There was more bad news for the automotive industry last week when the Japanese manufacturer Hitachi Automotive Systems was handed a $55.5 million criminal fine in the US for fixing the price of shock absorbers.
The company reached a plea agreement with the US Department of Justice as part of a long-running investigation into price fixing in the auto parts industry.
This comes against the background of the Volkswagen emissions scandal. In January, the US Environmental Protection Agency (EPA) filed a civil lawsuit against VW. It alleged that the company knew (or should have known) about the installation of software in various 2.0 and 3.0 litre diesel cars that switched the engine into a low emissions mode when it detected that it was undergoing an emissions test.
The suit alleged that over 500,000 cars in the US were affected. Given that fines equivalent to £28,000 per affected car, plus further fines equivalent to £25,500 per day of violation, could be imposed, this exposed VW to potential liability of up to £61 billion in the US alone.
At the end of June, VW reached a partial settlement in regards to the 2.0 litre cars, agreeing to pay over $10 billion to affected consumers, $2.7 billion to establish a fund designed to mitigate harm caused by the excess nitrogen oxide and a further $2 billion to be invested in promote zero emission cars and technologies.
Given that a further settlement will have to be reached in regards to the 3.0 litre cars, and with the potential for regulators around the globe taking separate action, the German auto giant is not out of the woods yet.
EU Commission action
The EU Commission has also fined a number of car component manufacturers over the past few years. There was the recent record €2.9 billion fine for a truck cartel (as we discussed here). Separately, in January the Commission found Denso, Mitsubishi and Hitachi guilty of price fixing in relation to starters and alternators (as we discussed here). Demonstrating the tough stance on cartel offences, the Commission found that even though the formation and operation of the cartel took place outside the EEA, European consumers were affected as the parts were sold directly to car manufacturers within the EEA.
Hitachi was fined €27 million, and Mitsubishi €110 million, while Denso were granted immunity for revealing the arrangement to the Commission. This is another example of the destabilising effect of the whistle-blower immunity provisions on cartels, as the incentive to avoid large fines prompts companies to race to reveal their involvement before one of their collaborators does.
MasterCard class action
As well as the immediate fines, these competition law violations can now lead to huge class action damages law suits in the UK under the Consumer Rights Act 2015. The most prominent example of this is MasterCard, which is facing a claim of around £19 billion (in the process of being revised to £14 billion) as a “follow-on” from the EU Court of Justice’s decision in 2014 that the credit card giant’s so-called ‘interchange fees’ were unlawful. When a company is found to have violated EU law in this way, a class action can be raised on behalf of consumers and, since the offence has already been proven, the dispute focuses on the amount of loss suffered by consumers. The MasterCard action is likely to come to a head in 2018 (unless a settlement is reached) and, depending on the outcome, UK consumers may be able to claim their share of compensation.