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Commission fines six companies in zinc phosphate cartel

Commission Européenne - IP/01/1797   11/12/2001

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IP/01/1797

Brussels, 11 December 2001

Commission fines six companies in zinc phosphate cartel

The European Commission today fined Britannia Alloys & Chemicals Ltd, Heubach GmbH & Co. KG, James Brown Ltd, Société Nouvelle des Couleurs Zinciques S.A., Trident Alloys Ltd and Waardals Kjemiske Fabrikker A/S a total of € 11.95 million for participating in a price-fixing and market-sharing cartel in zinc phosphate, an anti-corrosion mineral pigment widely used for the manufacture of industrial paints. Competition Commissioner Monti said: "Although small, the fines represent a significant percentage of the global turnover of the companies concerned and should deter them from being tempted to make illegal profits on customers' and consumers' back." Mr Monti added: "Sadly enough, today's decision shows that cartels are not the privilege of big, multinational firms". SMEs should be in no illusion that their size will not win them any kind of preferential treatment should they engage in cartel behaviour."

Following an investigation opened in May 1998, when on-the-spot investigations were carried out at the premises of several addressees of today's decision, the European Commission has found that British companies Britannia Alloys & Chemicals Ltd, James M. Brown Ltd and Trident Alloys Ltd, Germany's Dr Hans Heubach GmbH & Co. KG, France's Société Nouvelle des Couleurs Zinciques S.A (SNCZ) and Norwegian company Waardals Kjemiske Fabrikker A/S participated in a European-wide cartel between 1994 and 1998, through which they fixed the price and shared out the market for zinc phosphate.

In March 1997 the zinc phosphate activities of Britannia Alloys took the name of Trident Alloys Ltd following a Management Buy Out. The new company continued its involvement in the illegal practice. Since Britannia Alloys still exists, as a 100-percent subsidiary of M.I.M. Holdings, both it and Trident Alloys are the addresses of this decision.

Zinc phosphate is widely used as an anti-corrosion mineral pigment in protective coating systems. Paint manufacturers use it for the production of anti-corrosive industrial paints for the automotive, aeronautic and marine sectors. During the infringement period, the annual market was worth around €16 million in the European Economic Area the 15 EU member states plus Norway, Iceland and Liechtenstein. Whilst the companies concerned are of a modest size, they noticeably accounted for over 90% of the EEA-wide market for zinc phosphate.

The cartel began on 24 March 1994 in London, at the Holiday Inn Heathrow Airport Hotel. There, and following on previous informal contacts, Britannia Alloys, James Brown, Heubach, SNCZ and Waardals decided to maintain the "status quo" on quantities of zinc phosphate supplied in Europe. It was decided to attribute to each member of "the Club" (as they called themselves) a reference market share to be complied with.

The market shares were defined in reference to the 1991-1993 sales figures in France, Germany, UK and Scandinavia. During subsequent cartel meetings, the cartel participants circulated lists of "recommended" minimum prices and shared out specific customers. In order to ensure that market shares were adhered to, a monitoring system was also set-up.

From March 1994 until May 1998, "the Club" held regular cartel meetings, sixteen of which have been clearly identified by the Commission.

During the inspections carried out in May 1998, numerous hand-written notes and tables of the cartel meetings were collected. Whilst a meeting room had already been booked for the forthcoming cartel meeting at Amsterdam's Schiphol airport on 22 July 1998, the event had to be cancelled due to the Commission's intervention.

The companies' conduct was a very serious infringement of the competition rules, as set out in Article 81 of the European Union Treaty and Article 53 of the EEA-Agreement.

The following is a list of the individual fines (in million Euro):

  • Britannia Alloys & Chemicals Limited : 3.37

  • Dr Hans Heubach GmbH & Co. KG : 3.78

  • James M. Brown Limited : 0.94

  • Société Nouvelle des Couleurs Zinciques S.A. : 1.53

  • Trident Alloys Limited : 1.98

  • Waardals Kjemiske Fabrikker A/S: 0.35

Background

The Commission in May 1998 carried out on-the-spot investigations at the premises of Heubach, SNCZ, Trident and Waardals. The investigation at Waardals, which proved particularly successful, was carried out in Norway on behalf of the Commission by the EFTA Surveillance Authority.

    Calculation of the fines

To calculate the fines in cartel behaviour, the Commission takes account of the gravity of the infringement, its duration and the existence of any aggravating or mitigating circumstances. It also takes account of a company's share of the market concerned and of its overall size to ensure that the punishment is proportional and is sufficiently deterrent. The calculation of the fines is therefore not made solely with reference to a company's turnover, although the fine can never go beyond 10 percent of a company's total annual turnover, as set out in Regulation 17/62.

The zinc phosphate cartel was a very serious infringement of EU competition law. Without prejudice to this fact, the Commission nevertheless took into account the limited size of the market concerned in Europe. The cartel was also of medium duration (between one and five years). The Commission did not identify any ringleader, since the creation of the cartel, which followed various preliminary informal contacts, was a joint-initiative.

    Application of the Leniency notice

Part of the evidence on the cartel was provided to the Commission by the companies involved, under EU rules providing for full or partial immunity from fines for companies that co-operate with the Commission in cartel cases. See the Leniency Notice on http://ec.europa.eu/competition/antitrust/legislation/96c207_en.html.

Waardals approached the Commission shortly after the surprise investigations were carried out and fully co-operated with the Commission, giving an account of the cartel which included, inter alia, a list of the cartel meetings held between 1994 and 1998.

This allowed the Commission to establish a clearer picture of the history and mechanisms of the cartel, and to more accurately interpret the documents in its possession.

The explanations provided by Waardals enabled the Commission to address very detailed requests for information to the other cartel participants. On this basis, the Commission granted Waardals a 50% reduction of its fine.

Trident began to co-operate only after it received a request for information from the Commission. The company subsequently provided the Commission with a written statement giving a detailed account of the cartel, as well as a number of documents relevant to the case. On these grounds, Trident was granted a 40% reduction of its fine.

Britannia, Heubach and SNCZ did not substantially contest the facts as set out in the Statement of Objections they received in August 2000. For this reason, they were each granted a 10 % reduction of their fine.

James Brown has also been granted a 10 % reduction of its fine.

10 largest cartel fines: Total amount per case

*fines reduced by Court judgments

YearCaseTotal amount (€ million)
2001Vitamins855.23
1998TACA272.940
2001Graphite Electrodes218.8
2001Citric Acid135.22
1994Cartonboard*117.08
2000Amino acids109.990
1994Cement*109.335
2001German Banks100.8
1999Seamless steel tubes99.000
1998Pre-insulated pipes92.210

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