On 2 April 2014, the Commission announced the imposition of fines totalling €301,639, 000 on 11 producers of high voltage power cables that it alleged had operated a cartel. The companies concerned included most of the world´s largest high voltage power cable producers, namely ABB, Nexans, Prysmian (previously Pirelli), J-Power Systems (previously Sumitomo Electric and Hitachi Metals), VISCAS (previously Furukawa Electric and Fujikura), EXSYM (previously SWCC Showa and Mitsubishi Cable), Brugg, NKT, Silec (previously Safran), LS Cable and Taihan. ABB received full immunity from fines under the Commission’s 2006 Leniency Notice as it was the first to reveal the cartel to the Commission.
The cartel operated for a decade from 1999-2009 and according to the Commission, the participants openly weighed up the risk of being caught running a cartel against the potential profits that would result, as well as making extensive efforts to delete incriminating documents.
In general terms the companies allocated bids between them, agreeing price levels in advance to ensure that a designated supplier would offer the lowest price. The Japanese and Korean members of the cartel agreed not to bid against their European counterparts whenever they received requests from European customers. The members of the cartel regularly met in hotels in Europe and South-East Asia, sending e-mails and faxes to reach agreements. The participants divided up the world into regions and agreed to stay out of one another’s home territories.
Of particular note is the €37.3m fine announced on Goldman Sachs for its role as a former owner of Prysmian. According to the Commission, it is sufficient for an investment company to have a “decisive influence” over the commercial policy of the investee company to attract liability.
Commission Vice President in charge of competition policy Joaquín Almunia said: “These companies knew very well that what they were doing was illegal. This is why they acted cautiously and with great secrecy. Despite this and through joint efforts by several competition authorities around the world, we have detected their anti-competitive agreements and brought them to an end.”
On 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.
On 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.
On 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.”
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.
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.
On 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.
Russia’s Federal Investigative Committee said on 14th October 2013 that it had opened an investigation into Vladislav Baumgertner, CEO of potash producer Uralkali, on suspicion of abuse of power. Russian authorities confirmed that they would be seeking Mr Baumgertner’s extradition from Belarus, where he is currently under house arrest on charges of embezzlement and abuse of power.
The Criminal Code of the Russian Federation outlaws cartel agreements under Article 178, imposing fines of up to one million roubles, maximum seven year prison sentences or three years of compulsory labour.
However, it was Uralkali’s withdrawal from a potash sales cartel with Belarusian producer Belaruskali, leading to a sharp downward slide in prices, which reportedly led to Mr Baumgertner’s arrest by authorities in Minsk in August 2013. Together the cartel controlled approximately forty per cent of global potash exports. Belaruskali and Uralkali are the world’s two largest producers of potash.
Belarus has called for the arrest of Uralkali’s billionaire shareholder Suleiman Kerimov, who has since reportedly entered into negotiations to sell his stake. Potash, a soil nutrient, provides twelve per cent of the state revenue of Belarus and ten per cent of its export income. Uralkali’s withdrawal from the cartel is reported to have been unwelcome news for Belarusian president, Aleksandr Lukashenko, who has urged the two sides to collaborate once again in a cartel once valued at approximately $20 billion per annum.
Latest reports have suggested that Russia’s preparations for an extradition request for Mr Baumgertner are well advanced.
On 10 July 2013, the EU Competition Commission fined four wire harness suppliers a total of EU141.8 million for taking part in cartels that covered the whole European Economic Area (EEA) and affected four major car companies; Toyota, Nissan, Honda and Renault.
The investigation covered five cartels which operated between 2000 and 2009. They involved bid-rigging to coordinate both price and allocation of supplies of wire harnesses, which link together a car’s electrical components.
The largest fine of EUR125 million (over 85% of the total) was handed to Yasaki, the world’s largest maker of wire harnessing systems. The other companies fined were Furukawa, S-Y Systems Technologies and Leoni. The fines were set on the basis of the Commissions’ 2006 Guidelines on fines, taking into account the companies’ EEA sales of the products involved, the very serious nature of the infringement, the cartels geographic scope and their duration.
However, Sumitomo Electric, which was involved in all five cartels, will not have to pay any of its EUR291 million fine because it alerted regulators to the anti-competitive behaviour and as a result benefited from full immunity under the Commission’s 2006 Leniency Notice. The remaining companies received between 20 and 50% reductions under the leniency programme due to their full cooperation with the investigation. They received a further 10% reduction under the settlement procedure for cartels (see the Commission’s 2008 Settlement Notice) which requires companies to acknowledge both their infringement and liability in exchange for an additional discount.
The investigation started with inspections in 2010 and proceedings were opened in August 2012. It has taken just 8 months since settlement discussions started with the companies for the investigation to reach its conclusion. The immunity granted to Sumitomo Electric, which would otherwise have faced a fine twice as large as the total imposed on the other four companies, as well as the substantial reductions that the other participants in the cartels received, serves as a good example of the benefits of cooperation, and in particular of being the first to alert authorities in order to take advantage of antitrust leniency programmes.