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Germany’s top automakers sued in U.S. over two-decade tech-suppression ‘cartel’

Bloomberg

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

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

“These coordinated actions enabled the manufacturer defendants — the self-named ‘Fuenfer-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 suit, which seeks class-action status on behalf of U.S. drivers, says the companies agreed to limit the development of vehicle systems, including emissions control. The arrangement allegedly led to the development of the “defeat devices” used by Volkswagen to cheat on pollution tests.

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

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

“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.”

BMW spokesman Kenn Sparks and VW’s Jeannine Ginivan said their companies had no comment on Friday. The other companies didn’t respond to messages and emails seeking comment after normal business hours.

The complaint builds on claims arising out of Europe that the companies may have colluded on technology, costs and supplier contracts for years. European and German officials said last week they were reviewing information about the matter.

The claims were first reported by German magazine Der Spiegel, which said the companies held discussions involving more than 200 employees in 60 working groups in areas including development of gasoline and diesel motors, brakes, transmissions and potentially the size of urea tanks used in diesel autos.

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

That earlier suit also named BMW, VW, Audi, Porsche, Bentley, Daimler and Mercedes-Benz as defendants. It also included Bosch as a co-conspirator for its role in developing the so-called defeat device used by VW to beat diesel pollution tests that’s cost the company more than $24.5 billion in U.S. civil and criminal penalties and other costs.

Central to the conspiracy allegations is the use of AdBlue tanks containing a urea-based solution that, when injected into the diesel exhaust, cleans harmful pollutants. The carmakers are alleged to have secretly agreed to install cheaper, smaller tanks than the size needed to meet toughening U.S. Emissions standards, according to the New Jersey complaint.

“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.”

The San Francisco case is Burton v. BMW AG, 17-cv-04314, U.S. District Court, Northern District of California (San Francisco).

The New Jersey case is Kaufman v. BMW, 17-cv-05440, U.S. District Court of New Jersey (Newark).