European Investigators Probe German Price-Fixing Cartel: UPDATED

There’s another automotive scandal simmering in Germany. It’s not dirty diesels, tainted steel, ignition switches, or exploding airbags. This one is more insidious. European antitrust officials raided the offices of major German automakers looking for evidence of an alleged price-fixing cartel among the country’s top automakers.

The Brussels-based European Commission alleges that German carmakers conspired to fix prices for auto parts and technology, including diesel powertrains, for decades. This raised costs for car buyers, suppressed profits for parts suppliers, and stifled competition.

The Commission widened their investigation into the beleaguered automakers last week. Investigators searched the headquarters of BMW, Volkswagen, and Daimler. Naturally, the automakers are scrambling to point fingers as antitrust officials close in; Daimler claimed that they blew the whistle on the scheme last week in a bid to avoid fines, while BMW also claims they are cooperating with investigators. That said, Daimler CEO Dieter Zetsche maintains that cooperation among German automakers was good for consumers and did not harm competitive prices. Volkswagen CEO Matthias Mueller claimed that the companies cooperated on standardization but did not collude in price fixing.

While we’re grateful that the price-fixing scandal is unlikely to produce any road accidents or tragic deaths, the alleged collusion strikes at the heart of the German automotive industry. The all-too-cozy relationship between major automakers and parts suppliers already helped to bring Volkswagen to its knees. The company’s suppliers were willing to build an emissions-cheating device, and the automaker was willing to install and operate the device, defrauding countless customers and spewing toxic pollutants into the atmosphere. That, at least, isn’t “standardization.”

While not proven in a court of law, these allegations may be part of a worrying pattern. It could be that other automakers were just as happy to fix the prices of diesel technology, limiting competition and forestalling further development that could have mitigated the diesel emissions crisis in the first place. This is just one hypothetical example of the damage caused by this type of corruption.

It remains to be seen whether or not the European Commission has the teeth to punish the automakers under investigation and what, if anything, the government will do to reduce the likelihood of collusion in the future.

We have updated this post with Volkswagen and Daimler’s responses to the allegations, 25 October 2017.