Cartels Aren’t Just for Drug Traffickers

mercedes-logoDaimler (DAIGn.DE), Paccar (PCAR.O) and two other truck makers were fined a record 2.9 billion euros ($3.2 bln) by EU antitrust regulators on Tuesday for taking part in a 14-year cartel.

The European Commission said the companies fixed prices and coordinated on the timing of introducing new emission technologies in 1997 and on passing on costs of those new technologies. Its overall fine was more than double the previous record for a group operating a cartel in the EU. Daimler received the biggest fine at 1.01 billion euros while Volkswagen-owned (VOWG_p.DE) MAN escaped a penalty because it had alerted the cartel to the European Commission. “It is not acceptable that MAN, Volvo/Renault, Daimler, Iveco and DAF, which together account for around 9 out of every 10 medium and heavy trucks produced in Europe, were part of a cartel instead of competing with each other,” European Competition Commissioner Margrethe Vestager said in a statement. Volvo, Sweden’s biggest company by revenue, received a 670.45 million euro fine and Iveco, which is part of Italian truck and tractor maker CNH (CNHI.MI) Industrial, was fined 494.61 million euros.

DAF Trucks, owned by Paccar (PCAR.O), was handed a penalty 752.68 million euros. The four companies admitted wrongdoing in return for a 10 percent cut in the penalties imposed. Scania did not settle and will continue to be investigated. The highest fine prior to the truckmakers’ sanction was 1.4 billion euros levied against a TV and computer monitor tubes cartel in 2012. Campaign group Transport & Environment’s director William Todts said regulators should do more to improve the environment.

“Truckmakers have to change, but so do regulators; they need to create competition on environmental performance. Introducing fuel economy standards is one key way of doing that,” he said. Truck makers have invested heavily in recent years to make their engines compliant with so-called Euro VI standards, which focus on reducing health-threatening nitrogen oxides. The Commission has introduced more stringent regulation to curb pollution of health-threatening nitrogen oxides and introduced it in stages. So-called Euro 1 standards were unveiled in 1993 and since the start of 2014 any new vehicle must comply with Euro VI standards. In setting the level of fines, the Commission took into account the respective companies’ sales of medium trucks and heavy trucks in the EEA, as well as the serious nature of the infringement, the high combined market share of the companies, the geographic scope and the duration of the cartel. Under the Commission’s 2006 Leniency Notice, MAN received full immunity for revealing the existence of the cartel, thereby avoiding a fine of around €1.2 billion. For their cooperation with the investigation, Volvo/Renault, Daimler and Iveco benefited from reductions of their fines under the 2006 Leniency Notice. The reductions reflect the timing of their cooperation and the extent to which the evidence they provided helped the Commission to prove the existence of the cartel. Under the Commission’s 2008 Settlement Notice, the Commission applied a reduction of 10% to the fines imposed in view of the parties’ acknowledgment of their participation in the cartel and of their liability in this respect.

Any person or firm affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court and Council Regulation 1/2003 both confirm that in cases before national courts, a Commission decision constitutes binding proof that the behaviour took place and was illegal. Even though the Commission has fined the companies concerned, damages may be awarded without being reduced on account of the Commission fine. The Antitrust Damages Directive, which Member States have to implement in their legal systems by 27 December 2016, makes it easier for victims of anti-competitive practices to obtain damages. The more stringent emissions standards have forced truck makers to invest in expensive technologies such as exhaust treatment filters.  Daimler (DAIGn.DE) said it had made provisions to cover a billion-euro cartel fine imposed by the European Commission.

EU antitrust regulators handed down a record 2.93-billion-euro ($3.24 billion) fine on truck makers Daimler, Paccar (PCAR.O), Volvo/Renault (VOLVb.ST)(RENA.PA) and Iveco (CNHI.MI) for taking part in a cartel related to emissions-reducing technology. “We can confirm that a settlement has been reached with the EU Commission in the antitrust investigation. The fine that has been imposed (on Daimler) amounts to approximately 1.009 billion euros,” Daimler said in a statement, adding that it had made provisions to cover the fine. Last week, Daimler said it had set aside 400 million euros to cover unidentified legal costs.

The European Commission further said Daimler, DAF, Iveco, MAN and Volvo/Renault colluded over 14 years to fix prices. VW-owned MAN avoided a fine as it blew the whistle on the cartel. Daimler said it regretted these occurrences and took appropriate action some time ago. “The company has strengthened its internal controls and has intensified its regular and comprehensive employee training with regard to antitrust law and competition law,” it said in a statement. It is the highest penalty the EU has ever imposed on a cartel, and more than double the previous record. “These truck makers colluded for 14 years on truck pricing and on passing on the costs of compliance with stricter emission rules,” the EU statement said. EU competition commissioner Margrethe Vestager, said the fines were a clear “message to companies that cartels are not accepted.” The truck manufacturers were responsible for nine out of 10 of the medium and heavy trucks produced in Europe, she added.

But the EU said the collusion was not aimed at avoiding or manipulating compliance with the new emission standards, nor did its investigation find any evidence of the use of emissions cheating software. The investigation found that between 1997 and 2004, meetings were held at senior manager level, sometimes at the margins of trade fairs or other events, to discuss their plans. This was complemented by phone conversations. From 2004 onwards, the cartel was organised via the truck producers’ German subsidiaries, with participants generally exchanging information by email.  Daimler received the biggest fine at €1.01bn. Sweden’s Volvo was fined €670.4m and Iveco, part of Italian truck and tractor maker CNH Industrial, was fined €494.6m. DAF Trucks, owned by the US group Paccar, received a €752.7m fine. The four companies admitted wrongdoing in return for a 10% cut in their sanctions. Scania, another Volkswagen subsidiary, did not settle and will continue to be under investigation.

There are more than 30 million trucks on European roads, which account for around three quarters of inland transport of goods in Europe.