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German Car Collusion

A group of German automakers have been accused of collusion in a price fixing scheme and are now facing multiple lawsuits.

Several German car manufacturers have been named in a class-action lawsuit in the United States District Court for the District of New Jersey.  The automakers are also facing action in the EU and Canada for their participation in a conspiracy to increase luxury car prices, defraud the public and violate safety and environmental regulations.

Manufacturers under fire for collusion include:

  • Mercedes-Benz (manufactured by Daimler)
  • Volkswagen
  • Bentley (manufactured by Volkswagen)
  • Audi
  • BMW
  • Porsche

Volkswagen and Daimler are cooperating with EU authorities in exchange for reduced penalties but that does not reduce their U.S. liability and all 6 brands are named in the U.S. class-action lawsuit and a similar action in Canada.

Plaintiffs participating in the class-action lawsuit are seeking compensation and damages related to overpayment, violations of antitrust regulations and avoidance of consumer protection laws.  Purchasers of related automobiles may be eligible for participation in any eventual settlement.

Two Decades of Collusion

The five German automakers have been involved in a price-fixing scheme for more than two decades.  The group, which has become something of a “cartel”, reportedly worked together in secret development meetings to share information and agree upon plans which were ultimately intended to inflate car prices and defraud regulators.

In the working groups, company employees agreed to priority sourcing deals, auto design specifics and to a much bigger issue intended to skirt regulations for diesel emissions by use of a mechanism to bypass testing.

Diesel engines operate differently than gasoline combustion engines, producing a specific waste product, nitrous oxide, in their emissions.  Nitrous oxide is toxic and can be fatal if inhaled but can be neutralized with the addition of a separate chemical to make diesel emissions safer for the public.

The chemical, urea, is introduced into the exhaust system for diesel engines by the installation of a separate tank which is part of the “AdBlue” system.  The tanks which contain urea are refilled at regular intervals as part of the standard oil change for a consumer automobile.  In order to provide enough urea to reach the standard distance for oil changes, normally about 10,000 miles, AdBlue tanks would be required to be about 5 gallons.

Automakers, however, chose to agree upon a smaller, 2-gallon tank to save about $100 per vehicle, without telling the consumer or regulators that tanks were inadequate.  Because most areas require emissions testing, a computerized system was programmed to bypass the tank and only engage during active testing.

Initial problems for Volkswagen

Consumers were under the impression that emissions were safe, that regulations were being followed and that nitrous oxide was being neutralized during operation.  Regulators were also unaware of the bypass until discrepancies in Volkswagen testing was noted by the Environmental Protection Agency (EPA) in 2015.

Volkswagen paid $2.8 billion in criminal penalties and $billions more to compensate car owners, dealerships and investors.  The agency and public did not become aware that the problem involved five other types of automobiles until later.  In 2016, Volkswagen and Daimler both began cooperating with EU authorities and voluntarily disclosed participation in the conspiracy in exchange for reduced penalties but their U.S. liability was not reduced and a Volkswagen executive was jailed in the U.S. related to fraud.

Due, in part, to information from EU disclosures but also separately in the U.S., other German automakers are now named as part of the scandal and included in a recent class-action suit.

German Auto Class-Action Lawsuit

German automakers including Volkswagen, Bentley, Daimler, Mercedes-Benz, Audi, Porsche, and BMW have been named as defendants in a July 25, 2017, class-action lawsuit filed in the U.S. District Court for the District of New Jersey.  Plaintiffs are seeking compensation for damages as victims of fraud.  Financial loss may have occurred due to inflated prices, loss of fuel efficiency, vehicle repair costs, loss of vehicle value or other reasons related to price fixing.

Experts have noted that this may not be the only lawsuit related to diesel emissions and that automakers may face similar legal problems in the future.  People who purchased an automobile made by one of these German car manufacturers may be eligible to participate in the class action lawsuit and should seek legal advice.

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