You will recall that two years ago Volkswagen got in $14.7 billion worth of class action trouble for rigging software in its diesel cars to fake compliance with U.S. emission standards. The
We now learn that Volkswagen didn’t act alone.
Something rotten in Stuttgart
The German weekly news magazine Der Spiegel revealed over the weekend that, starting in 2006, Volkswagen teamed up with its Teutonic rivals BMW and Mercedes-Benz (Daimler) to avoid competing for customers.
Der Spiegel points particularly to the car makers’ savings of 80 Euros ($93) a vehicle from an agreement to limit the size of tanks holding the juice (mostly urea) allowing the emissions system to neutralize the nasty nitrogen oxide (NOx) that diesel engines emit. As a result, the cars had too little urea to knock out all the NOx. And that in turn made the software cheat necessary in order to obscure the vehicles’ failure to meet NOx emissions standards.
As Forbes wryly points out, when “you make 10 million cars a year, those 80 Euros quickly turn into real money.”
Ratting out the competish
Der Spiegel reports (with thanks to Google translator) that the cartel started decades ago:
The agreements of German car manufacturers are likely to form one of the largest cartel cases in German industrial history. They began in the 1990s and were extended to more and more subjects, probably because offenses against competition law in the [early] days were regarded as rather harmless rule violations, comparable to wrong parking.
The cartel came to light when Volkswagen turned itself in a few weeks ago. The company, which also owns Audi and Porsche, had turned over documents to Germany’s Federal Cartel Office in connection with an investigation of the steel industry. Der Spiegel notes:
Volkswagen itself then searched through all the documents that could be in this context and made them available to the cartel guards in Brussels and Bonn. This was by no means due to insight or remorse. The company wanted to take advantage of its last chance to get as far out of the matter as possible – by betraying everything and whistling the old partners.
(I guess “cartel guards” refers to antitrust enforcers and “whistling the old partners” means blowing the whistle on them.)
But the Mercedes-Benz folks also clamored to confess. Noting that which one begged for mercy first will determine which of them gets more lenient treatment, Der Spiegel concludes that in “this case, Daimler and Volkswagen are now competing with each other.”
What happens next
In the coming days, we will likely see a deluge of cases against Audi, BMW, Mercedes-Benz, Porsche, and Volkswagen.
They will at first mainly consist of putative class actions by individual owners of diesel cars and light trucks. Those cases will principally seek damages under state antitrust, consumer protection, contract, and unjust enrichment laws, but they may also request injunctive relief under federal antitrust law. Indirect purchasers like them do not have standing to,sue for damages under the federal Sherman Act.
Actions by dealers and other direct purchasers of Audi, BMW, Mercedes-Benz, Porsche, and Volkswagen vehicles will proceed under section 1 of the Sherman Act. These cases typically have the most value but take longer to develop and organize. Dealers have ongoing relationships with the manufacturers and tend to take a more circumspect approach to joining in litigation.
A big question will concern in which venue the dozens of cases from around the country will end up. That decision will fall to the Judicial Panel on Mulidistrict Litigation. Within several months, it will rule on which U.S. district court and which district judge to send the actions for pretrial proceedings.
The Panel chose Judge Charles Breyer in San Francisco for the fraud cases against Volkswagen. It may select him as well for the antitrust cases.
But the antitrust claims will have a broader scope. They won’t involve only the cheating on emissions. Per Der Spiegel, it will deal with a long-standing cartel that met hundreds of times and engaged in a variety of anticompetitive conduct.
The difference in focus and scope may prompt the Panel to transfer the cases to another district.
Candidates will likely include the Northern District of Georgia, U.S. headquarters of Mercedes-Benz and Porsche; the District of New Jersey, the U.S. Home of BMW; and the Eastern District of Virginia, where Volkswagen and Audi hang their American corporate hats.