On 8 July 2021 the European Commission fined BMW and the Volkswagen group €875 million for colluding to restrict the use of novel technology to clean diesel emissions (see the Commission press release here). Another participant, Daimler, notified the Commission of the conduct and so received immunity from fines.
The decision concludes a three year investigation and sets a new precedent for imposing fines regarding technical cooperation (an issue we previously considered here). It follows on the heels of the separate 2015 ‘diesel gate’ scandal where VW was found to have manipulated emissions test results. All of the parties ultimately admitted their participation and liability.
As well as breaking new ground on the scope of issues which have been identified as cartel-type activity, it is a further example of the Commission’s willingness to pursue conduct that impedes the development of environmentally-friendly technology. On this point Executive Vice-President Vestager noted “competition and innovation on managing car pollution are essential for Europe to meet our ambitious Green Deal objectives”.
From 2009 – 2014 Daimler, BMW and VW held regular meetings where they discussed the use of selective catalytic reduction (SCR)-technology. SCR-technology eliminates harmful nitrogen oxide emissions in diesel cars by injecting urea (also called ‘AdBlue’) into vehicles’ exhaust streams. Over the five years the manufacturers were found to have co-operated in a sustained plot to use less effective emissions technology than was potentially available to them. They exchanged commercially sensitive information and reached an understanding about each other’s approach to SCR-technology, thus removing uncertainty about each other’s future market conduct.
Specifically, the car manufacturers agreed sizes and ranges for AdBlue tanks as well as reaching consensus on the average estimated AdBlue consumption. This collusion restricted competition on product characteristics and limited technical development. The Commission held the conduct was a by-object infringement, and referenced Article 101(1)(b) TFEU (limiting or controlling product, markets, technical development or investment).
This decision is a timely reminder that companies must determine their own commercial strategy independently of their market competitors. Whilst the Commission continues to recognise the importance of technical collaboration that achieves pro-competitive outcomes (see for example, its recent highlighting of sustainability issues in its review of the guidance on horizontal cooperation agreements) it will not tolerate collusion that threatens innovation, particularly given the ever-growing demand for green technology.
The decision also raises an interesting question as to whether agreeing common technical standards – which can be beneficial to an industry as a whole – can still infringe competition law if they also involve limitations on technological advances. Standard development inevitably involves trade-offs between factors such as cost of manufacture of standard-compliant products, efficiency of different alternatives, compatibility with other related technologies – and at least formal standardisation often involves technology being developed in ‘generations’. In all cases, an inevitable consequence is a crystallisation of a particular solution at a given point in time, with further significant development being deferred for future generations. The issue here is more likely to be the necessity of this form of technical cooperation at all – a small number of competitors getting together to set standards almost inevitably raises significant competition law risks.
Although Article 101(1)(b) TFEU makes clear limiting technical development is a competition law infringement this is the first time it has been the focus of cartel-type behaviour. The Commission will be keen to distinguish this offence from situations where companies legitimately co-operate in order to further innovation and improve product quality. The Commission acknowledges that working together can result in a number of pro-competitive benefits including cost savings and shared know-how, as well as allowing companies to combine complementary assets and skills. This is something that is also important in efficient collaboration to achieve sustainability or other (legitimate) technical goals. As a result the Commission has also given guidance on the aspects of the AdBlue collaboration that do not raise competition concerns. It is to be hoped that this guidance (or a summary) will be made available publicly in due course.