On July 28, 2017, a group of plaintiffs filed a putative class action in the Northern District of California against BMW, Volkswagen, Audi, Porsche, Daimler, and Mercedes-Benz, as well as auto-parts manufacturer Robert Bosch. The suit alleges that, extending as far back as 1996, these five German car manufacturers colluded to suppress competition by agreeing to limit technological advancement, selecting favored suppliers, and exchanging confidential business information. The class-action suit follows recent publications reporting that European Union antitrust officials and the German Cartel Office are investigating allegations of a cartel among these manufacturers.
More specifically, the complaint alleges that BMW, Volkswagen, Audi, Porsche, Daimler, and Mercedes-Benz referred to themselves as the “Fünfer-Kreise,” or Circle of Five, and used working groups within the Verband der Automobilindustrie (German Automobile Association) to facilitate data sharing and collusion. One major area of alleged collusion was an agreement to limit the size of diesel exhaust fluid tanks, which hold a fluid used to reduce the concentration of nitrous oxide in the exhaust of diesel engines. The complaint further alleges that “these agreements to restrict tank size . . . were the impetus for the creation of the ‘defeat device’ that was the subject matter” of the “Dieselgate” litigation, a separate action (In re: Volskwagen “Clean Diesel” Marketing, Sales Practices and Product Liability Litigation, (Case No. 3:15-md-02672 (N.D. Cal.)) that alleged certain car companies (including Audi, Porsche, and Volkswagen) took steps to cheat emissions tests. The “defeat devices” allegedly allowed the vehicles to use less fluid (resulting in higher emissions), allowing them to last longer on the single—smaller—tank. The complaint adds that it is “a testament to the power of the cartel” that none of the members resolved the “emissions compliance dilemma by introducing a larger . . . tank.”
The complaint also alleges a variety of other agreements to limit technological advances in German automobiles through various “Arbeitskreise,” or working groups, of the German Automobile Association. These included agreements not to develop a convertible top that could be lowered at speeds higher than 50 kilometers per hour, an agreement to standardize when the parking lock should be activated, and other agreements to standardize elements of brake controls and seat systems. These standards precluded competition and advancement in these areas among the Circle of Five. The Arbeitskreise also allegedly shared competitively sensitive information, including information about suppliers, allowing the Circle of Five to cut prices paid to suppliers and limiting the ability of new suppliers to enter the market.
The complaint asserts causes of action for conspiracy under Section 1 of the Sherman Act, state law claims under California and Oregon’s antitrust statutes, and a state law claim for violations of California’s unfair competition law. One question that will be very important is how the relevant market is defined. The plaintiffs contend that the relevant market is limited to German automobiles; it alleges that German automobiles are “a differentiated market” and points to the defendants’ advertising touting the superiority of “German engineering.” The defendants will likely argue that the relevant market includes automobiles made by all manufacturers, and that the competition between automobiles manufactured by companies from Germany, Japan, the U.S., and other countries was vigorous.
A similar suit was also filed in the District of New Jersey. We will keep an eye on both actions as they progress.
