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Brussels, 21 December 2000

Commission fines JCB for unlawful distribution agreements and practices

The European Commission has adopted a decision finding that JC Bamford Group (JCB) of Britain, a leading manufacturer of construction, farm and industrial handling equipment, has violated European Union antitrust law. Since the late 80s, JCB has put in place distribution agreements and other practices which have the effect of severely restricting out of territory sales of JCB's products both within certain national territories and across national borders, as well as interfering with the freedom to set resale prices. For these very serious violations of article 81 of the EC treaty JCB was fined a total 39.6 million euros.

This decision is addressed to JCB Service, the parent company of the UK-based JC Bamford Group, the world's fifth largest manufacturer of construction and earthmoving machines.

The antitrust procedure concerns the restrictive agreements and concerted practices implemented by JCB and its network of independent authorised distributors. The proceedings were prompted by a complaint from a French distributor, Central Parts SA, in February 1996.

The infringements affect the market for construction and earthmoving machines, which is worth approximately €7.8 billion a year in Europe. JCB's sales account for 13% of Europe's total. This figure does not, however, reflect JCB's important position in relation to its flagship product, the backhoe loader, which was developed in the late forties by Mr JC Bamford, and where its European market share has remained stable at around 45% for the last 25 years.

During surprise inspections in November 1996, the Commission found evidence of the illegal agreements implemented by various companies of the JCB Group and, in particular, the JCB Sales organisation in the UK, JCB SA (France) and JCB Spa (Italy), all controlled by JCB Service. These illegal agreements or practices have been implemented in isolation or in combination between 1988 and 1998, according to evidence.

The restrictive agreements or practices between JCB and its distributors consist of:

  • Restrictions on sales outside allotted territories;

  • Restrictions on purchases of machines between authorised distributors in different EU states;

  • Bonuses and fees systems which disadvantaged out of territory sales;

Occasional joint fixing of resale prices and discounts across different territories.

There is evidence that the restrictions have been put in place in at least the United Kingdom, France, Italy and Ireland.

Each of these measures and, a fortiori, their combination, run contrary to the ban on restrictive agreements under article 81(1) of the EC Treaty. As a result, import and export purchases and sales of JCB's products have been severely restricted in the Member States more directly concerned and, consequently, within the European Community as a whole. Through such restrictions purchasers of JCB machines are illegally deprived of the opportunity to take advantage of substantial price differences for the same equipment in different Member States.

As a result, the Commission orders JCB to lift the above measures and to bring its agreements and practices in line with EC competition rules applicable to distribution.

JCB's infringements are comparable to those verified in the Volkswagen case, where a fine of €102 millions was imposed in 1998, subsequently reduced to €90 millions by the Court of First Instance. The case is also similar to a recent case involving Opel Netherlands, for which a fine of €43 millions was decided(1).

Pursuant to the Commission guidelines on antitrust fines(2), JCB's infringements were considered very serious. Given their long duration and the fact that JCB imposed financial penalties on one distributor who did not conform to the restrictive agreements an aggravating circumstance -- the penalty was set at €39.6 millions.

Commenting on the decision, Competition Commissioner Mario Monti said: "It is shocking that important companies present in all Member States still jeopardise the most fundamental principles of the internal market to the detriment of distributors and, ultimately, consumers" .

(1) IP 98/94 of 28.1.1998, IP/00/725 of 6.7.2000 and IP 00/1028 of 20.9.2000. The addressees have lodged appeals of these decisions before the EC Courts.

(2) Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation N° 17 and Article 65(2) of the ECSC Treaty, OJ C 9 of 14.1.1998.

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