Diesel Emissions Issues Continue To Plague The European Automotive Industry

Guy Robson, partner at Keller Lenkner UK, discusses Dieselgate and how the past continues to haunt the car industry.

In July this year, the European Commission fined the Volkswagen Group (which includes Volkswagen, Porsche and Audi) and BMW €875 million for breaching EU competition law by colluding in a cartel with Daimler (Mercedes-Benz’s parent company), formed to suppress clean emissions technology being deployed in diesel vehicles. Daimler itself avoided a very significant €727million fine from the European Commission for its part in the technology suppression cartel by informing the authorities of its existence.  

The “Dieselgate” scandal (which concerns the use of defeat device software installed in diesel vehicles and allows vehicles to pass emissions tests when they should not have) has already seen Volkswagen and Daimler pay out billions of pounds in fines and settlements around the world to date, yet both manufacturers problems are far from over as they continue to face significant legal actions brought by consumers in the UK and other European jurisdictions. The revelation that the same manufacturers at the heart of Dieselgate were also colluding at the same time in illegal anti-competitive behaviour designed to restrict emissions technology, highlights the lengths to which car manufacturers were prepared to go to protect their share of the market for diesel vehicles. It is clear that not only did these manufacturers put their own interests above their customers’ by cheating emissions testing regimes designed to protect the health of the population, as well as the environment, but that they agreed not to implement the most effective clean emissions technology available for their own commercial gain. 

Margrethe Vestager, the European Commission’s executive vice-president in charge of competition policy, said that “the five car manufacturers Daimler, BMW, Volkswagen, Audi and Porsche possessed the technology to reduce harmful emissions beyond what was legally required under EU emission standards,” adding that the European Commission’s decision “is about how legitimate technical co-operation went wrong,” when it veered into collusion, which “is illegal under EU antitrust rules.” 

Volkswagen has indicated that it is considering appealing the decision, though its window for doing this will shortly close. The company told Forbes of its view that the Commission is “breaking new legal ground with this decision, because it is the first time it has prosecuted technical cooperation as an antitrust violation.” All the other manufacturers involved, including Audi and Porsche, have admitted their involvement in the cartel and have agreed to settle with the Commission. 

The fines imposed by the Commission in this matter could well have been higher than they were since the Commission was taking into account the novel nature of its case when deciding the appropriate level of fine (it is the first time the Commission has issued a fine for technical cooperation rather than market sharing or price fixing). When asked about the comparatively low level of the fines in respect to the very high turnover of the companies involved, Ms Vestager said, “we have never had a cartel where the collusion was to restrict the use of a technical element. It is fair that when we have a novel case on the one hand, the illegal behaviour is being fined, while at the same time recognising that it may have been more uncertain if or if not this was illegal.”

The Commission found that the manufacturers colluded between 2006 and 2014, during which time the companies deliberately agreed to delay the introduction of cleaner emissions technologies which could otherwise have been rolled out had they been competing properly with one another. Leaving aside the legalistic niceties of the case, the technology in question would have led to cleaner diesel emissions from the vehicles, which would in turn have had a direct impact on people’s health and the environment. To put this in context, studies have shown that almost half of deaths linked to vehicle pollution are caused by diesel emissions, to give just one example of the very real health implications stemming from diesel vehicle emissions.

While the decisions to engage in the emissions technology cartel and install defeat devices in vehicles were taken a long time ago, the true extent of the behaviour of the diesel car manufacturers is only becoming clear now.

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