Legal Briefing

Commission turns up the heat on cartels

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Corporate and commercial | 01 February 2010

On 11 November 2009, the European Commission imposed fines totalling over €173m on companies involved in a cartel in the market for heat stabilisers (Commission decision of 11 November 2009 in case 38.589). This brings the total value of fines imposed by the Commission in 2009 for cartel activity to over €1.6bn. The Commission found that 24 companies from ten corporate groups had been involved in price fixing, allocation of markets and customers, and the exchange of commercially sensitive information.

The cartel involved two heat stabiliser chemicals, for which separate fines were imposed. The first was ‘tin stabilisers’, which are added to PVC products to improve their thermal resistance. The second was Epoxidized Soybean Oil (ESBO/esters heat stabilisers, which are used to increase the plasticity, rigidity and transparency of the final PVC products and protect them from discolouration.

The first company to provide information to the Commission, Chemtura Corporation, received total immunity from fines under the Commission’s leniency programme and several other companies received reductions in fines ranging from 25%-50%. The fines imposed on one of the companies, Arkema France, were increased by 90% as it had already been fined by the Commission for involvement in three previous cartels.

ACTING AS A CARTEL FACILITATOR

The Swiss consultancy AC-Treuhand, not itself active in the market for heat stabilisers, was fined for acting as a cartel facilitator. It was responsible for organising the cartel meetings, and providing its premises and services to the companies involved in the cartel. The principal decisions took place at these meetings, and details and implementation were then discussed at meetings held in each country. AC-Treuhand held the meetings at its premises in Zurich with, according to the Commission, ‘the express purpose of escaping the Commission’s jurisdiction’. The company also used various coding systems for documents to disguise the existence of the cartel.

AC-Treuhand has already been fined by the Commission for its role in facilitating a cartel in the organic peroxides sector. This fine was confirmed by the Court of First Instance (now known as the General Court) in July 2008. This previous fine was a nominal sum of €1,000, but in the heat stabilisers case the Commission has imposed a fine on AC-Treuhand of €348,000, indicating that it will not tolerate companies playing such a facilitator role. This view is strengthened by press reports that the Commission has contacted companies playing a similar role in relation to other alleged infringements of competition law.

Announcing the fine, Neelie Kroes, European Commissioner for Competition Policy, warned companies that:

‘Wherever you meet and whatever you try to do to hide your actions, if you form a cartel and rip off European consumers, you cannot escape from detection or punishment.’ (Neelie Kroes, opening remarks at press conference in Brussels, 11 November 2009.)

AC-Treuhand has announced that it will appeal the Commission’s decision, claiming that it:

‘Did not enter into any anti-competitive agreement but provided statistical services in line with competition law.’

WHY THE WAIT?

The time taken to reach a decision in this case was especially long. Unannounced inspections (also known as dawn raids) took place in February 2003, but nearly seven years elapsed before the Commission reached a final decision.

The delay was due to an ongoing dispute regarding whether certain documents taken by the Commission from the premises of Akzo Nobel Chemicals and Akcros Chemicals during the February 2003 inspections should be considered to be legally privileged. On appeal in September 2007, the General Court upheld the Commission’s decision that the documents were not covered by legal privilege. Akzo and Akcros have appealed to the Court of Justice. Applications by several legal and business associations (including the Law Society of England and Wales) for leave to intervene in the appeal have been dismissed (Akzo Nobel and Akcros Chemicals v Commission (Competition) [2007]).

AC-Treuhand considers that the long delay has violated its rights of defence. On appeal, it will argue that the Commission only contacted it at the end of the period of investigation when much of the relevant documentation was no longer available.

ANY DAMAGE?

Heat stabilisers are used in a wide range of products, including packaging, bottles, credit cards, artificial leather, coatings, floorings and other plastic products. Companies affected by the anti-competitive activity in the heat stabilisers cartel may wish to consider whether they are interested in bringing a damages claim in an European Economic Area national court.