EU says BMW, Daimler and VW colluded – threatens billions in fines [Update]

Chris Davies - Apr 5, 2019, 10:27 am CDT
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EU says BMW, Daimler and VW colluded – threatens billions in fines [Update]

BMW, Daimler, and VW have been accused of colluding on emissions cheating by the European Union antitrust regulators, the first step in process that could lead to huge fines for the automakers. According to the European Commission, the three car companies worked together to restrict competition around greener internal combustion engines.

Regulators issued what are known as Statement of Objections to BMW, Daimler, and VW Group today. That effectively sets out a preliminary view of the Commission’s thinking: in this case, that the three automakers colluded.

However, a Statement of Objections does not mean the same as a conclusion in the investigation, which saw surprise inspections of BMW, Daimler, Volkswagen, and Audi premises in late 2017. Documents and other materials were seized, and come September 2018 an in-depth investigation was opened. “The sending of a Statement of Objections does not prejudge the outcome of the investigation,” the EU points out.

Under the microscope are two technologies in particular, which the Commission says it has “concerns” about. First, for diesel cars, there’s the selective catalytic reduction (SCR) system, which is designed to reduce nitrogen oxides (NOx). The SCR injects urea into the exhaust gas stream, to cut the potentially harmful gases.

However, the Commission alleges that the automakers coordinated the amount of urea dosing – also known as AdBlue dosing – as well as the urea tank sizes and refill ranges, over the period between 2006 and 2014. That was done “with the common understanding that they thereby limited AdBlue-consumption and exhaust gas cleaning effectiveness,” antitrust regulators suggest.

For gasoline cars, meanwhile, the technology in question is the “Otto” particle filters, or OPF. These help cut particle emissions from direct injection gasoline cars. “In the Commission’s preliminary view, BMW, Daimler and VW coordinated to avoid, or at least to delay, the introduction of OPF in their new (direct injection) petrol passenger car models between 2009 and 2014, and to remove uncertainty about their future market conduct,” the investigators say today.

Automakers are, the EU highlights, perfectly within their rights to collaborate on technologies. However that’s different, it argues, from behaviors designed to restrict competition on innovation. The result, it alleges, was that consumers were denied the opportunity to buy less polluting cars, even though the technology to achieve such reductions was available for manufacturers if they so chose.

“Companies can cooperate in many ways to improve the quality of their products,” Margrethe Vestager, commissioner in charge of competition policy, said today of the Statement of Objections. “However, EU competition rules do not allow them to collude on exactly the opposite: not to improve their products, not to compete on quality. We are concerned that this is what happened in this case and that Daimler, VW and BMW may have broken EU competition rules.”

“As a result,” Vestager concludes, “European consumers may have been denied the opportunity to buy cars with the best available technology. The three car manufacturers now have the opportunity to respond to our findings.”

Notably, this investigation focuses on the potential competition law violations, rather than possible environmental legislation breaches. That makes it independent from other ongoing investigations into technologies used in the so-called “dieselgate” scandal, where devices were secretly employed in certain vehicles to automatically shift them into a lower emissions mode when testing was underway.

The penalties, should any of the automakers be found to have committed antitrust behaviors, are severe. The EU can impose a fine of up to 10-percent of a company’s annual worldwide turnover.

For BMW Group, based on 2018 revenues, that could mean a fine of up to around $11bn. For Daimler – the parent company of Mercedes-Benz – the figure could be higher, at up to $19bn. VW Group – which includes brands like Volkswagen and Audi – could be even more impacted, with a total potential fine of $26bn based on its 2018 global revenues.

Update: BMW has issued a statement, saying that it “will contest the EU Commission’s allegations with all legal means if necessary.” However, in accordance to its financial reporting requirements, it also recognizes that “a significant fine” could be levied by the Commission, “likely to exceed” one billion euro:

The Statement of Objections leads the BMW Group to believe that it is probable (“more likely than not”) that the EU Commission will issue a significant fine. According to the International Financial Reporting Standards, this results in an obligation to recognise a provision.

Therefore, following its review of the Statement of Objections, the BMW Group will recognise a provision, which is likely to exceed €1 billion. This effect will negatively impact the financial results in the first quarter of 2019. The company’s review of the Statement of Objections and the inspection of files will take some time. As a result, a final evaluation of the financial impact is currently not possible.


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