The fact that Europe’s truck makers allegedly agreed among themselves to manipulate the market in the past decade is no secret.
Just ask MAN, the Munich-based truck and bus manufacturer and Volkswagen subsidiary. In a recent voluntary deposition to an E.U. investigation into the scandal, the company’s lawyers listed in detail all of the meetings where leading firms discussed the alleged cartel.
For more than five years, the European Commission has been investigating the biggest companies in the sector, including Daimler, Scania, DAF, Iveco and Volvo. The investigation has led to searches of the offices of firms under suspicion. Thousands of pages of documents have been analyzed.
The core allegation is that prices and delivery times were fixed over several years up to 2011, with the target mainly being major customers.
Sources close to the investigation say it will reach its findings before August. Ultimately, according to reports in the Financial Times, record fines may be imposed, totaling well over €1.4 billion ($1.56 billion). That was what the manufacturers of cathode ray tubes, used in televisions and computer monitors, had to pay four years ago, when their price-rigging came to light.
In this kind of case, the European Union has the power to impose fines of up to 10 percent of a company’s turnover. In practice, authorities have aimed somewhat lower. But reports from truck industry sources suggest total fines in the sector amounting to €4 billion.
Neither the European Commission nor the companies affected would comment on the case. The reports from Brussels have long been expected. One year ago, Margrethe Vestager, the European commissioner for competition, suggested the case would be finished by the end of 2015.
Within the industry, no one has any doubt that the companies will be punished. According to those involved, the evidence is overwhelming. The core allegation, made by Vestager in a letter to the companies accused of conspiracy, is that prices and delivery times were fixed over several years up to 2011, with the target mainly being major customers.
To prevent a devastating price war, truck manufacturers mutually agreed on a kind of “preservation of the status quo.” If a regular customer could not get the desired truck from one supplier, it would turn out to be unavailable at other manufacturers, too. Competition on price and on delivery times was kept out of the system.
These kind of arrangements needed close collaboration among manufacturers. There were plenty of opportunities for this – documents seen by investigators indicate meetings of senior executives and of marketing staff, often using conferences of industry organizations as cover.
The agreements were meant to defend the companies’ position vis-à-vis their customers. Above all, they meant manufacturers could play off large freight companies against each other on price, putting their market power to good use.
In recent months, the damage caused by that competition for these key customers has become all too clear. Although European demand for trucks has grown steadily in the past 18 months, most manufacturers’ returns are stuck at a low level. Truck makers are undercutting each others’ prices, say industry sources. Currently, a truck can be leased for the same price as a Porsche Cayenne – at its cheapest, as little as €700 a month.
Once the fines have been officially imposed from Brussels, logistics firms can have their own day in court, demanding a refund of part of the purchase price of their trucks.
According to Thomas Funke, a Cologne lawyer specializing in competition law, preparations are already under way for lawsuits claiming damages. In addition, affected freight companies may demand interest payments higher than the original damages. From previous price-fixing cases, it’s estimated that truck companies artificially raised prices by between 10 and 18 percent.
In previous cases, demands for damages amounted to a similar figure as the fines imposed. For the truck industry, this could turn out to be a very heavy burden indeed. Demand in Europe may be recovering, but in America, Asia and Eastern Europe, manufacturers are seeing falling orders.
The freight companies will have plenty of evidence. In general, the European Union passes files from investigations to those directly affected. In this case, it includes the key evidence provided by MAN. The Volkswagen subsidiary may manage to avoid a fine, unlike its sister concern Scania, but it will undoubtedly be hit hard by damages suits.
The spotlight will fall on Andreas Renschler, currently Volkswagen’s head of commercial vehicles: He had the same job at Daimler from 2004 to 2013, a period covering the price-fixing arrangements.
Martin Murphy is an editor with Handelsblatt, specializing in the automotive, defense and steel industries. Stefan Menzel is the news editor of Handelsblatt Online. To contact the authors: firstname.lastname@example.org, email@example.com