Justice Department Launches Antitrust Probe Into Four Auto Makers

Source: By Timothy Puko, Wall Street Journal • Posted: Sunday, September 8, 2019

Government seeks to determine if Ford, Honda, BMW, VW violated competition law by agreeing with each other to follow emissions standards beyond those proposed by Trump administration

Ford is one of the auto makers being investigated by the Justice Department over an emissions agreement with California. Photo: Justin Sullivan/Getty Images

WASHINGTON—The Justice Department has launched an antitrust investigation into four auto makers that forged an independent agreement with California on vehicle-emissions standards, according to people familiar with the situation.

“Honda will work cooperatively with the Department of Justice with regard to the recent emissions agreement reached between the State of California and various automotive manufacturers, including Honda,” the company said.

The new antitrust inquiry by the Justice Department stands to escalate tensions between Washington, Sacramento and the auto industry over plans by the Trump administration to roll back clean-air mandates on auto makers.

California regulators have said they are willing to ease mandates, but not nearly as far as the Trump administration, which has proposed eliminating all upcoming increases in the efficiency requirements.

Auto makers are caught in the middle—they favor an easing of the standards, but want to seek a middle ground to avoid getting caught in a lengthy battle that could hamper their ability to design emissions systems for a national market.

The four companies and the California Air Resources Board announced the deal to signal support for keeping one, nationwide emissions standard. But the Trump administration and others question how the rules will be administered, and whether California might give special treatment on compliance and approval for new models for companies participating in the agreement.

The Justice Department investigation, preliminary in nature, is the latest salvo from a Trump administration that is intent on curbing California’s influence on the auto industry. California has power rivaling the federal government’s in setting environmental rules for cars and trucks, irritating the president and several high-ranking officials in his administration who are working to eliminate authority they think the state has abused.

The state has legal exemptions to set standards higher than the federal government’s and arrangements from about a dozen other states to follow those rules. That territory accounted for one-third of overall U.S. auto sales last year—giving California’s air regulators wide power over national standards. Many expect the administration’s challenge to that power to become a seminal legal case very possibly headed to the Supreme Court.

The Justice Department’s antitrust division is acting on its own accord and without direction from or coordination with the White House, according to one of the people familiar with the investigation. Its review began after news reports of the deal between the four companies and California, an arrangement that on its face raised concerns about antitrust violations, according to the people familiar with the probe.

The department sent letters to each of the companies within the past two weeks to alert them of the department’s interest and to request information, one of the people said. They explained that the department had not reached any conclusions, but that the deal may have antitrust-law implications.

The four companies put their names on a one-page agreement in the announcement, and said the California regulators had agreed to the terms. That structure raised concerns by the Justice Department that the deal was not something a regulator had compelled, but something that the companies had negotiated with one another, in the fashion of a cartel.

Justice Department staffers are concerned the deal is effectively an agreement not to compete, which could cross legal lines. Courts have prohibited deals done for a public good but which ended up limiting competition. And officials are concerned the deal might artificially limit the types of cars and trucks the auto companies offer to consumers, the people familiar with the matter said.