Published on July 9th, 2021 | by Subhash Nair0
Understanding The 2021 Emissions Collusion Scandal Involving VW Group, BMW Group and Daimler
These three brands were involved in an unprecedented technical collusion case with the EU.
Crazy to think that dieselgate’s repercussions are still unfolding to this day. Just yesterday, the European Commission fined two of the largest German carmakers €875 million… BMW and Volkswagen Group. However, there’s more to this story than just another emissions-related fine.
The EU regularly sets emissions standards. These are the bare minimum required by companies in order to sell new cars in the market. They’re done in order to improve the air quality over time, thereby improving the quality of life. While the standards are harsh, they’re not impossible to meet.
By the late 2000s, all three major German manufacturers were independently able to deliver powertrains that met AND EXCEEDED the EU’s emissions requirements.
Instead of competing and delivering the best, cleanest engines to customers and therefore improving the quality of air, they did something else. Volkswagen Group, BMW Group AND DAIMLER (who owns Mercedes-Benz), were regularly meeting up between 2009 and 2014.
Why were Volkswagen Group, BMW Group and Daimler meeting up?
In these regular “technical meetings”, the three companies would agree to limit themselves to only what was legally required by the EU’s current emissions standards. They recognised that they each could do better than the bare minimum that was asked of them, but decided it would be more profitable to keep their costs down as a collective.
Was this illegal?
The EU treats itself as a single market, and that can often spawn monopolistic or oligopolistic situations. When this happens, competition becomes unequal – smaller businesses will not be able to compete on price and consumers may not have access to the best possible goods and services, as there is no alternative.
To stop this from happening, the EU has very strict competition laws. No collusion to price fix or market sharing agreements are allowed. However, this particular case is new ground for the EU. It’s the first time companies are being fined for collusion on technical elements. They’re simply agreeing not to compete on the grounds of emissions.
Is it really so wrong?
Depends on who you ask. If you ask BMW Group, their stance is that no, it’s not wrong. In a post that they’ve since removed, they stated:
“The BMW Group made it clear from the start of the antitrust proceedings that it considered the allegations made at that time to be exaggerated and unjustified. For this reason, unlike the other competitors involved, the company did not prematurely admit its guilt by applying for leniency.”
If you ask Daimler, or Mercedes-Benz, as they’re known as now, you might get a different answer… And that’s where things get interesting.
Daimler Tattled, And Got Out Of The Biggest Fine
BMW Group settle for €372,827,000 while VW Group had to pay €502,362,000. How much Daimler pay? Nothing. They could have been slapped with up to €727,000,000 in fines. However, this did not happen. Why?
Because they were the ones who blew the whistle and assisted the EU with the investigations! Imagine that! They’re all rival companies anyway, so it was probably not in Daimler’s interest to behave honourably amongst its band of co-conspirators. These companies may have joked and poked at each other in good spirit in the past, but maybe that era is over.
But who knows? The act of collusion shows these companies model their behaviour after complex pricing models. Maybe even this arrangement was the one that was most profitable. Perhaps it was a secret contingency plan – whistleblow, negotiate for lower fines and then share the burden between the three of them.