Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EC imposes fines on steel abrasive and power cable producers in cartel actions, (Apr 3, 2014)

The European Commission (EC) announced yesterday the imposition of fines totaling €30.7 million on Winoa, Metalltechnik Schmidt and Eisenwerk Würth for their participation in a cartel to coordinate prices for steel abrasives in Europe for over six years. Steel abrasives are loose steel particles used for cleaning or enhancing metal surfaces in the steel, automotive, metallurgy and petrochemical industries. They are also used for cutting hard stones such as granite and marble.

Another producer, Ervin, was not fined as it benefited from immunity under the Commission’s 2006 Leniency Notice for revealing the existence of the cartel to the EC. Since all four undertakings agreed to settle the case, their fines were reduced by 10%.

For more than six years, with varying durations from autumn 2003 until the EC carried out unannounced inspections in June 2010, the cartelists had contacts on a bilateral and multilateral basis to discuss key price components of their sales in Europe.

Metal scrap, which is the main raw material for steel abrasives, is characterized by sharp price fluctuations as well as significant price differences between the EEA countries. To compensate for such fluctuations, the cartel participants set up a specific surcharge (called the “scrap surcharge” or “scrap cost variance (SCV)”) based on a common formula. When energy prices rose sharply in 2008, the cartel members agreed that they would all introduce at the same time an “energy surcharge” or “energy complement”. In addition, the cartelists agreed not to compete against each other on price with respect to individual customers.

In introductory remarks regarding the two cartel decisions, Joaquin Almunia, EC Vice President for Competition Policy, said “The cartel in steel abrasives is yet another example of how the cartelization of a particular input product may affect a wide range of European industries. Defeating cartels is a key precondition of the efficient functioning of markets and, ultimately, of the competitiveness of the EU economy as a whole.”

The EC has also found that 11 producers of underground and submarine high voltage power cables operated a cartel, and imposed fines of €302 million. Such cables are typically used to connect generation capacity to the electricity grid or to interconnect power grids in different countries. From 1999 and for almost ten years, these companies shared markets and allocated customers between themselves on an almost worldwide scale. Part of this plan was to allocate important high voltage power cable projects in Europe, including large infrastructure and renewable energy projects such as offshore wind farms. Most of the world’s largest high voltage power cable producers—ABB, Nexans, Prysmian, J-Power Systems, VISCAS, EXSYM, Brugg, NKT, Silec, LS Cable, and Taihan—participated in the illegal agreements. ABB received full immunity from fines under the Commission’s 2006 Leniency Notice as it was the first to reveal the cartel to the Commission.

Six European, three Japanese and two Korean producers of submarine or underground power cables were involved in the cartel. Several companies that took part in the infringement and later merged their activities into joint ventures are also held liable, as well as parent companies of the producers involved, because they exercised a decisive influence over them. This includes the investment company Goldman Sachs, the former owner of Prysmian.

“Of course, these companies knew perfectly well that they were breaking the law,” Almunia said. “We have found a note of a meeting where they discussed explicitly how to organize the cartel just before it started. The note states that having this kind of arrangement would be ‘tough unless the pie for each company increases and the merits exceed the risk of having cartel.’ The participants also did everything they could to hide the existence of their arrangement. During the 2009 inspections, the Commission recovered several thousand relevant documents that had been previously deleted from a computer by an employee of Nexans.”

Companies: Ervin; Winoa; Metalltechnik Schmidt; Eisenwerk Würth; ABB; Nexans; Prysmian; J-Power Systems; VISCAS, EXSYM; Brugg, NKT; Silec; LS Cable; Taihan

News: Antitrust