European Union: €518 Million Cartel Fine Imposed on 17 Producers of Prestressing Steel

Last Updated: 5 July 2010
Article by SJ Berwin's EU & Competition Team

The European Commission ("Commission") has fined 17 producers of prestressing steel a total of €518 million for operating a price-fixing and market-sharing cartel that lasted 18 years (from January 1984 to September 2002). The Commission decision concludes that the producers violated the EU's ban on cartels and restrictive business practices.

Prestressing steel comprises long, curled steel wires used with concrete in construction sites to make foundations, balconies or bridges.

The cartel ended in 2002 when DWK/Saarstahl revealed its existence under the EU Leniency Programme which had only been introduced that year. This resulted in DWK/Saarstahl being given complete immunity. Following this, the Commission carried out surprise inspections at the premises of the suspected members.

For 18 years, the companies illegally fixed individual quotas and prices, allocated clients and exchanged sensitive commercial information at over 550 separate cartel meetings (usually under cover of official trade meetings in hotels all over Europe). In addition, the cartel members monitored prices, clients and quota arrangements through a system of national co-ordinators and bilateral contacts. The first pan-European cartel meetings were held in Zurich, Switzerland, under the "Club Zurich" name, later changing to "Club Europe".

The highest fine was on the ArcelorMittal group of €276 million, which included a 20% leniency discount, but which also included an increase of 60% for two counts of previous cartel involvement in the steel sector.

Despite receiving 13 applications, the Commission accepted only three inability-to-pay applications and granted reductions of 25%, 50% and 75% respectively from the fine that would otherwise have been imposed. The Commission's rejection of the majority of applications is in line with its current policy of scrutinising inability-to-pay applications rigorously on a case by case basis. Competition Commissioner Joaquín Almunia stated that "inability-to-pay claims will be accepted only when it is clear the fine would send a company into bankruptcy, which is rare even in the current difficult times".

This is the fourth Commission cartel decision since the beginning of February (including one re-adopted decision) bringing the total amount of antitrust fines imposed in 2010 to € 1,493 million.  

General Court reduces ICI's soda ash fine but upholds finding of loyalty-inducing rebates

The General Court has largely rejected ICI's appeal against a re-adopted Commission infringement decision for abusive practices in the soda ash market, although the fine has been reduced by 20% from €10 to €8 million.

In 1990, the Commission found ICI to have abused its dominant position by applying loyalty-inducing rebates.  That infringement decision was however annulled by the European Courts for procedural reasons, with final judgment being handed down in April 2000. 

In December 2000 (some 10 years after the original decision) the Commission re-adopted the decision and imposed the same fines.  ICI again appealed the decision contesting the finding of abuse, and argued that the applicable limitation periods for imposing a fine had expired and that the decision had not been re-adopted within a reasonable time frame.

In its judgment this week, the General Court upheld the Commission's finding of abuse (rejecting ICI's arguments) and allowed the Commission to rely on its original findings from 1990.  The Court re-affirmed that a rebate system which is not linked purely to volumes purchased and which prevents customers from obtaining supplies from competitors (as was found in this case) infringes Article 102 TFEU.  This is the case even if the rebate system is non-discriminatory, of limited duration and introduced in response to customer requests. 

Rejecting ICI's argument that the rebates only related to 8% of its total sales, the General Court held that 8% of total sales cannot be regarded as negligible.  The Court also confirmed that, for the purposes of establishing a breach of Article 102, it is sufficient to show that the abusive conduct tended to restrict competition, or is capable of doing so.  ICI's desire to maintain or increase production capacity was found not to be an objective justification for its abusive action.

In terms of the limitation period, the General Court held that the basic five year period within which the Commission must impose a fine is suspended whilst there are appeals before the European Courts. Due to the appeals in this case, the limitation period was suspended for over 8 years. On this basis the Commission had acted within time.  Also, the General Court noted that the Commission had only taken 8 months to reissue the decision following the conclusion of its appeal to the ECJ and so had not acted unreasonably.

Notwithstanding the refusal of the General Court to annul the decision, the fine was reduced from €10 to €8 million. Amongst other things, the Commission was found to have erred in increasing the fine for recidivism by taking account of previous non-Article 102 infringements.

Solvay (another EU producer of soda ash), which is in a similar position to ICI having been fined for similar practices in 1990, has lodged an appeal with the ECJ and it will be interesting to see whether ICI will follow suit in relation to the General Court's findings. Any such appeal would increase even further, the duration of this already very long running case, with the abusive conduct in this matter dating back to 1984

To view Community Week, Issue 478; 2 July 2010 in full, Click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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