Background
In two recent decisions, the European Commission ("the Commission") imposed substantial fines on those operating cartels in breach of EU anti-competition rules.
In the first case, nine companies were fined a total of €85.876 million for operating an EU wide cartel in the market for window mountings. Essentially, the cartel fixed the prices of window mountings by agreeing on common price increases, which would apply to such products. When setting the fine, the Commission took into account the duration of the cartel, which lasted from November 1999 until July 2007. The Commission also took into consideration the size of the window mounting market (which is currently estimated at €1 billion) and the high combined market share of the cartel members (estimated at 80% share for the "turn and tilt" mounting).
In this instance, the cartel was very well established. A regular pattern of meetings ran every third week in November named the "Permanent Conference". Before the official meeting, participants would meet to agree a set price increase for the following year and surcharges for raw material costs. The parties would also meet throughout the year to discuss how they had implemented the agreed price increase and ensure the success of the cartel.
One of the companies received full immunity from the fines under the Commission's 2006 Leniency Notice by coming forward first to provide information about the cartel. Fines for two other companies were reduced by 45% and 25% respectively to reflect their co-operation with the Commission's investigation.
Freight Forwarding Cartel
The Commission took a similar firm stance in the second case, which concerned 14 companies who participated in four distinct price fixing cartels for international freight forwarding services. During the period 2002 until 2007 the freight forwarders colluded on surcharges and charging mechanisms that concerned important trade routes, in particular, the Europe to USA and China/Hong Kong to Europe routes. For each cartel, participants and duration varied.
The freight forwarders went to great lengths to conceal their cartel activities. In one cartel, the parties organised their meetings under the pretence of a "Gardening Club" where vegetables were used as code names. For example, asparagus and courgettes were code for fixing prices.
The Commission fined the participants a total of €169 million for their collusive activities. Akin to the decision discussed above, one of the companies received full immunity from fines for all four cartels, being the first to come forward to the Commission with information. Other companies received reductions of 5% to 50% reflecting the timing of their co-operation and the extent of evidence given.
Comment
These decisions serve as an important reminder that agreeing prices or any aspect of pricing with your competitors is a serious breach of the competition rules, which can result in very severe penalties.
If you are involved in a cartel, act fast as you may be able to seek immunity or a substantial reduction from any imposed fine in return for your co-operation. Time really does cost money in this instance.
The decisions, when published, can be found at the following links:
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
