The German competition authority has imposed fines totalling around EUR 100 million on BMW, Daimler and Volkswagen for anticompetitive practices in the purchase of long steel products.
Andreas Mundt, President of the Bundeskartellamt explained: “Between 2004 and the end of 2013 representatives of BMW, Daimler and Volkswagen regularly met twice a year with steel manufacturers, forging companies and large systems suppliers and exchanged information on uniform surcharges for the purchase of long steel products. Scrap and alloy surcharges account for a substantial part of the purchase prices for long steel. Insofar as the surcharges were no longer negotiated individually with the suppliers as a consequence of these talks, price competition between the companies on these price components was eliminated.”
Parts made from long steel include crankshafts, connecting rods, camshafts, gear wheels and steering rods, which are either purchased from forging companies or produced by car manufacturers in their own forges. Long steel is purchased beforehand as a raw material and is usually sold by the steel manufacturers or forging companies based on a price model that consists of a basic price plus scrap and alloy surcharges.
According to the Bundeskartellamt, during the period of infringement, the surcharges, which fluctuated, accounted on average for a third of the end price of engineering steel, the main type of long steel concerned. In contrast to the basic prices, the surcharges were traditionally not negotiated but calculated according to sector-wide uniform formulas and added to the basic price as separate price components.
In 2003 and 2004 the steel manufacturers unilaterally made changes to the surcharge calculation, in some cases under the threat of refusal to supply. As a reaction to this, discussions between the car and steel manufacturers and forging companies were taken up under the umbrella of the German association for steel and metal processing (Wirtschaftsverband Stahl- und Metallverarbeitung or WSM). In these talks representatives of the car manufacturers assured one another that they would adopt the changes introduced by the steel manufacturers and continue to adhere to the established practice of uniformly calculated price surcharges, which they did until January 2016.
The companies acknowledged the facts established by the Bundeskartellamt and agreed to a settlement. This, together with their cooperation with the investigation, was taken in to account when calculating the fines. The decision and findings may be appealed.
Investigations against three component suppliers and an industrial association were terminated for discretionary reasons, the Bundeskartellamt stated.
Euroforge has subsequently established with the authorities that this statement does not relate to forging companies or the German WSM association. A separate ‘forging’ case, based on the same meetings, remains ongoing and is expected to be finalised in the first quarter 2020.