Transnational Antitrust—EU Cartel Raids

The European Union has stepped up efforts to “stamp out” transnational cartels operating within that supranational organization’s boundaries.^[1] “[F]ormerly docile cartel authorities are cracking down on collusion in economically weighty sectors like telecommunications, construction and banking.”^[2] Price-fixers are being startled with early-morning raids, flashy publicity against prominent executives, and the imposition of large fines.^[3] The next step in the campaign, conducted both by the EU as a whole and within the individual nations, could be jail time for executives, something “officials say would be the most successful deterrent to price-fixing.”^[4]

Some of the more spectacular fines are those assessed against France Télécom, Vivendi Universal, and Bouygues in the telecommunications sector (€534 million); Hôtel de Crillon and Hôtel Ritz for room-rate fixing (€700,000); German cement makers, including HeidelbergCement, in the construction sector (€702 million); and pharmaceutical companies, including Hoffmann-La Roche of Switzerland, for fixing the prices of vitamin additives (€855 million).^[5] In addition, some other notable actions against European cartels include the Italian tobacco cartel, which involved 8 firms and was fined €56 million, while the five firms that comprised the monochloroacetic cartel were fined nearly €217 million.^[6]

Much of the pressure seems to be coming from the United States, and it seems that “[m]ost European policy makers agree that curbing cartels improves economic performance.”^[7] New policies have created incentives for European regulators to see “who can swing the biggest club,” and new rules that allow “companies to inform on co-conspirators in exchange for exemptions from fines mean that whistle-blowers have been lining up to confess.”^[8]

According to the European Commission, 493 investigations were conducted between May 1, 2004 and November 30, 2005; 20 new investigations were opened in November of 2005 alone.^[9] In June of this year, an entire directorate, dubbed Directorate F, having a staff of around 60, “has been involved exclusively in detecting and combating cartels.”^[10]

In Europe, “it is [generally] illegal for businesses … to collude with each other to fix prices or carve up markets between them.”^[11] However, some exceptions are allowed if cooperation in developing technical standards results in “an agreed single standard for the market as a whole” or if allowing smaller companies to cooperate “strengthens their ability to compete with larger ones.”^[12]

The rules governing collusion in the EU are contained in articles 81 through 85 of the Treaty Establishing the European Community. Under article 81, all agreements or decisions “which have as their object or effect the prevention, restriction or distortion of competition within the common market” are prohibited.^[13] These agreements can include: directly or indirectly fixing prices; limiting or controlling production; and applying dissimilar conditions to equivalent transactions with other trading parties.^[14] The potential fines that can be imposed on colluders fall into three categories: minor, serious, and very serious.^[15] Minor infringements typically include trade restrictions, “usually of a vertical nature,” that have a limited market impact; likely fines for this category range from €1,000 to €1 million.^[16] Serious infringements are often horizontal agreements, or vertical agreements with a large market impact; fines in this category can range from €1 million to €20 million.^[17] Finally, very serious infringements generally involve horizontal restrictions such as price cartels and market-sharing quotas; the likely fines for this category range above €20 million.^[18]

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[1] James Kanter, A Crackdown on Cartels By European Regulators, NY Times, Dec. 27, 2005.
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] European Commission [EC], Competition: Commission Action Against Cartels – Questions and Answers, Europa, Nov. 30, 2005.
[7] Kanter, supra note 1.
[8] Id.
[9] EC, Figures on Antitrust Cases Dealt With by ECN Authorities, Europa, Dec. 5, 2005. (PDF)
[10] EC, supra note 6.
[11] EC, Overviews of the European Activities – Competition, Europa, Jun. 2005.
[12] Id.
[13] Treaty Establishing The European Community, Mar. 25, 1957, art. 81, para. 1, 298 UNTS 11, as amended by Treaty Of Amsterdam, Oct. 2, 1997, 1997 O.J. (C 340) 1, as amended by Treaty Of Nice, Feb. 26, 2001, 2001 O.J. (C 80) 1, consolidated version reprinted in 2002 O.J. (C 325) 33.
[14] Id.
[15] EC, Calculation of Fines, Europa, Mar. 7, 2002.
[16] Id.
[17] Id.
[18] Id.