Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EC fines foam producers €114 million in cartel settlement, (Jan 29, 2014)

By Linda O’Brien, J.D., LL.M.

The European Commission (EC) announced today that it has imposed fines of over €114 million on four major producers of flexible polyurethane form—Vita, Carpenter, Recticel, and Eurofoam—for their participation in a cartel. Flexible polyurethane foam is mainly used in household furniture such as mattresses or sofas. Applications in the automotive sector, in particular for car seats, also account for around a quarter of the total flexible polyurethane foam market.

Background. Flexible polyurethane foam can be subdivided into “comfort foam” applications, used in upholstered furniture and mattresses, and “technical foam” applications, used in the automotive and other industries. The cartel covered comfort foam and specific types of flexible foam. The Commission’s investigation started with unannounced inspections in July 2010. More information will be released on the Commission’s website under Case No. 39801 once confidentiality issues have been resolved.

The companies colluded to coordinate the sales prices of various types of foam for nearly five years, from October 2005 until July 2010, in ten European Union Member States (Austria, Belgium, Estonia, France, Germany, Hungary, the Netherlands, Poland, Romania and the UK). Vita was not fined as it received immunity under the EC’s Leniency Notice from 2006 for revealing the existence of the cartel to the Commission. Eurofoam (a joint venture between Recticel and Greiner Holding AG), Recticel, and Greiner received reductions of their fines for their cooperation in the investigation under the Commission’s leniency program. Since all companies agreed to settle the case with the Commission, their fines were further reduced by ten percent.

The objective of the cartel was to pass on raw material price increases of bulk chemicals to customers and avoid aggressive price competition between the four producers. In order to achieve this goal, the cartel organized price coordination meetings at all levels of European management. The participants met on the margins of European and national associations and had numerous telephone and other bilateral contacts.

Fines. The total fines imposed are as follows: Carpenter (75 million) and Recticel (7 million) for their own participation. For the conduct of Eurofoam: Eurofoam, Recticel, and Greiner (14 million); Greiner and Recticel (9 million); and Recticel (7 million). The fines were set on the basis of the EU’s 2006 Guidelines on fines. In setting the level of fines, the Commission took into account the companies’ sales of the products concerned in the relevant Member States, the serious nature of the infringement, its geographic scope, and its duration.

Vita received full immunity for revealing the existence of the cartel and thereby avoided a fine of €61.7 million for its participation in the cartel. Recticel, Eurofoam, and Greiner received reductions of fines of 50% under the 2006 Leniency Notice for their cooperation. The reductions reflect the timing of their cooperation and the extent to which the evidence they provided helped the Commission to prove the existence of the cartel.

Moreover, under the Commission’s Settlement Notice in 2008, the EC reduced the fines imposed on all the companies by ten percent as they acknowledged their participation in the cartel and their liability in this respect. The responsibility of Carpenter was established by the direct participation in the conduct of Carpenter’s European subsidiaries, while Carpenter Co was considered liable only as their parent company.

The settlement procedure. This is the tenth settlement decision since the introduction of the settlement procedure for cartels in June 2008. Under a settlement, companies that have participated in a cartel acknowledge their participation in the infringement and their liability for it. The settlement procedure is based on the Antitrust Regulation 1/2003 and allows the Commission to apply a simplified procedure and thereby reduce the length of the investigation. The procedure helps consumers and taxpayers as it reduces costs, frees up resources to tackle other suspected cases for antitrust enforcement, and benefits companies with quicker decisions and a ten percent reduction in fines.

The EC previously reached settlements with participants in cartels for dynamic random access memory (DRAMs), animal feed phosphates, washing powder, glass for cathode ray tubes, compressors for fridges, water management products, wire harnesses, Euro interest rate derivatives and Yen interest rate derivatives.

“Cartels harm our entire economy and cannot be tolerated,” said Joaquin Almunia, EC Vice President for Competition Policy. “This case illustrates how essential it is to keep fighting and sanctioning such illegal behavior: here the cartelized product is both a key component of the furniture bought by all citizens, such as mattresses and sofas, and a significant input for certain businesses, for example car makers.”

News: Antitrust