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German automakers fined $1 billion for colluding to curb emissions technology

Skirting the requirements had an impact on both people and the environment

Photo (c) josefkubes - Getty Images
Five German automakers -- Daimler (Mercedes-Benz), BMW, Volkswagen, Audi, and Porsche -- have been fined $1 billion (875 million euros) for colluding to restrict competition in emission cleaning for new diesel passenger cars. In handing down the fine, the European Union (EU) said what the car manufacturers did “amounts to cartel behaviour.”

The technology ploy the companies took is new territory for the Commission. In the past, the fines it has handed down to automakers have dealt with price-fixing or market sharing.

All the companies acknowledged their role in the alliance and agreed to settle the case. Interestingly, Daimler -- a key figure in the “Dieselgate” scandal -- is getting off scot-free because it blew the whistle on the others.

The effect on both people and the environment

At the center of the issue are “selective catalytic reduction systems” (SCR) in diesel cars. Those systems are designed to clean up the emissions and make them less polluting. But in skirting that requirement, the EU found that what the automakers did was concerning for both people and the environment.

The Commission said all seemed well after it introduced minimum standards for nitrogen oxide emissions in 2007. Daimler, BMW, Volkswagen, Porsche, and Audi held regular technical meetings to cooperatively develop SCR systems to meet the requirements and quickly bring that technology to the market.

However, it was at that juncture things went wrong. While the automakers worked together to develop the technology, they also decided not to compete with each other so that the systems could be brought to their full potential. Officials said deciding to avoid competition breached the EU’s competition rules.

“They knew that they had the technical possibility to clean better than required by law and compete on this important parameter relevant for consumers,” said Margrethe Vestager, the EU’s Executive Vice President. “Instead, they decided to collude by indicating to each other that none of them would aim at cleaning above the minimum standard required by law.”

Creating a lack of trust with consumers 

Unwinding the consumer impact of this could take some time. The EU said the gambit lasted more than five years, leaving people who purchased a vehicle from one of the accused automakers with unfulfilled expectations.

“Every year millions of new diesel cars worth billions of Euros are sold in Europe. And many more are already in use. Not only users of these cars, but all citizens must be able to trust that car manufacturers compete with one another to reduce harmful emissions from their vehicles,” Vestager said.

While the EU found the ruse disconcerting, officials said the ruling makes it clear that manufacturers have “ample room” to cooperate and compete for the common good on things like research and development.

“Companies must not coordinate their behaviour to limit the full potential of any type of technology,” Vestager concluded. “Companies must not restrict their competition on performing better than what is required by law and they should continue to compete to the benefit of the consumers. Agreeing not to do so is simply illegal. As we have done today, also in the future, if we find that companies have restricted competition in such a way, we will not hesitate to take firm action.”

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