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Bruxelles, 18 July 2001

Commission fines eight companies in graphite electrode cartel

The European Commission today fined Germany's SGL Carbon AG, UCAR International of the United States and six other companies a total of € 218.8 million for fixing the price and sharing the market for graphite electrodes, which are ceramic-moulded columns of graphite used primarily in the production of steel in electric furnaces. The Commission's decision comes after a thorough investigation, which established that the eight producers, which together account for the quasi totality of the production world-wide, operated a secret cartel during most of the 90s resulting in considerably higher prices than if the companies had competed against each other.

Following an investigation which started in 1997, the European Commission has established that SGL Carbon AG (Germany), UCAR International Inc. (USA), Tokai Carbon Co. Ltd. (Japan), Showa Denko K.K. (Japan), VAW Aluminium AG (Germany), SEC Corporation (Japan), Nippon Carbon Co. Ltd. (Japan) and The Carbide Graphite Group Inc. (USA) participated in a worldwide cartel between 1992 and 1998 through which they fixed the price and shared out the market for graphite electrodes.

Graphite electrodes are ceramic-moulded columns of graphite used primarily in the recycling of scrap steel into new steel in electric arc furnaces, also referred to as 'mini-mills'. The electric arc process accounts for some 35 percent of steel production in the European Union. The market at stake in 1998 was worth €420 million in the European Economic Area including the 15 EU member states plus Norway.

The cartel started in 1992 at the instigation of SGL and UCAR, which together supply more than two thirds of European demand, and continued until 1998, despite the fact that competition authorities in the United States, Canada and the EU had begun investigations.

The companies held regular meetings including at chief executive level (dubbed "Top guy" meetings) to agree concerted price increases usually triggered by the "home producer" or market leader and then followed in other parts of the world.

The Commission has evidence of the secret meetings, often held in Switzerland, and of the illegal agreements which was provided by some of the companies involved under Commission rules which provide for full or partial immunity from fines for companies that supply information on cartels. See Leniency Notice on and today's separate IP/XX/01 on draft new notice.

The companies were well aware that they were infringing antitrust law as they took great pains to conceal meetings hotel and travel expenses were paid in cash with no explicit reference to those meetings in expense claims --, to avoid keeping any written evidence of the meetings and agreements and when the documents exist they used code names to refer to the cartel participants, such as "BMW" for SGL, "Pinot" for UCAR and "Cold" for the group of Japanese companies.

In the period in which the cartel operated, prices of graphite electrodes increased 50 percent. The concerted price increases became less regular as the companies became aware of the antitrust investigations.

The Commission characterised the companies' behaviour as a very serious infringement of the EC competition rules and adopted a decision under Article 81 of the EC-Treaty and Article 53 of the EEA-Agreement imposing fines totalling € 218.8 million.

Following is a list of the individual fines in million euros:

  • SGL Carbon : 80.2

  • UCAR International: 50.4

  • Tokai Carbon : 24.5

  • Showa Denko: 17.4

  • VAW Aluminium : 11.6

  • SEC: 12.2

  • Nippon Carbon: 12.2

  • Carbide Graphite: 10.3

Competition Commissioner Mario Monti said:

"This decision is a further signal that the Commission will apply the full force of the law on hardcore cartels. The substantial fines imposed in this case are not only warranted in light of the particular gravity of the infringement, but also intend to dissuade companies from engaging in similar illegal practices in the future."

"At the same time, by granting a very substantial reduction in the fine imposed on Showa Denko and significant reductions to several other companies the Commission shows that it takes proper account of companies' co-operation in uncovering cartels, which are the worst kind of violation of competition rules."

Calculation of fines

The Commission takes into account the gravity of antitrust violations, their duration and the existence or not of aggravating/mitigating circumstances to calculate fines. It also bears in mind the companies' share of the market concerned and their overall size. The calculation of the fines is not made in reference to the companies turnover rather according to the Commission's guidelines for setting fines of 1998 -- but the final figure cannot be higher that 10 percent of a company's annual sales.

SGL and UCAR were the driving forces behind the cartel. They initiated the contacts in 1991, developed the whole plan to set up a cartel and organised the first "Top Guy" meeting in May 1992 at which they adopted a "common position" vis a vis the other producers, hence the highest fines.

Most of the cartel members committed an infringement of long duration (more than five years). Aggravating circumstances were taken into account for several of them (role of ringleader, continuation of the infringement after the Commission started its investigation and attempts to obstruct the Commission's investigation).

The Commission's case started in June 1997 when it carried out "surprise" investigations. At the beginning of 1998, Showa Denko co-operated with the Commission under the terms of the Leniency Notice.

This is the first time that the Commission has granted a substantial reduction of a fine (70%) under the terms of the Leniency Notice. Showa Denko benefited from this reduction, having been the first company to co-operate and provide decisive evidence of the cartel to the Commission.

UCAR also co-operated with the Commission at an early stage of the investigation. The Commission therefore granted a reduction of 40 percent.

In the US, the major parties to the cartel pleaded guilty and paid substantial fines, including $110 million for UCAR and $135 million for SGL. Two former executives of the largest US producer, UCAR, were jailed for several months.

Amelia TORRES :

Michael TSCHERNY :

10 largest cartel fines: Total amount per case

*fines reduced by Court judgments

YearCaseTotal amount (€ million)
2001Graphite Electrodes218.8
2000Amino acids109.990
1999Seamless steel tubes99.000
1998Preinsulated pipes92.210
1998British Sugar*48.800

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