EU antitrust chief fines VW, BMW €875 mln for restricting competition in emission cleaning

Daimler, BMW Volkswagen Group have breached European Union’s antitrust rules by colluding on technical development in the area of nitrogen oxide cleaning, the EU’s antitrust… Read More »

Daimler, BMW Volkswagen Group have breached European Union’s antitrust rules by colluding on technical development in the area of nitrogen oxide cleaning, the EU’s antitrust chief  Margrethe Vestager said on July 8, imposing a fine of €875 million. Daimler was not fined, as it revealed the existence of the cartel to the Commission, the EU Commission said, adding that all parties acknowledged their involvement in the cartel and agreed to settle the case.

“Today, the Commission took a decision against five car manufacturers – Daimler, BMW, as well as Volkswagen, Audi and Porsche, which are part of the Volkswagen group. The Commission imposed a total fine of 875 million euros,” Vestager said. “These car manufacturers illegally colluded to restrict competition in the area of emission cleaning technology for diesel cars. This is the first time that the Commission finds that cooperation on technical elements, as opposed to price fixing or market sharing, amounts to cartel behaviour. All companies acknowledged their participation in the cartel and agreed to settle the case. Daimler disclosed the existence of the cartel to the Commission and was therefore granted full immunity from fines,” the EU’s antitrust chief added.

She reminded that 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. But these companies did not meet these expectations. For over five years, the car manufacturers deliberately avoided to compete on cleaning better than what was required by EU emission standards. And they did it despite the relevant technology being available,” Vestager said, adding that the law fixes minimum cleaning standards, which all producers have to respect. “But it still leaves ample room for manufacturers to compete on doing better than the minimum required,” she said.

The SCR-system

Cars emit an exhaust stream of gases into the environment. Some of these gases are harmful both for the environment and for people’s health. One of them is nitrogen oxide (NOx). If you add liquid urea, called “AdBlue” to the exhaust stream, nitrogen oxide turns into harmless water and nitrogen. But this happens only if you add enough of this ‘blue liquid,’ Vestager explained.

“This is what selective catalytic reduction (SCR)-systems in diesel cars do: They clean up the emissions and make them less polluting,” she said.

Already in 2007, European law had introduced minimum standards for nitrogen oxide emissions (so-called “Euro 5” and “Euro 6” norms), which were to be implemented over time as of 2009.

Daimler, BMW, Volkswagen, Porsche and Audi held regular technical meetings, internally referred to as ‘circles of five’, to develop together SCR-systems for diesel passenger cars meeting these EU regulatory requirements. That cooperation allowed them to develop a technology to reduce the nitrogen oxide emissions of new diesel passenger cars and to bring that technology swiftly to the market, to the benefit of consumers and the environment.

The cartel

“Today’s case is about how that legitimate cooperation went wrong. Carmakers developed together a very good technology but decided not to compete on exploiting it to its full potential. By reaching a common understanding to avoid competition on the effectiveness of the SCR-system they breached our competition rules,” Vestager said.

“The carmakers agreed on the size of the AdBlue tanks placed in the diesel cars and on the ranges until the next refill. They also exchanged sensitive information about envisaged AdBlue tank sizes, ranges and average AdBlue consumption of future car models,” she said.

The carmakers knew that injecting more AdBlue could lead to more effective nitrogen oxide cleaning for many car models under certain driving conditions, Vestager said, adding that they knew that they had the technical possibility to clean better than required by law and compete on this important parameter relevant for consumers. “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,” she said.

“In today’s world, polluting less is an important characteristic of any car. And this cartel aimed at restricting competition on this key competition parameter,” Vestager said, adding that through this conduct, the carmakers eliminated the inherent threat that their competitor would do better. “And this threat is a key driver of innovation. It is the essence of a well-functioning market and a guarantee of best possible outcomes, including in terms of quality and product development,” she said.

Vestager stressed that competition and innovation in this space are also essential for Europe to meet its ambitious Green Deal objectives. “And any attempt to restrict competition to the detriment of innovation will make it more difficult to meet these targets.  Today’s decision is an example of the Commission’s determination to pursue any anti-competitive conduct in this space,” she said.

“This case is distinct from the diesel scandal, which was, and still is, prosecuted at national level under various administrative and criminal laws,” she said.

EU antitrust rules do not stand in the way of pro-competitive cooperation between competitors on R&D and product development, Vestager said, adding that such cooperation can bring efficiency gains, for example in the form of a faster development and marketing of improved products because of the combined skills and assets. In the context of this case, the Commission provided guidance to the companies on aspects of their technical cooperation which raise no competition concerns.

“But the dividing line is clear: companies must not coordinate their behavior to limit the full potential of any type of technology. 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,” Vestager said, adding that 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,” Vestager concluded.