EU Commission Breaks New Ground by Fining German Carmakers for Participation in a Cartel Restricting Technical Development

Wilson Sonsini Goodrich & Rosati

Wilson Sonsini Goodrich & Rosati

The European Commission (EC) issued a EUR 875 million (USD 1.05 billion) cartel fine against German carmakers, namely BMW, Audi, Porsche, and Volkswagen (the latter three are all part of the Volkswagen Group). Daimler was able to avoid a EUR 727 million (USD 876 million) fine by successfully applying for leniency and revealing the cartel conduct to the authority. Most notably, the EC did not charge the companies for "classical" cartel practices such as price fixing, market sharing, or customer allocations but, for the first time in its decision practice, for secretly agreeing on restrictions of technical development. This may have sweeping consequences for many companies engaging in industry collaboration on innovative technologies.

The carmakers had established a working group under the umbrella of industry associations, discussing technologies to eliminate harmful nitrogen oxide (NOx) emissions from diesel passenger cars. The EC found that participants had agreed not to compete on offering technology to consumers that was cleaner than required by law. Specifically, the car makers had discussed standardized tank sizes and ranges for AdBlue tanks (containing urea to remove NOx emissions) and agreed on average AdBlue consumption. Further, they were found to have exchanged sensitive information on these elements, removing uncertainty about each other's future conduct.

The carmakers claim that the results of the discussions were never implemented in practice and were thus unable to affect competition. This was, however, deemed irrelevant by the EC, which qualified the conduct as an infringement of competition law "by object," removing the necessity to prove such effects (similar to "per-se" infringements under U.S. cartel laws).

European cartel law (Article 101 TFEU) explicitly prohibits agreements that "limit or control production, markets, technical development, or investment." Nonetheless, the prosecution of companies for agreeing to withhold technical innovations is breaking new legal ground with potentially broad implications far beyond the automotive sector. All companies engaging in standardization efforts or other tech cooperation with effects for the EU may want to check their compliance standards.

The EC is aware that it is walking the tightrope between ensuring competition and stifling technical innovation through sowing uncertainty, including in industries seeking to reduce their environmental impact. The authority therefore announced to publish a guidance letter provided to the carmakers to ensure cartel law compliant technical cooperation. At the same time, Commissioner Vestager was quick to add that the decision does not undermine companies' ability of joint lobbying: "One is allowed to lobby, and one is also allowed to lobby together."1

Notably, the EC also chose to walk the tightrope in its fine calculation. In an unprecedented move, the authority granted all cartel-participants a blanket 20 percent fine reduction based on the absence of prior decisional practice prosecuting this type of cartel behavior. On the one hand, this deviates from the EC's previous practice in "novelty-cases" to issue symbolic fines2 or not to impose fines at all,3 creating a third type of "novelty-discount." On the other hand, the authority manages to have its lunch and eat it too by granting the novelty-discount, despite also arguing that the illegality of the conduct was clear from the letter of the law and even infringed competition law by object, i.e., by its very nature.

All fined carmakers had settled the case with the EC but can still appeal the decision before EU courts until mid-September.

[1] Quote from MLex Insight, EU guidance to German carmakers on tech cooperation to be made public, Vestager says, published July 8, 2021.

[2] See the EC’s guidelines on the method of setting fines, OJ 2006 C 210/2, para. 36.

[3] See, e.g., EC, Case AT.39985 – Motorola – Enforcement of GPRS SEPs, para. 561, in which the EC chose not to impose a fine due to the absence of EU decisional practice and diverging handling of SEPs by national courts.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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