South Korea Fines German Automakers for Rigging Diesel Car Emissions

Courtesy of Mercedes Benz

South Korea officials fined German automakers for colluding to rig diesel car emissions.

The country’s antitrust regulator announced the imposition of a fine totaling a combined 42.3 billion won ($33.48 million) on three German automakers for colluding to curb emissions-cleaning technology for their diesel-powered cars, reported Reuters.

Mercedes-Benz, BMW, Audi (Volkswagen) were accused of colluding to hurt competition and restrict consumer choice, the Korea Fair Trade Commission (KFTC) stated in a press release on Feb. 9.

The KFTC fined Mercedes-Benz Korea 20.7 billion won, BMW Korea 15.7 billion won, and Audi (a Volkswagen subsidiary) 6 billion.

However, the regulatory agency said that Volkswagen was not directly penalized, as the German automaker failed to earn any revenue relevant to the case.

Volkswagen was not found to have sold the diesel cars in question.

German Auto Cartel Caught Cheating by South Korean Authorities

The carmakers were found to have installed software designed to reduce nitrogen oxide, which barely satisfied Korean environmental regulations, reported The Korea Herald.

The KFTC said the three carmakers agreed at a meeting in Stuttgart, Germany, in June 2006 to adopt a dual-mode Selective Catalytic Reduction (SCR) software system, which would reduce the amount of diesel exhaust fluid that releases nitrogen oxide emissions.

The private agreement was written ahead of stricter regulations by the European Union, South Korea, and other countries concerning nitrogen oxide emissions.

The gas has been found to cause acid rain and is linked to asthma, respiratory disorders, and lung disease.

“The three carmakers had an agreement so that not a single company would make more eco-friendly (diesel) cars using a single-mode system. They limited competition for developing innovative clean technology and consumer choice to buy more clean cars,” said Shin Dong-yeol, head of the cartel investigation division of the KFTC.

A single-mode SCR system is designed to reduce more nitrogen oxide than dual mode systems.

Shin said that Bosch, the German auto parts supplier, initially suggested that Mercedes-Benz, BMW, and Volkswagen use the more effective single-mode system, but they rejected the notion because it required larger diesel exhaust fluid tanks, which would add excessive weight and negatively affect fuel economy.

The regulator chief blamed the collusion for causing the “dieselgate” scandal in which car manufacturers caught manipulating the emissions reduction system, which was exposed in 2015, when Volkswagen was caught fixing engine emission standards test on about 500,000 of its diesel cars.

German Automakers Also Investigated, Fined for Rigging Admission Standards

Last year, Mercedes-Benz and its Korean division were fined 16 billion won for false advertising tied to diesel gas emissions and for also rigging their tests.

“It is the first case for the Fair Trade Commission to penalize companies of research and development collusion, stressing that price or quantity of products as well as eco-friendly features is a key competition parameter,” Shin added.

Mercedes-Benz refuted the KFTC’s allegations and stated that they had complied with all local standards.

“On the similar account (on colluding with the other two companies), the case has been referred to the European Commission. We have been exempted from the fines through voluntary report,” said a Mercedes-Benz spokesperson, The Korea Herald reported.

A Mercedes-Benz spokesperson told Reuters that the German carmaker “will not have to pay any fine” and referred to the outcome of a similar investigation by the European Commission.

“The case related to the same set of facts which has been subject to the European Commission’s proceedings and where Mercedes-Benz acted as a leniency applicant and did not have to pay a fine,” said the spokesperson.

The European Commission in 2021 fined Volkswagen, Audi, Porsche, and BMW a total of $939 million for similarly colluding to reduced the use of emissions-cleaning technology they had developed, but Mercedes-Benz, was not fined at that time after revealing its existence.

“At no point were agreements or an exchange of information on prices, volumes or market sharing part of the investigation,” the spokesperson added.

The German automaker claimed that it did not share any information on the price, production volume, or other business strategies of its cars with other companies.

“We cannot agree with the commission’s claims that this alleged collusion led to the dieselgate scandal,” the spokesperson concluded.

Reuters contributed to this report.