BMW, Daimler, VW Found Guilty of Emissions Collusion

The European Commission finds BMW, Mercedes-Benz parent company Daimler and Volkswagen guilty of collusion in a case investigating the introduction of selective catalytic reduction aftertreatment for diesel engines and particulate filters for gasoline engines.

The three German automakers are accused of participating in a scheme to limit the inclusion of SCR converters and particulate filters on cars sold in Europe. Hazardous particulate emissions, more common with diesel engines, have become problematic for certain gasoline engines now as high-pressure direct-injection systems have gained popularity.

SCR employs urea dosing (marketed by some automakers as AdBlue) in the exhaust stream to minimize nitrogen oxide emissions from diesel engines. The technology is expensive and was the source of VW’s Dieselgate scandal in 2015, in which engineers were convicted of rigging SCR systems to function only when vehicles were being tested by government regulators.

European Commission records suggest Volkswagen Group companies Audi and Porsche also were involved in the most recent scheme, which alleges BMW, Daimler and VW illegally set their own standards and timeline for the introduction of emission technology.

In a statement, the EC – the executive branch of the European Union – says, “The Commission's preliminary view is that BMW, Daimler and VW participated in a collusive scheme, in breach of EU competition rules, to limit the development and roll-out of emission-cleaning technology.”

In handing down a preliminary verdict, the EC accuses BMW, Daimler and VW of “blocking innovation and denying customers the opportunity to buy more environmentally friendly vehicles.”

Commenting on the preliminary verdict, Daimler says: “We are aware that a statement of objections has been issued and are awaiting formal notification. Daimler has been cooperating extensively with the European Commission… at an early stage and does not expect to receive a fine in this matter.”

In a lengthy response, BMW says it is examining in depth the EC’s allegations, and that lawful coordination of industry positions on regulatory matters should not be equated with unlawful cartel agreements.

“Based on current knowledge, the Commission is specifically investigating whether German automobile manufacturers cooperated in technical working groups to restrict competition in development and rollout of emission-reduction technologies,” BMW says in its statement.

Other excerpts from BMW’s response: “Fundamentally, the participating engineers from the manufacturers’ development departments were concerned with improving exhaust gas treatment technologies. Unlike cartel agreements, the whole industry was aware of these discussions – which did not involve any ‘secret agreements’ and did not intend any detriment to customers or suppliers.

“Based on current knowledge, a focus of the European Commission’s proceedings is the allegation that manufacturers reached an agreement on the size of AdBlue tanks for SCR (Selective Catalytic Reduction)-systems. This is said to have restricted competition for the best emission control method for diesel vehicles.

“The fact remains that German automobile manufacturers jointly developed the first generation of an SCR system together with an automotive supplier. This cooperation on SCR development resulted in effective exhaust gas treatment systems rapidly achieving series maturity.

“A further goal of the manufacturers was the establishment of an extensive, customer-friendly AdBlue filling infrastructure over the long term as a pre-condition for the installation of smaller and lighter tanks. Manufacturers and automotive industry associations held talks with the petroleum industry regarding this matter.”

The European Commission confirms VW, alongside Daimler, has provided evidence in the case.

The three automakers can expect big fines if the preliminary finding is confirmed.

Fines for breaking EC competition law is based on company sales. It is limited to 10% of overall annual company sales but may be based on sales by the group to which the company belongs “if the parent of that group exercised decisive influence over the operations of the subsidiary during the infringement period.”

BMW Group, Daimler and Volkswagen Group posted respective revenue of €97 billion ($109 billion), €167 billion ($187 billion) and €174 billion ($195 billion) in 2018.

--with Tom Murphy in Detroit