EUROPEAN COURT REDUCES COMMISSION’S LARGEST EVER FINE

carglassOn 27 March 2014, the European Court announced its decision to reduce from €880 million to €715 million, the fine imposed for cartel activity upon subsidiaries of the Saint-Gobain Group and its parent company. The fine had been the largest ever imposed by the European Commission, for participation between 1998 and 2003 in the car-glass cartel. In 2008 the Commission fined four car-glass makers €1.3 billion for participating in a cartel between 1998 and 2003.

Saint-Gobain had been the subject of previous Commission decisions relating to similar infringements in 1984 and 1988. The 2006 Fining Guidelines give the Commission the power to increase fines by 100% for repeat offending, even if the infringements took place long before the existence of the cartel in question. In this instance, the Commission increased Saint-Gobain’s fine by 60% for earlier violations.

However, the European General Court decided that, for repeated infringement to count as an aggravating circumstance, the infringements must have been committed by the same undertaking. Since the 1988 decision concerned a different subsidiary of the same parent, it was decided that a finding of repeated infringement applied only to the 1984 decision. The Court pointed out that the passage of a long period of time since the adoption of an earlier decision may make it more difficult, if not impossible, for the parent company to contest the circumstances upon which a finding of repeated infringement was based.

AUSTRALIAN FEDERAL COURT FINES FLIGHT CENTRE FOR “PRICE-FIXING”

ACCCOn 28 March 2014, the Australian Competition and Consumer Commission (“ACCC”) announced that travel agent, Flight Centre had been ordered by the Autralian Federal Court to pay fines totaling AU$11 million for “repeatedly attempting [between 2005 and 2009] to enter into anti-competitive arrangements with three international airlines to eliminate differences in international air fares offered to customers.”

The judgment dated 28 March 2014 of Logan J, sitting in the Federal Court in Brisbane, names the three airlines as Singapore Airlines, Emirates and Malaysian Airlines. With regard to all three, Flight Centre “attempted to induce, including by threats to withdraw the provision of distribution and booking services” an agreement by which the three airlines would be forced to:

 (i)                  make all their fares for international passenger air travel available for sale by Flight Centre

(ii)                pay to Flight Centre a retail or distribution margin on all sales of international passenger air travel

(iii)               sell international passenger air travel directly to the public at a price not less than the net fare plus Flight Centre’s retail or distribution margin

 Logan J noted that during the period covered by the contraventions, Flight Centre had a  share of at least 20% of the market for the distribution and booking of international air travel from Australia. The judge added  that:

“[Flight Centre] was the principal distributor for each of the airlines in question. It was this market power which it deployed in each of the attempted inducements. The threats which were entailed carried all of the weight associated with that market power. They could not have been more deliberately made.”

He also described 2009 e-mails from Flight Centre Chief Executive Graham Turner, which were sent in reaction to the threat to the travel agent’s business of direct offers by the airlines to the public of international fares, as “the most blatant of all the charged attempts to induce.”

The ACCC welcomed the decision of the Federal Court. However, ACCC Chairman Rod Sims expressed disappointed that Logan J did not apply the maximum fine of 10% of the travel agent’s turnover, as the ACCC had recommended.

EU RAIDS AUTOMOTIVE EXHAUST COMPANIES

exhaustOn 25 March 2014, the European Commission announced that it had conducted dawn raids at the premises of a number of car exhaust companies, based in several EU Member States. A full list of the companies has not been released, however, French company Faurecia, US company Tenneco Inc. and German company Eberspächer confirmed that they had been raided. Reports have suggested that Tenneco Inc. has also received a sub poena from the US Department of Justice, Antitrust Division.

The raids appear to relate to suspicion that the companies may have violated EU rules on cartel activity and restrictive business practices. Faurecia, which is 52% owned by PSA Peugeot Citroen, has confirmed that it is fully cooperating with the Commission.

In a statement, the Commission emphasised that “the fact that the Commission carries out such inspections does not mean that the companies are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation itself.”

As reported in an earlier blog, the car industry faces numerous antitrust investagations globally, with as many as 70 companies involved.

PROPOSED EU DIRECTIVE AIMS TO HELP CARTEL VICTIMS

almuniaOn 18 March 2014, MEPs and European Council representatives agreed on the terms of a new proposed directive on antitrust damages. The measure, which is expected to become law before the European elections in May 2014, is intended to make it easier for victims of cartel activity to claim compensation.

The main changes to the law will be that:

  • Decisions of national competition authorities will constitute full proof before civil courts that the infringement occurred.
  • Clear limitation period rules will be established.
  • Victims will be able to obtain full compensation for lost profits as well as actual loss suffered.
  • A rebuttable presumption that cartels cause harm will be established, and
  • Victims will have easier access to evidence to pursue cases.

Joaquín Almunia, the European Commissioner for Competition, said: “This directive will remove the barriers that currently prevent the victims of antitrust infringements in the EU from obtaining effective compensation. At the same time, it will ensure an adequate and balanced interaction between actions for damages and the effective public enforcement of competition law by the Commission and national competition authorities.”

ITALIAN COMPETITION AUTHORITY LAUNCHES BID-RIGGING PROBE

On 18 March 2014 Italy’s Competition Authority, the Autorità Garante della Concorrenza e del Mercato (“AGCM”), announced the launch of a bid-rigging investigation into Chef Express S.p.A. and My Chef Ristorazione Commerciale S.p.A. Both companies manage motorway service restaurants.

The independent company managing the submission process for tenders drew the attention of the authorities to evidence of collusion. According to the AGCM, evidence indicated that the two companies had colluded on bids for 16 of the 43 licences available. It has been alleged that they intended to take 8 licences each.

The investigation is the latest in a series of probes into bid-rigging in Italy. The rail sector is one of the more prominent recent investigations. For the last 15 years, Italy’s motorway service restaurants have been controlled by Autogrill, which is majority owned by the company that runs Italy’s motorways, Autostrade. Both are controlled by the Benetton family.

BRAZILIAN COMPETITION AUTHORITY INVESTIGATES SUBWAY CONTRACTORS

On 21 March 2014 the Brazilian Conselho Administrativo de Defesa Econômica, (“CADE”), announced that its investigation into trains and subways in 5 Brazilian states had turned up evidence of cartel activity. The investigation is one of the largest ever conducted in Brazil and includes several multinational companies.

The investigation is focused on train and subway procurements between 1998 and 2013. 18 companies and 109 employees are accused of participation. A search and seizure operation in July 2013, carried out by CADE, produced evidence of possible bid-rigging in 15 public tenders worth a total of BRL 9.4 billion. The investigation arose from participation in a leniency programme by the German conglomerate Siemens.

In a 200-page report, CADE’s investigators claim the subway contractors divided the tenders among themselves by agreeing bids in advance. CADE has alleged that contractors accepted payments from rivals for not participating in the tenders.

The politically sensitive investigation has attracted more media attention than any previous cartel investigation in Brazil, due to suggestions that public officials were aware of the alleged conspiracy. Siemens’ voluntary disclosure surfaced just weeks before a contract for a 318-mile high-speed line between the cities of Sao Paulo and Rio de Janeiro came up for bidding. Under Brazilian law the companies involved could be fined 20% of their turnover. Balfour Beatty, Caterpillar, Alstom and Mitsui are included within the scope of the investigation, which has reportedly proceeded slowly due to the quantity of information seized in the July 2013 raids.

Public prosecutors in São Paulo have launched a parallel investigation into whether illegal kickbacks were paid to government officials to obtain lucrative contracts for the construction, fitting and maintenance of metro trains and lines. Observers have suggested that the case could lead to the first prison sentences for cartel activity in Brazilian history.

EU FINES EUROPEAN AND JAPANESE AUTOMOTIVE BEARINGS PRODUCERS

car plantOn 19 March 2014, the European Commission announced the imposition of fines totalling € 953 306 000 on two European companies (SKF and Schaeffler) and four Japanese companies (JTEKT, NSK, NFC and NTN with its French subsidiary NTN-SNR) for participating in a cartel in automotive bearings market from April 2004 until July 2011.

The Commission found that the companies coordinated the passing-on of steel price increases to their customers, colluded on Requests for Quotations and for Annual Price Reductions from customers and exchanged commercially sensitive information.  This occurred through multi-, tri- and bilateral contacts.  The size of the EU market for automotive bearings is estimated to be at least € 2 billion a year.

 Japanese company JTEKT was not fined as it benefited from immunity under the Commission’s 2006 Leniency Notice for revealing the existence of the cartel to the Commission.  NSK, NFC, SKF and Schaeffler received reductions of their fines for their co-operation in the investigation under the Commission’s leniency programme. Since all companies agreed to settle the case with the Commission, their fines were further reduced by 10%.

 Commission Vice President in charge of competition policy, Joaquín Almunia, said: “Today’s decision is a further milestone in the Commission’s ongoing effort to bust cartels in the markets for car parts, after the sanctions we imposed on producers of electric wires and of foam used in car seats. It is incredible to see that one more car component was cartelised. I hope the fines imposed will deter companies from engaging in such illegal behaviour and help restore competition in this industry.”

 The decision is part of a major investigative effort into suspected cartels in the automotive parts industry.  The Commission has pursued cartel activity in several sectors of the industry, including wire harnesses in cars (IP/13/673) and flexible foam used in car seats (IP/14/88).

 The Commission announced on 19 March 2014 that it is investigating more products, such as airbags, safety belts and steering wheels (see MEMO/11/395), air conditioning and engine cooling products (see MEMO/12/563) and lighting systems.