Jul

Truck makers get record R45,7-billion fine for cartel collusion

2016-07-20 14:47
MAN avoided a 1.2-billion-Euro (R18,8-billion) fine by tipping off European regulators to the cartel.

The European Commission (EC) has issued a record fine of 2.93-billion Euro (R45,7-billon) to four truck makers for colluding on truck pricing for the past 14 years and for passing on the costs of compliance with emission rules to customers. This is the largest cartel fine in EU history and was issued following a five-year investigation that began in 2011.

The four companies are Volvo/Renault, Daimler, Iveco, and DAF, a subsidiary of US-based Paccar. MAN, which belongs to the Volkswagen Group, was not fined as it revealed the existence of the cartel to the Commission. As the whistle-blower in this case, MAN thus avoided a penalty that would have been €1.2-billion (R18,8-billion). All companies acknowledged their involvement and agreed to settle the case.

Daimler was fined just more than 1 billion euros (R15,7-billion), DAF €753-million R11,8-billion), Volvo/Renault €670-million (R10,5-billion) and Iveco €495-million (R7,8-billion).

In a statement issued on Tuesday July 19th, the Commissioner for competition, Margrethe Vestager, said: “We have today put down a marker by imposing record fines for a serious infringement. 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. For 14 years they colluded on the pricing and on passing on the costs for meeting environmental standards to customers. This is also a clear message to companies that cartels are not accepted.”

The statement pointed out that “in the context of this investigation, proceedings were also opened with regard to Scania. Scania is not covered by this settlement decision and therefore the investigation will continue under the standard (non-settlement) cartel procedure for this company.”

The decision relates specifically to the market for the manufacturing of medium (between 6 to 16 tons) and heavy trucks (over 16 tons). The Commission’s investigation revealed that MAN, Volvo/Renault, Daimler, Iveco and DAF had engaged in a cartel relating to:

Coordinating prices at “gross list” level for medium and heavy trucks in the European Economic Area (EEA). The “gross list” price level relates to the factory price of trucks, as set by each manufacturer. Generally, these gross list prices are the basis for pricing in the trucks industry. The final price paid by buyers is then based on further adjustments, done at national and local level, to these gross list prices.

The timing for the introduction of emission technologies for medium and heavy trucks to comply with the increasingly strict European emissions standards (from Euro III through to the currently applicable Euro VI)

The passing on to customers of the costs for the emissions technologies required to comply with the increasingly strict European emissions standards (from Euro III through to the currently applicable Euro VI).

According to the EC statement, between 1997 and 2004 meetings between the manufacturers were held at senior manager level, sometimes at the margins of trade fairs or other events. This was complemented by phone conversations. From 2004 onwards, the cartel was organised via the truck producers’ German subsidiaries, with participants generally exchanging information electronically.

Over the 14 years, the discussions between the companies covered the same topics, namely the respective “gross list” price increases, timing for the introduction of new emissions technologies and the passing on to customers of the costs for the emissions technologies.

Tuesday’s decision follows the sending of a Statement of Objections to the truck producers in November 2014. The collusion was not aimed at avoiding or manipulating compliance with the new emission standards. The Commission’s investigation also did not reveal any links between this cartel and allegations or practices on circumventing the anti-pollution system of certain vehicles (commonly referred to as “defeat devices”).

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. 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.

And this is not the end of it for the manufacturers. Having admitted guilt, they could now face lawsuits from haulage companies that were forced to overpay for their vehicles for years. According to a Bloomberg report, there are 600 000 hauliers across Europe, many of which are small businesses that will have lost out financially because of the cartel’s actions.

After the news of the fine broke, UK Road Haulage Association said it was “actively considering representing the industry - and is making final detailed checks about making representation to the courts.”

The Bloomberg report also stated that a law firm from the Netherlands, BarentsKrans, said it was working with legal financing group Claims Funding Europe to “prepare and file proceedings on behalf of businesses from all over Europe who bought trucks in the cartel period from 1997 to 2011”.

South Africa currently legislates at the Euro 3 emissions standards with a handful of Euro 5 trucks operating in certain fleets. FleetWatch will be approaching the local arms of the four European manufacturers for comment on this – and its local ramifications.

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