Have carmakers been caught in Europe’s biggest corporate scandal?

April 16, 2019

A massive cartel involving five leading German carmakers has been alleged, and, if true, the early indications are that it could result in the highest antitrust fines in EU history – totalling more than €5 billion. Preliminary investigations by the European Commission have concluded that German companies colluded to delay the development of clean emissions technology. T&E says that, if proven, the findings should lead to more than just fines against the guilty companies.

In July 2017, the German news magazine Der Spiegel published allegations suggesting that leading German carmakers had secretly worked together to slow down development of technology that reduces harmful emissions. Now the Commission investigation has published its ‘preliminary view’ that there is evidence of such collusion. The five carmakers are BMW, Daimler and the three brands who fall under the Volkswagen umbrella: VW, Audi and Porsche.

BMW has since issued a profit warning, saying it would budget for up to €1 billion to cover fines from the Commission. The Financial Times newspaper quoted market analysts Citi as saying Volkswagen would need to budget for €2.4bn in fines and Daimler €1.7bn. Although these are worst-case scenario estimates, they suggest the scandal could break the EU’s record for corporate fines.

In 2016, five European truck manufacturers were found guilty of colluding to fix the prices of trucks between 1997 and 2011. The fines issued by the Commission totalled €3.8 billion, which was the record until Google was fined €4.3bn last year. If the Citi estimates prove accurate, the fines in the car collusion scandal could exceed €5bn.

T&E director William Todts said: ‘It would be indefensible if the German car industry had colluded to fit useless emissions controls, as the preliminary findings indicate. That would mean Europeans were breathing poisonous air that could and should have been avoided. The EU must impose heavy fines on the colluding companies, but it mustn’t stop there. We need to clean up the 43 million dirty diesels that are on our roads today. The roadmap that the European Commission presented a few weeks ago, and which T&E has analysed, shows how this can be done.’

The accusations against the five are that they broke EU ‘antitrust’ rules by working together on technology ‘aimed at restricting competition on innovation’ and thus ‘denied consumers the opportunity to buy less polluting cars’. The carmakers were charged with effectively using defective emissions technology in their diesel cars over an eight-year period (2006-14) by limiting the scope for using the NOx reduction agent AdBlue, and in their petrol cars over five years (2009-14) by delaying cleaner particulate filters. Cooperation is allowed under EU rules when it is for the benefit of improved technology and emissions, but not to obstruct such improvements.

Daimler, the parent company of the luxury brand Mercedes, was involved in both the truck cartel and the car collusion scandals. Volkswagen was involved in the ‘Dieselgate’ scandal in 2015 when it emerged the company had been using special software to cheat type approval emissions tests.

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