Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EC fines smart chip producers for cartel activity, (Sep 3, 2014)

The European Commission (EC) has announced today the imposition of fines totaling €138 million on Infineon, Philips, Samsung, and Renesas for coordinating their market behavior for smart card chips in the European Economic Area (EEA), in breach of European Union (EU) regulations that prohibit cartels. The companies colluded through bilateral contacts that took place in the period between September 2003 and September 2005.

Smart card chips are used in subscriber identity module (SIM) cards of mobile telephones, bank cards, identity cards and passports, pay TV cards, and various other applications. Those used in the SIM segment rely mainly on memory to store telephone numbers, while the smart card chips used in other applications also rely on security devices like cryptography in order to ensure data confidentiality.

The companies involved in the cartel colluded through a network of bilateral contacts in order to determine their respective responses to customers' requests to lower prices. They discussed and exchanged sensitive commercial information on pricing, customers, contract negotiations, production capacity or capacity utilization and their future market conduct.

The Commission had initially explored the possibility of settling the case with some of the companies involved under the Commission's 2008 Settlement Notice. However, in 2012, the Commission discontinued the settlement discussions and reverted to the normal procedure.

The fines were set on the basis of the EC’s 2006 guidelines on fines and taking into account the serious nature of the infringement, its geographic scope, and the duration of each company's participation in the infringement. Under the EC’s 2006 leniency notice, Renesas received full immunity, as it was the first to reveal the existence of the cartel to the Commission, avoiding a fine of more than € 51 million for its participation in the infringement. Samsung received a reduction of 30% of its fine for cooperating with the investigation. Philips has divested its smart card chips business after the infringement, but remains liable for what happened during the period of the infringement.

The EC's decision follows the Statement of Objections sent to the parties in April 2013 and the start of an investigation in October 2008 with unannounced inspections.

In a statement, Joaquín Almunia, Commission Vice President in charge of competition policy, said: "In this digital era smart card chips are used by almost everybody, whether in their mobile phones, bank cards or passports. It is crucial that the companies producing them focus their efforts on how to outperform their competitors by innovating and providing the best products at the most attractive prices. If instead companies choose to collude, at the expense of both customers and end consumers, they should expect sanctions."

Almunia also stated: “Such contacts were clearly anticompetitive since they reduced uncertainty concerning each other's behavior on the market. The cartelists must have known that their conduct was illegal. Some of them even took measures to conceal the collusion. But the cartel was ultimately discovered and punished.”

Companies: Infineon; Philips; Samsung; Renesas

News: Antitrust IndustryNewsTrends