German Car Companies May Have Colluded to Fix Price of Diesel Parts

To date, the Volkswagen scandal over diesel emissions (and lying to the California Air Resources Board and the EPA) has mostly been contained to VW and, in a few cases, other brands Volkswagen Group owns like Porsche and Audi. But now it’s possible BMW, an entirely separate company, may have colluded with the various Volkswagen Group brands to fix the price of diesel emissions systems and other parts.

VW admitted to “possible anti-competitive behavior” in a letter sent to the Federal Cartel Office (Bundeskartellamt) in Germany, Reuters, via Der Spiegel, reports. The cartel office is responsible for oversight and maintaining fair competition between manufacturers. The word “cartel” is often used in the US to refer to drug operations or other negative connotations, but that’s not how it’s sometimes used elsewhere.

“This new chapter in the diesel saga needs to be taken seriously,” Evercore ISI analyst Arndt Ellinghorst said in a note. “Our conclusion is that there might be a risk of several hundred millions or even low billions.”

diesel emissions

To be fair, researchers have been charting the vast difference between claimed and actual diesel pollution records for quite some time.

Der Spiegel reports that “around 200 employees sitting in 60 industry committees discussed vehicle development, brakes, petrol and diesel engines, clutches and transmissions as well as exhaust treatment systems.” The auto manufacturers also apparently agreed to use smaller tanks to hold the AdBlue liquid, a critical portion of removing diesel pollution before it spews out the tailpipe. They also discussed the price of various components, and which suppliers they were opting to use.

This kind of action, if true, is practically the definition of illegal collusion. Think about it like this: If you have two options, Supplier A and Supplier B, and the automotive industry collectively agrees to give 90 percent of its business to Supplier A, Supplier B is almost certainly going to fail — not because it did anything wrong, but because some executives from the various companies in question knew and liked Supplier A and had a stronger relationship or personal history with the company.

For a CPU analogy (and for once, a CPU analogy makes sense), part of AMD’s anti-trust lawsuit against Intel involved how AMD had offered HP one million free processors to use in Athlon 64 systems. HP turned the offer down, because even one million free chips from AMD wouldn’t offset the punishment they’d take from shipping more AMD hardware and losing their Intel kickback discount on Intel CPUs as a result.

News also broke today that the EU Industry Commissioner, Elzbieta Bienkowska, dropped a bomb on VW today, ordering the company to either bring its entire vehicle fleet into pollution compliance by the end of the year, or else face the entire decommissioning of its fleet across the whole EU. From that report, it looks like VW, Audi, and Porsche have been collectively stalling; it took investigation from public prosecutors to expose the company’s fraud.

In the US, the VW scandal is mostly considered over. In the EU, on the other hand, it looks like things are just getting started.

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