German carmakers won’t face US trial over diesel emission claims

Volkswagen, BMW and Daimler will not have to face trial on allegations of conspiring to limit the development of technology to reduce diesel vehicle emissions, a federal judge ruled.

Even if the leading German carmakers had engaged in anti-competitive conduct, U.S. District Judge Charles Breyer ruled Friday in San Francisco that consumers did not suffer from higher prices. He said the allegations "did not evince a conspiracy," calling the charges "too general and too vague to plausibly support a broad agreement to reduce innovation."

The multi-district litigation involved two classes of plaintiffs: consumers and dealerships.

In his order denying both classes a third attempt to revise their complaint, Breyer found that deficiencies to the plaintiffs' claims over the alleged harm cannot be fixed. In re: German Automotive Manufacturers Antitrust Litigation, 17-cv-06857 (N.D. Cal., filed Oct. 5, 2017).

Responding to arguments from the consumers that the defendants illegally agreed not to advance diesel emissions system technology, the judge wrote they "have not detailed any specific collusive agreements."

Concerning allegations from the dealership plaintiffs that the carmakers engaged in a steel price-fixing scheme, Breyer disagreed that they engaged in anticompetitive conduct.

Plaintiffs' attorney Bruce Simon of Pearson Simon & Warshaw LLP, representing the consumers, called the outcome disappointing. He said Monday, "We are currently looking at all our options."

Volkswagen AG, including its subsidiaries Audi AG and Porsche AG, declined to comment. Daimler AG and BMW AG did not respond to requests to do so.

The consumer plaintiffs focused their case on their claim of a scheme from the 1990s to at least 2014 to restrict the research and implementation of certain technology. They claimed the automakers agreed to limit the size of tanks that contain AdBlue, an additive they said neutralizes emissions in diesel engines.

Plaintiffs' attorneys supported those claims with findings from the European Commission Competition department, which concluded that defendants "coordinated their strategies" on AdBlue tank size.

But European regulators' conclusions have no relevance to litigation in a U.S. federal court, Breyer ruled. While they may support claims that the carmakers violated European antitrust law, he said that they do not support allegations they violated American antitrust law.

"What matters here is whether plaintiffs have met the requirements for pleading a violation of the Sherman Act," he wrote in a previous order granting a motion to dismiss. "That requires more than pointing to the findings of European authorities regarding European law."

The uniform standards might also be beneficial for consumers by protecting them from inferior products and by increasing the availability of parts by making them interchangeable, Breyer found.

"The kind of restraint alleged does not obviously lack any procompetitive benefit," he wrote.

Breyer cited economically rational reasons as to why they might accept the steel surcharges, including ensuring a stable supply and avoiding frequent renegotiating with the manufacturers.

"[Plaintiffs'] allegations plausibly establish that steel manufacturers, not defendants, inflated the price of steel," he wrote.

Defendants were represented by attorneys at Latham & Watkins, LLP, Sullivan & Cromwell LLP and Quinn Emanuel Urquhart & Sullivan, LLP, among other firms.

Plaintiffs were represented by attorneys at Carella Byrne Cecchi Olstein Brody & Agnello PC, Pearson Simon & Warshaw LLP, and Eggnatz Lopatin & Pascucci LLP.

The plaintiffs' attorneys claimed in their filings that the carmakers accepted unlawful surcharges without informing authorities because they "recognized that they could accept higher prices so long as they all agreed to accept the same prices so that none of them would be placed at a competitive disadvantage."