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September 27, 2017 11:00 AM, EDT

Volkswagen’s Scania Fined $1.03 Billion by European Union for Price Fixing

Scania Group

Volkswagen AG’s tarnished reputation suffered another blow after its Scania unit was slapped with a 880.5 million euro ($1.03 billion) fine for fixing truck prices, a year after other members of the cartel reached a record settlement with the European Union.

The European Commission, the EU’s antitrust regulator in Brussels, said Scania colluded for 14 years with five other truck manufacturers on truck pricing and on passing on the costs of new technologies to meet stricter emission rules.

VW now faces compensation claims from truck buyers who paid too much and may also be dragged into other EU cartel probes over alleged collusion with Daimler and BMW AG on technology standards. Those add to other European investigations and lawsuits over the manipulation of car diesel emissions. The firm has already paid billions of dollars in settlements in the U.S.

RELATED: EU fines truck makers record $3.2 billion over 14-year cartel

Scania, which denies any wrongdoing, set aside $470 million last year to cover a potential penalty after the other truck makers were fined nearly 3 billion euros for working together on sales. It said it will challenge the fine at the EU courts.

Scania’s fine “is slightly above expectations” and “the potential damages claims by logistics companies that are now being prepared sound ominous in terms of the potential financial impact,” said Christian Ludwig, an analyst at Bankhaus Lampe in Germany, in a phone interview.

Still, Ludwig said, “the chances of this coming to pass seem remote as it’ll be difficult to prove the actual damage.”

Second-Highest

The other truck makers settled with the EU, winning a discount on their fine and denying them a chance to sue regulators. The Scania fine is the EU’s second-highest ever for one company in a price-fixing case, topped only by a 1.01 billion-euro penalty for Daimler AG in last year’s decision.

“This cartel affected very substantial numbers of road haulers in Europe, since Scania and the other truck manufacturers in the cartel produce more than nine out of every 10 medium and heavy trucks sold in Europe,” EU Competition Commissioner Margrethe Vestager said in a statement on Sept. 27.

RELATED: Volkswagen AG seeks $1.12 billion savings from MAN, Scania integration

The fine casts another cloud over Volkswagen as the automaker seeks to emerge from the two-year-old diesel-cheating scandal, which has cost it 22.6 billion euros in penalties and damages. The financial burdens and management distraction are particularly unwelcome as the manufacturer seeks to navigate disruption from a shift to an era of self-driving electric cars.

Truck Emissions

The truck cartel fixed factory prices for trucks between 1997 and 2011 and also coordinated when producers would introduce technology to curb emissions from trucks and how they’d pass on the costs of that technology to customers, the EU said.

The company believes it wasn’t involved in price-fixing or delaying new engines that would meet EU emissions requirements, Scania spokeswoman Karin Hallstan said in a phone interview. Scania plans to prepare an appeal to the EU court “unless there is any significant new information” in the EU’s final decision, she said.

VW shares rose 0.4% at 1:51 p.m in Frankfurt trading.

Senior managers initially met at the margins of trade fairs or other events and sometimes held calls to coordinate behavior, starting from a Brussels meet-up in January 1997. From 2004, the truck makers’ German units swapped information electronically.

The 2016 settlement included a 10% reduction for promising not to challenge the EU in court, as well as other discounts for cooperating with regulators. The companies involved now face potential court claims from customers seeking compensation for being overcharged which could total as much as $84 billion, according to Bloomberg Intelligence.

DAF also had to pay 752.7 million euros last year. Despite the settlement, penalties were high because the cartel covered a large market and lasted a long time, the EU said. MAN SE, also owned by Volkswagen, wasn’t fined because it was first to provide evidence of the cartel to regulators.

With assistance by Niklas Magnusson, Elisabeth Behrmann, and Stephanie Bodoni