Two-Decade ‘Cartel’ Allegations Result In Suit Against Top German Automakers In U.S.

In allegations that widen the scope of the latest scandal to hit the nation’s auto industry, allegations of colluding for nearly two decades to limit the pace of technological advances in their vehicles and stifle competition have bene placed against German’s major automakers in a U.S. lawsuit of acting as a cartel.

According to a complaint filed Friday in San Francisco federal court, from 1996 through at least 2015, BMW AG, Daimler AG, Volkswagen AG and its Audi and Porsche brands shared competitive information about vehicle technologies with one another.

“These coordinated actions enabled the manufacturer defendants — the self-named ‘Fünfer-Kreise,’ or Circle of Five — to impose a German automobile premium on consumers premised on superior German engineering, while secretly stunting incentives to innovate,” the suit alleges.

The companies agreed to limit the development of vehicle systems, including emissions control, says the suit, which seeks class-action status on behalf of U.S. drivers. The development of so-called “defeat devices” used by Volkswagen to cheat on pollution tests, was allegedly the result of the arrangement.

And also part of the “technological innovations inhibited” by the pacts were the operation of convertible roofs, body design, brakes and electronic systems, plaintiffs claim.

And named as a defendant in the lawsuit was the supplier of VW’s cheat software, Robert Bosch Gmbh.

“In secret, closed meetings, the manufacturer defendants identified certain key suppliers—such as Robert Bosch GmbH—that would supply the Five with a specific product,” according to the suit. “Suppliers not selected were damaged by failure to participate in the market.”

“We consider this class action suit to lack merit,” Han Tjan, a spokesman for Daimler, said in an emailed statement. “We will defend ourselves by all legal means.”

Their companies had no comment, said BMW spokesman Kenn Sparks and VW’s Jeannine Ginivan. There were also no comments available from the other companies.

For years, the companies may have colluded on technology, costs and supplier contracts are the claims I Europe which forms the basis of the complaint. They were reviewing information about the matter, European and German officials said last week.

In areas including development of gasoline and diesel motors, brakes, transmissions and potentially the size of urea tanks used in diesel autos, the companies held discussions involving more than 200 employees in 60 working groups, claimed German magazine Der Spiegel, which was the first to report the claims.

The second in the U.S. to allege the anti-competitive actions by the companies is the suit filed on Friday. Alleging that German automakers conspired over 20 years to increase prices of luxury vehicles while sharing technology to skirt emissions norms and created an anti-competitive culture in the U.S., drivers filed a similar class-action suit in New Jersey federal court on Tuesday.

The use of AdBlue tanks containing a urea-based solution that, when injected into the diesel exhaust, cleans harmful pollutants is central to the conspiracy allegations. According to the New Jersey complaint, allegations is that secret agreements to install cheaper, smaller-sized tanks than the size needed to meet toughening U.S. Emissions standards had been developed between the carmakers.

“Volkswagen was insistent that the agreements on AdBlue tank size were necessary to ensure that U.S. emissions regulators did not scrutinize its emissions control systems,” according to the filing. ”Volkswagen knew that it could still pass U.S. emissions testing with a 16-liter tank because it had designed a work around that enabled its vehicles to pass emissions testing without adequately sized AdBlue tanks.”

(Adapted from Bloomberg)

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