Shin Dong-yeol, head of the cartel investigation division of the Fair Trade Commission, speaks at a press conference at the Sejong headquarters on Thursday. (Yonhap)

South Korea’s antitrust watchdog imposed a combined 42.3 billion won ($33.5 million) in fines Thursday on three German carmakers -- Mercedes-Benz, BMW and Audi -- for collusion in the emissions of their diesel-powered vehicles.

The carmakers were found to have installed software designed to reduce nitrogen oxide only minimally to just satisfy Korean environmental regulations. The toxic gas causes ozone and acid rain, and is linked to asthma, respiratory disorders and lung disease.

The Fair Trade Commission said the three companies held a meeting in Stuttgart, Germany in June 2006 to agree on adopting a dual-mode Selective Catalytic Reduction software system, which reduces the sprayed amount of diesel exhaust fluid that cuts nitrogen oxide emissions.

The closed-door agreement was meant as a preemptive measure for the strengthened regulations of the EU, South Korea and other countries concerning nitrogen oxide emissions, it added.

“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 Fair Trade Commission.

A single-mode SCR system can reduce more nitrogen oxide than dual mode. German auto parts supplier Bosch initially suggested that Mercedes-Benz, BMW and Volkswagen use the single-mode system, but they rejected the notion, according to Shin.

Shin claimed the reason the three did not choose the more effective emissions reduction system was because it required bigger diesel exhaust fluid tanks, which would make the cars heavier and negatively affect fuel economy.

Shin said the collusion incident prompted the “dieselgate” scandal in which car manufacturers manipulated the emissions reduction system. The controversy came to light in 2015 when about half a million Volkswagen diesel cars were found to have cheated engine emissions tests. Mercedes-Benz was later fined on the same account as well.

“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.

In 2021, the EU also found Volkswagen, Audi, Porsche and BMW had colluded on making similar size diesel exhaust fuel tanks and reducing the consumption level of the exhaust fuel, slapping them with fines totaling 875 million euros ($939 million).

Following the watchdog’s investigation, Mercedes-Benz Korea must pay approximately 20.7 billion won in fines, while BMW Korea and the Audi brand under Volkswagen Korea were imposed with fines of 15.6 billion won and 6 billion won, respectively. Volkswagen was not found to have sold the diesel cars in question.

Mercedes-Benz Korea immediately refuted the commission’s claims.

“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 an official from Mercedes-Benz Korea. The official declined to respond to the content of the report as to whether it has cleared its name from the collusion claim.

The company stressed it has not shared any information on the price, production volume or other business strategies of its cars with rivals.

Mercedes-Benz Korea contended, “We cannot agree with the commission’s claims that this alleged collusion led to the dieselgate scandal.”

BMW Korea and Volkswagen Korea declined to comment on the matter.