The European Commission Wednesday said it has imposed fines totaling EUR 67.64 million on seven companies for violating the EC Treaty's ban on cartels and restrictive business practices. The companies involved are ABB Ltd. (ABB), Areva T&D, Alstom, Fuji Electrics, Hitachi and Toshiba (TOSBF.PK).
Cartel is an illegal secret agreement concluded between competitors to fix prices, restrict supply and/or divide up markets. Cartels shield participants from competition allowing them to charge higher prices and removing the pressure on them to improve the products they sell. Article 81 of the Treaty establishing the European Community prohibits agreements and concerted practices between firms that distort competition within the Single Market.
Between 1999 and 2003, Japanese and European producers of power transformers had operated an oral market sharing agreement, referred to as a "Gentlemen's Agreement". Under the deal, they agreed that the Japanese members would not sell power transformers in Europe and that the European members would not sell power transformers in Japan. The cartelists went to great lengths to try to hide their illegal behaviour, the Commission noted.
The Commission's investigation started with surprise inspections in February 2007. The power transformers in question are used to modify the voltage in electricity transmission networks.
Power transformers are electrical components that reduce or increase the voltage in an electrical circuit. They are used by electricity suppliers in their electricity grids for the transmission and distribution of electric power to the customer. Through the "Gentlemen's Agreement", the cartelists not only harmed their direct customers but also European electricity consumers, the Commission stated.
The Commission also said that ABB's fine has been increased by 50% because it had previously taken part in a similar infringement. Siemens also participated in the violation but was not fined as it revealed the existence of the cartel in question to the Commission.
Commenting on the fines, European Commissioner for Competition Neelie Kroes said: "Customers and tax payers all over Europe suffered from this cartel for a number of years. The Commission has now put an end to this rip-off by the self-appointed "Gentlemen". The Commission will not hesitate to increase fines for repeat offenders until they have learned the lesson that cartels do not pay."
According to the Commission, at the time of the infringement, the parties' combined annual sales in the European Economic Area, or EEA, were estimated to be worth around EUR 100 million. In setting the fines, the Commission took into account the amount of sales of the companies involved as well as the very serious nature of the infringement and the geographic scope of the cartel. The Commission also took into account the cooperation of Fuji, Hitachi and Areva in the investigation. Fuji was granted a reduction of 40% under the Leniency Notice and the fine for Areva and Hitachi was reduced by 18% for their cooperation outside the Leniency Notice.
ABB closed Tuesday's trading at $20.03, up $0.39, on a volume of 3.03 million shares.
TOSBF.PK ended trading at $5 on Tuesday, up $0.05, on a volume of 12,000 shares.
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