cars and "Otto" particulate filters for gasoline engines.

"These technologies aim at making passenger cars less damaging to the environment," EU Competition Commissioner Margrethe Vestager said Tuesday in an emailed statement. "If proven, this collusion may have denied consumers the opportunity to buy less polluting cars, despite the technology being available to the manufacturers."

The probe is novel because it focuses on suspicions that the companies "agreed not to use the best technology" to cut costs instead of looking at shady deals to fix prices, Vestager told a conference at the European Parliament in Brussels.


The EU probe represents another challenge for the German auto industry, which is grappling with the fallout from revelations in 2015 of VW’s diesel-cheating and the disruptive shift to self-driving, electric cars. Allegations on a cartel emerged last year in Germany’s Spiegel magazine, which reported that VW, Daimler and BMW met starting in the 1990s to coordinate activities related to vehicle technology, costs, suppliers and strategy as well as diesel emissions controls.

Still, the EU said it had no indications the carmakers coordinated on illegal defeat devices to cheat regulatory testing -- a wider scandal that has tarnished the reputation of VW globally. The EU also said Tuesday it didn’t have "sufficient indications" that talks on developing other technology -- crash tests, car roof opening and cruise control speed -- were anti-competitive.

'Quiet Life'

Tuesday’s announcement by the EU “is an unusual example” of a probe into a so-called quiet-life cartel, said Angus MacCulloch, a senior law lecturer at Lancaster University. These are where companies seek to avoid having to compete in developing expensive new technology with uncertain results.

By opening the investigation in Brussels, the European Commission prevents Germany’s cartel office, the Bundeskartellamt, from opening a similar national probe for EU law infringements, said Aitor Ortiz, an analyst at Bloomberg Intelligence.

“If companies are fined, the commission will take into account the sales in Europe and not only in Germany, so it is definitely worse for the companies,” according to Ortiz.

Volkswagen has been cooperating with the European Commission and will continue to do so, the company, whose namesake VW as well as Audi and Porsche brands have been implicated in the cartel probe, said in an emailed statement.

'Normal' Step

“This initiation of proceedings is a normal, process-driven step that Volkswagen has been expecting,” the carmaker said.

Daimler also said it’s cooperating with authorities. The Mercedes-Benz maker has filed a leniency application, it said, meaning it’ll act as a key witness in the probe in exchange for a reduction in potential fines. The carmaker noted the EU investigation didn’t involve allegations on price fixing.

BMW is also cooperating with the commission, saying in an emailed statement that it’s important to distinguish between a possible violation of antitrust law and “targeted manipulation of exhaust gas purification,” because the latter is not part of the probe.

VW Challenges

The start of the EU probe adds to VW’s ongoing legal and regulatory woes. In the coming months, VW will have to deal with at least a half-dozen court actions stemming from its use of software to cheat on diesel emission tests.

After putting aside some $32 billion to settle lawsuits and pay damages, VW faces more than $10 billion in further claims from disgruntled investors and customers -- as well as untold damage to its reputation as top executives risk being hauled before the court. At the same time, Daimler has agreed to recall some 774,000 vehicles in Europe to improve emissions performance.

BMW has agreed to pay a 10 million-euro ($11.7 million) fine, after an investigation found the company had installed the wrong emissions software in a limited number of vehicles by accident.

By Aoife White

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