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Brussels, 13th September 2006
Competition: Commission fines companies for road bitumen cartel in The Netherlands – frequently asked questions
(see also IP/06/1179)
Why has the Commission handled this case instead of the Dutch Competition Authority NMa (Nederlandse Mededingingsautoriteit)?
The European Commission’s investigation was prompted by an immunity application made to the Commission and covering several Member States. The Commission conducted inspections in five Member States. Bitumen sold in The Netherlands is sourced from at least three countries (The Netherlands, Belgium and Germany). The Commission was therefore in a good position to handle the investigation.
Would the Commission still handle such a case under the current case allocation rules within the European Competition Network?
The European Competition Network and the arrangements for work sharing between the Commission and the Member States did not exist at the time the case was initiated – they came into effect only on 1st May 2004, when Regulation 1/2003 came into force (see IP/04/411). If a similar case were to arise now, the Commission would discuss with the Member States concerned about how such a matter could be investigated most efficiently. It would depend on the precise circumstances of the case which authority would do the investigation.
Why has the Commission limited the case to The Netherlands if in fact cartel behaviour existed that covered more Member States?
The investigation covered several Member States. The Commission has found, however, that the cartel in The Netherlands, in which the large buyers were also involved, operated as a distinct cartel. It could not be established that this cartel formed part of a larger collusion covering other Member States as well. The Commission therefore decided to handle the investigation in The Netherlands in its own right, given that the facts in question constitute a separate infringement.
What is the link between the Commission’s investigation and the investigations the Dutch competition authorities have conducted in recent years in the asphalt and construction sectors? Aren’t the construction companies being punished twice for the same acts? Didn’t the NMa already fine them for participating in road construction company meetings?
The Commission’s investigations and those of the NMa are separate matters. The Commission has investigated price fixing for sales and purchases of bitumen in The Netherlands whereas the NMa has investigated market sharing and bid rigging in the asphalt and construction markets in the Netherlands. The fines imposed by the Commission therefore apply to a different product and different cartel activities than the fines imposed by the NMa. The players involved are also different in that the bitumen cartel included the bitumen suppliers. There is therefore no question of fining the same companies twice for the same acts, even if these different acts may sometimes have been discussed by the road builders in the same road construction company meetings.
Wasn’t the behaviour of the construction companies already covered by their leniency applications to the NMa and the notification they had made to the NMa of their joint ownership of asphalt plants?
Questions as to the leniency applications made to the NMa should be addressed to the NMa itself.
The Commission’s investigation was launched well before the construction companies made their leniency applications to the NMa. Even if bitumen price fixing were mentioned in subsequent leniency applications to the NMa, there was no question of not pursuing the Commission investigation as it was already well underway and none of the construction companies applied for leniency with the Commission. The Member States and the Commission do, of course, coordinate their efforts at appropriate instances, as has happened in this case. As for the joint ownership of asphalt plants, this matter has been dealt with by the NMa and is not the object of the Commission’s decision.
Wasn’t the behaviour of the construction companies simply collective purchasing? Why would buyers sit together with the sellers in a cartel?
The large construction companies fixed together with the suppliers the price of bitumen in the Netherlands, not just for the bitumen purchased by these construction companies, but for all bitumen. They also agreed with the suppliers a uniform minimum discount for themselves and a smaller, maximum discount for all other construction companies active in the Netherlands. In this manner, they not only limited competition for an important input among themselves, but they also deliberately and artificially disadvantaged smaller construction companies in the Netherlands. Such behaviour is cartel behaviour, not collective purchasing. This also explains the interest the large construction companies had in the cartel. They were not particularly concerned about the absolute level of the price of bitumen, as long as they received larger discounts than their smaller competitors.
Were the Dutch Government and the Dutch tax payer disadvantaged by the cartel?
The Dutch Government (and indirectly Dutch tax payers) purchased roads and other construction projects using asphalt, and the price of bitumen appeared higher in The Netherlands than in neighbouring countries, even after deduction of the rebates granted to the large road builders. The cartel certainly disadvantaged buyers of bitumen other than the five or six largest construction companies in The Netherlands because companies that were not members of the cartel had to pay an artificially higher price for their bitumen.
Why are the fines imposed by the Commission so high?
The fines imposed by the Commission are in line with its 1998 Fining Guidelines (not the more recent Fining Guidelines adopted in June 2006 – see IP/06/857 and MEMO/06/256, which will apply to decisions where a statement of objections was sent since 1st September 2006, when the new Guidelines were published in the EU’s Official Journal – C210). The level of the fines imposed in this case is explained by the fact that:
Why does the Commission address its Decision to (ultimate) parent companies such as Total SA in France or Kuwait Petroleum Corporation in Kuwait for which there is no evidence that they were involved in or even aware of cartel activities by one of their many subsidiaries?
The European competition rules apply to undertakings. “Undertaking” is an economic concept. But Commission decisions are necessarily addressed to legal entities. An undertaking consists of all the legal entities within a group of companies that together perform the functions of an economic operator. Therefore, if a parent company within the group is responsible for the most important strategic decisions regarding the commercial behaviour of its subsidiaries then the subsidiary cannot be said to be an autonomous economic actor. Instead it forms part of a larger undertaking, which is managed by the (ultimate) parent company. It is that larger undertaking that committed the infringement. The Commission may therefore address its decision not only to the subsidiary that actually participated in the cartel activity, but also to the parent company or parent companies that exercised decisive influence over the commercial behaviour of that subsidiary, as together they form a single undertaking. This approach has been endorsed by the case law of the European Court of Justice.