Facing ever-increasing competition from Chinese automakers, European auto manufacturers are exploring ways to drastically reduce having to pay for licenses for their use of critical technology standards–—such as in-vehicle 5G or Wi-Fi—that are required for modern cars. And it looks like the European Union will let them get away with not paying, to the detriment of innovators around the world, including the U.S.
Licensing royalties for technologies such as 5G or Wi-Fi compensate innovators for use of those important technologies and also support continued advancements of those technologies, which ultimately benefit both auto manufacturers and consumers. Contributors to these technology standards are located in countries across the globe. Although the EU has frequently voiced its support of the innovation economy, recent EU actions on innovation appear to discourage it.
Rather than take steps to encourage innovation in the EU so that the continent can continue to benefit directly from such innovation, it has decided instead to help a subset of auto manufacturers undermine the innovation economy in Europe and globally by facilitating something that would more or less function akin to a cartel.
Last year, the European Commission issued a so-called “Comfort Letter” to an Automotive Licensing Negotiation Group (ALNG), which effectively permitted it to proceed in its quest to collectively negotiate IP licenses for participating European automobile manufacturers.
The ultimate objective of such horizontal collusion is to make the ALNG the sole European buyer — a monopsony, in effect — collectively exercising market power among competitors to reduce licensing payments.
Other major economies do not share the European Commission’s view on such arrangements. For instance, the U.S. Department of Justice (DOJ) has publicly taken a contrary position on the ALNG, indicating that the structure proposed in the Comfort Letter would likely violate U.S. antitrust laws. Furthermore, earlier this year the Antitrust Division at the DOJ sent Civil Investigative Demands (CIDs) to the ALNG’s members—namely BMW, Mercedes-Benz, and Volkswagen, as well as industrial conglomerate Thyssenkrupp, which is a major automotive supplier. It is reasonable to suspect that enforcement of existing U.S. antitrust laws will prevent the ALNG from operating in the U.S.
Even regulatory authorities in other countries are similarly likely to disapprove of it, since its formation ultimately harms their producers and, in the case of standardized technology, stifles innovation by reducing returns on investment.
Instead of reconsidering its controversial policies and pivoting to embrace the cultivation of a technology industry, the European Commission instead seems to have decided to further legitimize such collusive arrangements: On April 16, 2026, the EU issued new antitrust guidelines blessing LNGs that conform to a specified safe harbor, thereby using its regulatory policy to undermine an innovation ecosystem that has otherwise worked quite well to date.
An alternative method available to European automakers — and one they have employed in various contexts for over a century — would be to continue supporting patent pools, which aggregate patents that underpin standardized technologies into a single license. Such a step has been proven to significantly reduce transaction costs and bring a level playing field to the market.
A collective European decision to band together to negotiate lower payments for necessary technologies is simply not a viable long-term practical option for either both European carmakers or consumers, and EU leaders appear to be insufficiently attuned to the political and economic risks that such a maneuver presents to the carmakers. If Europe continues forging ahead with the scheme, other countries with a less responsive antitrust framework will likely follow. Soon, the European LNGs might find themselves being outmaneuvered by others, such as China.
European carmakers already face something that resembles an existential crisis these days, as Chinese EVs threaten to greatly diminish their sales in every market where they compete. But attempting to maneuver around U.S. antitrust law to engineer short-term savings would accomplish little, other than exacerbating an already-strained relationship between the continents.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
