Introduction
Background
Implementing European Green Deal
Impact
Comment
The European Commission has clearly demonstrated its determination to meet the targets of the European Green Deal after imposing fines of €875 million on BMW and Volkswagen Group (Volkswagen, Audi and Porsche) for violating EU antitrust rules. In a decision issued on 8 July 2021, the companies in question were found to have colluded to restrict the development of AdBlue, a nitrogen oxide cleaning technology that could reduce harmful emissions.
With a budget of approximately €1 trillion, the European Green Deal aims to achieve carbon neutrality across all 27 member states by 2050.
The European Commission found that five car manufacturers (BMW, Daimler, Volkswagen, Audi and Porsche) had breached EU antitrust rules by limiting the development of the selective catalytic reduction (SCR) technology, which eliminates harmful nitrogen oxide (NOx)-emissions from diesel cars through the injection of AdBlue (urea) into the exhaust gas stream.
Such action is explicitly defined as an infringement under Article 101(1)(b) of the Treaty on the Functioning of the European Union (TFEU) and Article 53(1)(b) of the Agreement on the European Economic Area. Even though the five car manufacturers had access to technology that could reduce harmful emissions beyond the legally required EU emission standards, the manufactures colluded to avoid competition.
The manufacturers also exchanged commercially sensitive information, agreed on AdBlue tank sizes and ranges and agreed to a common understanding on the average estimated AdBlue-consumption.
The infringement resulted in the following:
- Volkswagen Group: fined €502.3 million but benefited from a 45% leniency reduction and a 10% settlement discount.
- BWM: fined €372.8 million but benefited from a 10% settlement discount.
- An additional 20% reduction on all fines with this being the first antitrust decision based solely on a restriction of technical development and not on price fixing, market sharing or customer allocation.
- As the whistleblower, Daimler received full immunity and avoided an aggregate fine of approximately €727 million Euro, thus receiving a 100% leniency reduction and a 10% settlement discount.
Fines for technical limitations are new but have always been clearly set out under Article 101 (1)(b) of the TFEU, which prohibits agreements in which parties decide to "limit or control production, markets, technical development, or investment".
Implementing European Green Deal
Competition and innovation related to managing and improving car pollution are essential for Europe to meet the ambitious objectives of the European Green Deal. The European Commission's punishment of the five car manufactures has shown that it does not tolerate collusion on such issues that could compromise efforts to implement the deal. Executive Vice-President of the Commission Margrethe Vestager said that: "This decision shows that we will not hesitate to take action against all forms of cartel conduct putting in jeopardy this goal."
The European Commission does not only consider environmental technology worthy of protection but appears to be placing a special focus on its development and interplay between antitrust, state aid and environmental protection as the global effects of climate change intensify. However, the general rule of not restricting competition by limiting technological development could still be applied in many other areas of technical development.
In addition to hindering the European Green Deal, collusion to prevent technical development gives customers or other affected parties the right to seek damages for financial loss in court.
Suppliers of AdBlue tanks could argue that they could have sold larger and therefore more expensive tanks if the penalised manufactures had not agreed to limit their size.
On the other hand, customers could claim that the collusion caused them to buy cars of inferior quality, compared to other diesel vehicles with larger AdBlue tanks. This would constitute a product defect and the damages could be calculated as the inferior vehicle loses its value. It remains to be seen what impact the exchange of commercially sensitive information may have for customers.
Finally, a thus far unconfirmed aspect of the collusion is the use of defeat devices. In similar cases, such as the Volkswagen emissions scandal in 2015, car manufacturers have been found to use defeat devices, which stop or limit the emission controls of a vehicle and can thereby cheat regulatory testing. Such devices are in breach of Article 3(10) of Regulation 715/2007.
The European Commission did not find any indication that the parties had also agreed on the use of these devices, but further investigations are anticipated to reveal that the use of small AdBlue tanks could only work in connection with this type of software.
BMW, Daimler and Volkswagen Group not only agreed to stop any further research into emission controls, they also refrained from using existing technologies that could better protect the environment and humanity.
The fines therefore reflect the misuse of the kind of technical cooperation that the European Commission typically welcomes. Agreements on joint research initiatives or the development of the results of research, up to the stage of industrial application, generally do not fall within the scope of Article 101(1) of the Treaty. However, agreeing not to carry out further research and development in the same field and thereby foregoing the possibility of gaining competitive advantages over the parties may fall within Article 101(1).
For further information on this topic please contact Sebastian Jungermann at Arnecke Sibeth Dabelstein by telephone (+49 40 31 779 70) or email ([email protected]). The Arnecke Sibeth Dabelstein website can be accessed at www.asd-law.com.