German Automakers Collusion Against Innovation and Competition Class Action

Just when you thought the story couldn’t get any worse for the reputation of German car makers, this class action names BMW, Volkswagen, Audi, Porsche, and Daimler as defendants. The allegation is that these famed car manufacturers colluded, over a period of twenty years, to keep innovation and competition down while keeping prices up.

Two classes have been proposed.

• The Diesel Premium Class is all persons and entities who, from 1996 to 2017, bought or leased a German automobile with a diesel engine in the US, not for resale, which was made or sold by a defendant, its current or former subsidiary, or a co-conspirator.
• The German Premium Class is all persons and entities who, from 1996 to 2017, bought or leased a German automobile with a gas engine in the US, not for resale, which was made or sold by a defendant, its current or former subsidiary, or a co-conspirator.

The complaint alleges that the five car makers formed the “Fünfer-Kreise” or Circle of Five to create a perception of innovation, competition, and superior engineering to keep prices high on German cars while colluding to reduce competition and stunt initiatives to innovate. Other defendants are named, including Bosch, since it helped enable the cartel and profited from it. The complaint alleges that German auto sales in the US therefore violated the Sherman Antitrust Act and some state antitrust laws, such as California’s Cartwright Act.

According to the complaint, the Circle originated around 1996, when Japanese car makers were ascendant in the US market, and German car makers decided to improve their position by exchanging information about costs, technologies, and design and forging agreements related to development, suppliers, and markets.

The complaint says that the Circle met through working groups of the German automobile association (VDA), where engineers reached secret agreements and shared sensitive information on such topics as propulsion systems, structure, chassis, electronics, and whole vehicles, all of which were central to the purported superiority of German cars. They also met via teleconferences, e-mail, in-person meetings, auto shows, and meeting of other groups such as the German ADA, a trade organization. Volkswagen has admitted that “in the past five years, over 1,000 meetings took place.”

One of the meetings of the cartel was said to discuss the defendants’ desire to reduce costs associated with urea tanks, which relate to emissions. The complaint claims that the resulting agreements limited innovations in emissions control systems were “the impetus for the creation of the ‘defeat device’” in the Volkswagen/Audi “clean diesel” scandal.

After one such meeting, a VW manager wrote, “Everybody wants a limitation … No one wants to report the real motivation of this limitation to the authorities (CARB, EPA).” Since CARB is the California Air Resource Board and the EPA is the US Environmental Protection Agency, the complaint claims, “There can be no mistake that the cartel was thus aimed at California and the United States…”

In 2014, the complaint says, Daimler secretly reported its collusion to German authorities, hoping for lenient treatment in exchange for cooperation, and in 2016, Volkswagen admitted it had participated as well. The complaint says that Germany’s Federal Cartel office last year raided the offices of six companies, including some of the defendants in this case, investigating a steel cartel, which may relate to their collusion to extract price concessions from steelmakers. The European Commission (EC) is also investigating the car makers’ conspiracy.

Far more information is contained in the complaint than can be summarized in a few paragraphs. If you’re interested in knowing more, click below to read the 48-page complaint. 

Article Type: Lawsuit
Topic: Consumer
Tags: Antitrust, Your Car