European regulator fines 11 cable manufacturers $416 mn for operating a cartel

02 Apr 2014

1

US investment bank Goldman Sachs along with 10 European, Japanese and Korean cable manufacturers have been fined a total of €302 million ($416 million) by the European regulator for operating a cartel.

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 were also held liable, as well as parent companies of the producers involved, for exercising a decisive influence over them. This includes  Goldman Sachs, the former owner of Prysmian.

These cables are typically used to connect generation capacity to the electricity grid or to interconnect power grids.

The Brussels-based regulator said that from 1999 onwards and for almost 10 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 the European Economic Area (EEA), including large infrastructure and renewable energy projects such as offshore wind farms,'' the EC said in a release.

The cartel comprised most of the world´s largest high-voltage power cable producers, including ABB, Nexans, Prysmian (previously Pirelli), J-Power Systems (previously Sumitomo Electric and Hitachi Metals), VISCAS (previously Furukawa Electric and Fujikura), EXSYM (previously SWCC Showa and Mitsubishi Cable), Brugg, NKT, Silec (previously Safran), LS Cable and Taihan.

ABB received full immunity from fines since it was the first to reveal the cartel to the EC.

The investigation revealed that from 1999 to the inspections carried out by the EC in January 2009, these cable manufacturers entered into mutual agreements whereby the European and Asian producers would stay out of each other's home territories and most of the rest of the world would be divided amongst them.

In implementing these agreements, the cartel participants allocated projects between themselves according to the geographic region or customer. In particular, the European companies agreed to allocate projects within the European Economic Area (EEA). The evidence in the Commission's file shows that these agreements were in place for almost ten years. In internal communications the cartelists referred to themselves as the "R", "A" and "K" companies, meaning European, Japanese and Korean companies.

Whenever Japanese and Korean companies received requests from European customers, they would notify their European counterparts and decline to bid.

In order to allocate projects successfully, the cartelists also agreed on price levels to be applied or exchanged information on price offers to ensure that the designated power cable supplier or "allottee" would bid the lowest price while the other companies would submit a higher offer, refrain from bidding or submit an offer that was unattractive to the customer.

The cartelists regularly met each other in hotels in South-East Asia and Europe and maintained further contacts by means of e-mails, faxes and telephone calls, the EC said.

The investigation also revealed that the companies were well aware that they were breaking competition rules. For instance, in a note of a meeting, the advantages and disadvantages of entering into a cartel were discussed: "It would be tough unless the pie for each company increases and the merits exceed the risk of having cartel".

The participants were also taking precautions not to be found in possession of anticompetitive documents. By using its forensic IT technologies the Commission was able to recover several thousand documents that had been deleted by an employee of Nexans. Most of these documents were closely linked to the illegal cartel activities and relevant for the Commission's investigation.

Joaquín Almunia, vice president in charge of competition policy at EC said, "These companies knew very well that what they were doing was illegal. This is why they acted cautiously and with great secrecy. Despite this and through joint efforts by several competition authorities around the world, we have detected their anti-competitive agreements and brought them to an end."

The Commission said any person or firm affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the EU member states and seek damages.

It said, "The case law of the European Court of Justice (ECJ) and the Antitrust Regulation (Council Regulation 1/2003) both confirm that in cases before national courts, a Commission decision is binding proof that the behaviour took place and was illegal."

"Even though the Commission has fined the companies concerned, damages may be awarded without these being reduced on account of the Commission fine," it added.

The fines imposed are as follows:

Reduction under the Leniency Notice
Fine (€)
Brugg
8 490 000
Nexans
70 670 000
NKT
3 887 000
Prysmian
104 613 000
jointly and severally liable with Pirelli
67 310 000
jointly and severally liable with Goldman Sachs
37 303 000
Safran
8 567 000
Silec
1 976 000
jointly and severally liable with General Cable
1 852 500
jointly and severally liable with Safran
123 500
Sumitomo (solely liable)
45 %
2 630 000
Hitachi (solely liable)
45 %
2 346 000
JPS (jointly and severally liable with Sumitomo and Hitachi)
45%
20 741 000
Furukawa (solely liable)
8 858 000
Fujikura (solely liable)
8 152 000
VISCAS (jointly and severally liable with Furukawa and Fujikura)
34 992 000
SWCC Showa (solely liable)
844 000
Mitsubishi (solely liable)
750 000
EXSYM (jointly and severally liable with Showa and Mitsubishi)
6 551 000
LS Cable
11 349 000
Taihan
6 223 000
TOTAL
301 639 000

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