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Vice President of the European Commission responsible for Competition policy
Introductory remarks on two cartel decisions: Power Cables and Steel Abrasives
Brussels, 2 April 2014
Today the European Commission has adopted two decisions sanctioning two cartels in important industrial sectors, power cables and steel abrasives. The total fines amount to 332 million euros.
The first decision concerns a cartel by European and Asian companies producing high voltage underground and submarine power cables.
These cables are used for the transmission and distribution of electrical power. They are bought by large utility companies and by governments for infrastructure projects, for example to connect power plants or offshore wind farms with power grids, or to establish electricity interconnections between countries.
The cartel involved eleven producers. It had an almost world-wide scope and lasted for nearly ten years, from 1999 until the Commission's inspections in January 2009.
The cartelists agreed to stay out of each other’s home territories and to allocate projects between them on an almost worldwide scale.
This means that Japanese and Korean producers did not compete in Europe. Moreover, the European companies participating in the cartel allocated projects within the European Economic Area.
As a result, utilities and governments were deprived of a genuine possibility to choose between different providers when planning important energy infrastructure projects.
Indeed, the suppliers were agreeing on prices and sharing information behind their back to ensure that one of them would bid the lowest price and would win the project, whereas others would either submit an unattractive offer or just refrain from bidding.
Of course, these companies knew perfectly well that they were breaking the law. We have found a note of a meeting where they discussed explicitly how to organise the cartel just before it started. The note states that having this kind of arrangements would be "tough unless the pie for each company increases and the merits exceed the risk of having cartel".
The participants also did everything they could to hide the existence of their arrangement. During the 2009 inspections, the Commission recovered several thousand relevant documents that had been previously deleted from a computer by an employee of Nexans.
So the companies' secret arrangements, in the end, were defeated. This is the direct result of our enforcement work. One company, ABB, has received immunity from fines as it had revealed the existence of the illegal agreements to us. This showed once more that our leniency programme is a key instrument for the detection of cartels.
The other cartel participants in this cartel received fines totalling 302 million euros. In line with the Commission's well-established practice, the liability for these fines also extends to the parent companies that exercised a decisive influence over their subsidiaries. This applies, among others, to Goldman Sachs, which exercised such influence on the cable producer Prysmian for several years when the infringement was committed.
I would like to highlight the responsibility of groups of companies, up to the highest level of the corporate structure, to make sure that they fully comply with competition rules. This responsibility is the same for investment companies, who should take a careful look at the compliance culture of the companies they invest in.
Let me now move to the second decision that the Commission has adopted today.
The Commission has concluded a settlement with four undertakings which operated a cartel in the steel abrasives sector for more than 6 years. The total fines imposed amount to 30.7 million euros.
Steel abrasives are loose steel particles used for metal treatment and stone cutting in a wide range of industries, such as the automotive, aerospace, railroad, construction and energy sectors.
One company (Pometon) chose not to settle, and the investigation will continue under the standard procedure.
The cartel lasted from 2003 to June 2010 and the participants aimed at coordinating prices. They colluded on key price components of steel abrasives. Given the price fluctuations of metal scrap, which is the main raw material used for these products, they agreed to set up a specific surcharge (accounting for up to 40-50% of the production costs). They also agreed to introduce at the same time an energy surcharge when energy prices rose sharply in 2008.
Changes in input costs are never an excuse for replacing healthy competition between rivals by collusion. On top of this, the cartelists also colluded to ensure that price competition in respect of specific customers was restricted, thereby limiting competition to quality and services only.
Here also, the Commission's investigation was helped by a company that came forward with information about the cartel. Ervin received full immunity from fines as it brought the cartel to the Commission's attention. It also cooperated throughout the investigation and provided valuable information to prove the infringement.
This decision is the 13th settlement decision adopted by the Commission since the entry into force of the settlement procedure and the fourth settlement decision in 2014. Settlements allow for a more efficient procedure and, in return, the fines imposed on the companies that admit their wrongdoing are reduced by 10%. It also allows them to put the procedure behind them, focus on their business and restore their reputation.
In both cases – one concluded through a settlement, the other with a standard cartel decision – the companies fined today have got the sanction they deserved. The amounts imposed reflect mainly the gravity of the infringements, the turnover generated by the cartelised products and the duration of involvement of each company.
Cartels are unjustifiable in all market circumstances. They make markets less efficient and stifle innovation. The infringements sanctioned today show once again how the cartelisation of specific products is detrimental to key industries and infrastructure projects, ultimately hampering economic growth. To prevent this from happening, the Commission and national competition authorities must resolutely enforce competition rules.