Competition: Commission fines companies €56 million for cartel in Italian raw tobacco market
European Commission - IP/05/1315 20/10/2005
Brussels, 20 October 2005
The European Commission has fined four Italian tobacco processors a total of €56 million for colluding over a period of more than six years on the prices paid to growers and other intermediaries and on the allocation of suppliers. Such collusion is outlawed by the EC Treaty’s ban on restrictive business practices (Article 81). The processors concerned are Deltafina, Dimon (which has now changed its name to Mindo), Transcatab and Romana Tabacchi. The Commission has also imposed small fines on APTI and UNITAB (respectively the Italian trade associations of processors and tobacco growers) for engaging in collective price negotiations.
“Cartel culture must be eradicated from all sectors and agriculture is no exception. Last year the Commission fined 5 processors on the Spanish tobacco market. As Italy is the largest producer of raw tobacco in Europe, today’s decision is all the more significant” commented Competition Commissioner Neelie Kroes.
Between 1995 and 2002, the leading tobacco processors in Italy colluded on their overall purchasing strategy, agreeing between themselves purchase prices and allocating on a preferential or exclusive basis their suppliers (both growers and so-called “third packers” i.e. intermediaries who only provide initial conditioning for tobacco). They also rigged their bids in respect of public auctions organised by public authorities for the sale of tobacco in 1995 and 1998.
After processing, tobacco can be sold to manufacturers of tobacco products (notably cigarettes). Illegal contacts and agreements between the tobacco processors were frequent and continuous throughout the whole period of the infringement.
As from 1999, public negotiations took place between APTI and UNITAB on reference minimum prices to be inserted in “cultivation contracts” at the beginning of the season. Processors however continued to collude on the final prices that they would actually pay upon the delivery of tobacco, as well as on the allocation of suppliers.
The behaviour of all the companies involved was wholly different to the measures required by the European Union’s common organisation of the market in raw tobacco as part of the Common Agricultural Policy. However, Italian Law 88/88, providing for the collective negotiation of minimum prices in the agricultural sector, had a clear effect on the conduct of APTI and UNITAB. For this reason a fine of only €1000 is applied on both APTI and UNITAB.
As the conduct of the processors constitutes a very serious breach of Article 81 of the EC Treaty, the decision imposes the following fines:
Deltafina €30 million
Transcatab: €14 million
Mindo (Dimon) €10 million
Romana Tabacchi €2.05 million
Fines for Mindo and Transcatab include reductions under the terms of the 2002 Commission Leniency Notice (of 50% and 30% respectively). Deltafina was granted conditional immunity at the beginning of the procedure under the terms of the Leniency Notice, but today’s decision withholds final immunity due to a serious breach by Deltafina of its co-operation obligations: having received conditional immunity, Deltafina revealed to its main competitors that it had applied for leniency with the Commission. This occurred before the Commission could carry out surprise inspections, so that when these took place, most companies concerned were already aware of the existence of the Commission investigation. Nevertheless, based on the specific circumstances of the present case, the decision acknowledges Deltafina’s actual contribution to the establishment of the processors’ infringement and regards it as a factor justifying a reduction in the fine imposed.
This is the second time that the Commission has taken a decision with fines in the raw tobacco sector. In October 2004, the Commission also imposed fines on processors and producers associations in Spain (see IP/04/1256).