On December 16, 2008, the French Competition Council imposed fines of €575 million on 11 steel products traders for colluding to fix prices and to share the market in violation of the antitrust laws of the EC and France. This is the highest total fine ever imposed on a cartel by the Council. The fine shows that the Council is moving in the same direction as the European Commission in fighting and "cracking down" on hard-core cartels. (The Risk of Coordinated Regulatory/Enforcement Proceedings in Multiple Countries is discussed in Proskauer's January 2009 report on Trends and Developments in International Legal Practice.) Also, for the first time, the Council used its leniency powers to grant partial immunity to a cartel member that shared evidence and cooperated with the Council after the cartel was uncovered. Prior to this decision, the Council had used its leniency powers in only three cases and only to grant total immunity for whistleblowers.
Customer complaints triggered an investigation by the Minister of Economy into suspected price fixing by wholesalers of steel products. (Until recently, the Minister of Economy conducted investigations and, if warranted, filed a complaint with the Council. As of January 2009, the investigation and prosecution functions have been consolidated in a single Competition Authority.) The Minister of Economy conducted several dawn raids in the offices of the suspected companies in summer 2004 and uncovered substantial evidence of a price fixing cartel. During the course of the investigation, one of the companies that was being investigated, Descours & Cabaud SA ("D&C"), applied to participate in the Council's leniency program and to cooperate with the authorities in their investigation in return for a potential reduction in its fine. D&C provided the Council with evidence of the infringement which the Council felt added significant value to its investigation.
The evidence collected describes in detail a wellorganized and sophisticated cartel that lasted for five years, from 1999 and 2004. The cartel purportedly consisted of eleven companies involved in the business of trading "long steel products" (tubes, pipes, etc.) and "flat steel products" (panels, sheets) at the wholesale level, plus the France Négoce Acier (FNA, which became FFDM in 2008), a steel products trade association. Cartel members were said to hold a combined market share comprised between 70% and 90% of the steel products trading market in France (depending on the products). The three identified "leaders" of the cartel, PUM Service Acier (subsidiary of Arcelor/Mittal), KDI (a subsidiary of Klöckner & Co) and D&C were claimed to hold 60 to 80% of the market. Prosecutors claimed that the FNA was used by cartel members to arrange meetings and administer the cartel: regular meetings of the top commercial managers of the cartel members were claimed to have been held at the FNA.
During such meetings, the cartel members allegedly discussed and agreed on a common price and a common rebate for each steel product and for each category of customers. The cartel members purportedly also agreed to share the customers and thus freeze the market share of each member. Sensitive commercial information was alleged to have been exchanged. To monitor the implementation of the conspiracy on price and market sharing, each member allegedly provided the cartel with very detailed information on the volume and price of the products sold to each customer. In case of an infringement of the agreed price by any member of the cartel, retaliation measures purportedly were taken to enforce the cartel agreement, such as temporary exclusion of the cartel and temporary prohibition to sell to certain customers. Finally, it was claimed that, to ensure that the cartel would not be discovered, cartel members would occasionally decide to jointly suspend the implementation of the conspiracy for short time periods, so as not to arouse suspicion from the clients.
Authorities claimed that all the national cartel decisions taken by the top managers within the trade association (the FNA) were then communicated to the appointed regional managers of the cartel, sometimes themselves supervised by a "godfather" also appointed by the cartel. Each of the eleven regional managers were claimed to have held regular secret meeting with the local management of the cartel members to discuss the conspiracy, monitor its implementation at the regional level, organize the exchange of sensitive information, and if necessary, implement retaliation measures for violation of the cartel directives.
Following the statement of objections issued by the French Competition Council in March 2008, several companies, including two of the cartel leaders, PUM and KDI, as well as the trade association FFDM, officially acknowledged their participation in the cartel in an attempt to mitigate fines. They also undertook commitments to ensure that the cartel, which ended in 2004, could not be resuscitated, including requiring that the meetings within the trade association be recorded, reforming the trade association, training the managers in antitrust law.
The French Competition Council issued a decision that the price-fixing, market sharing and exchange of confidential information constituted serious infringements of EC Treaty antitrust rules and of French antitrust rules. All eleven companies and the trade association were sanctioned with heavy fines which totaled more than € 575 M. The Council justified the fines based on the seriousness of the offense, the duration of the cartel (more than 5 years), and the fact that the cartel affected the entire country as the cartel members had a combined market share of up to 90% of the markets.
The leaders of the cartel, PUM, KDI, and D&C were subject to higher fines. PUM was fined €288 million; KDI was fined €169 million and D&C was fined €82.5 million. D&C's fine reflects a 35% reduction for its cooperation with the Council under the leniency program. This is the fourth time that the Council applied its leniency program, but it is the first time that partial immunity for cooperation with Competition Council has been granted: the three previous cases concerned total immunity for whistle blowing of antitrust law infringement. PUM, KDI, and FFDM's fines were also reduced (by 17%) because they had each officially acknowledged their participation in the cartel after the statement of objections and made commitments to ensure that there would be no subsequent cartel behavior.
An appeal has been filed with the Court of Appeal of Paris, which will review the case on both points of facts and law. Proskauer's Antitrust and International Practice Groups members in Paris and New York will monitor this groundbreaking case.
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