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Significant Fine Imposed by the French Competition Authority in Floor Coverings Cartel

by Elena Chutrova and McDermott Will & Emery | Oct 25, 2017 | Cartel Enforcement, EU Developments, French Developments, Joint Ventures/Competitor Collaboration, Monopolization/Abuse of Dominance

On October 19, 2017, the French Competition Authority (the “FCA”) imposed a EUR 302 million fine on the three leading companies in the PVC and linoleum floor coverings sector; Forbo, Gerflor and Tarkett, as well as the industry’s trade association, SFEC (Syndicat Français des Enducteurs Calandreurs et Fabricants de Revêtements de Sols et Murs), for price-fixing, sharing commercially sensitive information, and signing a non-compete agreement relating to environmental performance advertising.

The FCA said the significant fine reflected the gravity of the offence and the long duration of the anticompetitive behavior, which for one company lasted 23 years.

WHAT HAPPENED

The proceedings were originally initiated by unannounced inspections carried out in the floor coverings industry in 2013 by the FCA, acting on information submitted by the DGCCRF (Directorate General for Competition Policy, Consumer Affairs and Fraud Control), which resulted in the discovery of three distinct anticompetitive practices.

Price-fixing

The FCA found that the three main manufacturers of floor coverings in France met secretly at so-called “1, 2, 3” meetings, from October 2001 to September 2011, at hotels, on the margins of official meetings of the SFEC or through dedicated telephone lines, in order to discuss minimum prices and price increases for their products. The manufacturers also entered into agreements covering a great deal of other sensitive information, such as the strategies to adopt with regard to specific customers or competitors, organization of sales activities and sampling of new products.

Confidential information exchange via the trade association

The FCA found that from 1990 until the start of the FCA’s investigations in 2013, Forbo, Gerflor and Tarkett also exchanged, in the context of official meetings of the SFEC, very precise information relating to their trading volumes, revenues per product category and business forecasts. In its decision, the FCA also raised the active role played by the SFEC, supporting companies in their conduct.

Non-compete agreement relating to environmental performance advertising

The three main manufacturers of floor coverings in France, together with the trade association, also signed a ‘non-compete’ agreement which prevented each company from advertising the individual environmental performance of its products. The FCA considered that this agreement may have acted as a disincentive for manufacturers to innovate and offer new products, earmarked by better environmental performance, compared to the products offered by their competitors.

Neither the manufacturers nor the trade association disputed the facts and all of them sought a settlement procedure. In addition, Forbo and Tarkett, leniency applicants, benefited from fine reductions corresponding to the respective dates they approached the FCA (the sooner, the higher the fine reduction), the quality of the evidence they provided and their cooperation during the investigation.

WHAT THIS MEANS

The FCA’s decision in the floor coverings cartel case has significant impact due to the total amount of the fines imposed which is (i) higher than the aggregate amount of sanctions imposed by the FCA in 2016 (i.e., EUR 202,873,000), and (ii) until now the highest fine imposed by the FCA in 2017, the FCA having imposed a EUR 100 million fine on Engie for abusing its dominant position in the [...]

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Changes to Polish Antimonopoly Law in a Nutshell

by Patryk Wcislo | Jan 19, 2017 | Cartel Enforcement, EC Developments, Mergers & Acquisitions, Monopolization/Abuse of Dominance

The Polish Office of Competition and Consumer Protection (Urząd Ochrony Konkurencji i Konsumentów, “UOKiK”) has recently published its 2015 annual report presenting its first experiences with the recent amendments to Polish merger control regulations. However, only future developments will show the effects of the new much more severe rules on cartel infringement proceedings and sanctions for cartel behaviour.

On 18 January 2015 far-reaching changes to the Polish Act on Competition and Consumer Protection (Ustawa o ochronie konkurencji i konsumentów), alternatively named “Antimonopoly Law” (prawo antymonopolowe), came into effect. These have been made to close previously identified gaps and strengthen competition and consumer protection. In addition to important changes with respect to merger control and anticompetitive practices, the Antimonopoly Law as amended has introduced changes that allow for more open dialogue between undertakings and the UOKiK.

Faster and more flexible merger control proceedings

According to UOKiK’s 2015 annual report the average duration of merger control proceedings could be reduced by half despite the fact that the overall number of merger control proceedings increased. The average duration dropped from 57 days in 2014 to 34 days in 2015. Of all merger control proceedings that UOKiK completed in 2015 only three (of 235) were Phase 2 proceedings. This can be explained by the following amendments introduced in early 2015:

A new two-stage merger control process: Phase 1 (1 month) and Phase 2 (4 months). The waiting period may be extended by UOKiK in the event that UOKiK requires additional information and documents from the parties;
New approach in case of competition concerns: UOKiK informs undertakings about its competition concerns so that they may alter the proposed concentration to alleviate UOKiK’s concerns, e.g. through adequate remedies;
Approach towards remedies: Undertakings may request UOKiK that it refrains from publishing in its decisions the deadline by which divestments must be made;
De minimis clause extended: mergers and the creation of joint ventures explicitly (just like acquisitions of control already under the old law) do not need to be notified to the UOKiK if the turnover in Poland of each of the parties to the transaction does not exceed the equivalent of EUR 10 million in each of the two financial years preceding the transaction. The de minimis clause also applies to concentrations whereby control and assets are being acquired simultaneously.

Effective fight against cartels

New rules for more effective fights against cartels have been introduced but could not yet show any significant effect in 2015. The number of started proceedings (from 87 in 2013 down to 34 in 2015) and of leniency applications (from 10 in 2014 down to 2 in 2015) has dropped. UOKIK explains the reduction in numbers with the application of its new “soft approach” that contains inter alia best practices and the authority’s possibility to request undertakings to voluntarily terminate an infringement and to apply its best practices.

Nonetheless, one should keep in mind the following amendments to the law:

New provisions concerning fines on individuals: individuals can now [...]

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Ad hoc Local Leniency Application Makes the Difference: The Italian Council of State Upholds the Administrative Court of Lazio Judgment on the Alleged International Road Freight Cartel

by Emily Townsend | Oct 26, 2016 | Cartel Enforcement, EC Developments, Italian Developments

On 20 October 2016, the Italian Council of State (the “Council of State”) upheld the judgment of the Administrative Court of Lazio (“TAR”) on the cartel in the sector of international road freight forwarding to and from Italy and confirmed the ranking applied in granting the reduction of the fine. According to the Council of State, in order to access the national leniency program, a company should provide the Authority with all necessary information and elements for the uncovering of the infringement, and should take into account that all the relevant information and elements provided to other authorities, in the context of other leniency application, will not be considered by the Authority. Therefore, companies should be careful and verify that each leniency application submitted is prepared ad hoc for each jurisdiction and is not capable of raising doubts regarding its scope. (more…)

The European Commission Fines Truck Manufacturers a Record €2.93 billion for Cartel Conduct

by McDermott Will & Emery | Aug 15, 2016 | Cartel Enforcement, EC Developments

On 19 July 2016, the European Commission (Commission) imposed fines totaling €2,926,499,000 on four truck producers (39824 – Trucks). The fine is the highest ever imposed on members of a cartel by the EU competition regulator. The case is also noteworthy because it is the first Commission prohibition decision following “Brexit” and could thus become a test case to see whether the UK remains a jurisdiction of choice for follow-on damages actions.
(more…)

Commission Holds Goldman Sachs Liable for Former Portfolio Company’s Antitrust Infringement

by Irina Denisova | Apr 7, 2014 | Cartel Enforcement, EC Developments

by Veronica Pinotti, Lionel Lesur, Martino Sforza, Nicolò di Castelnuovo

In its decision of 2 April 2014 in relation to the underground and submarine high voltage power cables cartel case (COMP/39610), the European Commission (Commission) held the parent companies of the producers involved liable, on the basis that they had exercised decisive influence over the producers. The fines levied by the Commission in this case totalled €301.6 million. One of the businesses found liable was Goldman Sachs, the former owner of Prysmian, which is one of the companies that allegedly participated in the cartel.

This case has important implications for private equity funds. It confirms that, in principle, the Commission does not view private equity funds differently to other businesses for the purpose of the application of the parental liability doctrine.

Read the full article

U.S. Senators Debate Toughening Cartel Penalties

by Lisa A. Peterson | Nov 19, 2013 | Cartel Enforcement, DOJ Developments

On November 14, 2013, members of the Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy and Consumer Rights heard arguments regarding the effectiveness of current cartel prosecution and punishment strategies in deterring cartel conduct. In her opening remarks, Senator Amy Klobuchar, chair of the Subcommittee on Antitrust, called price-fixing the most egregious form of antitrust violations. “Cartels have no other purpose than to rob consumers,” Klobuchar stated.

At the hearing, William Baer, assistant attorney general for the Department of Justice (DOJ) Antitrust Division, highlighted the Division’s efforts to prosecute cartels over the last decade. Under the Antitrust Division’s recent aggressive enforcement efforts, the DOJ obtained record fines and jail time against corporations and individual corporate officers for cartels conduct. In 2013, the DOJ obtained $1.02 billion in fines and filed 50 cases against cartels, including charges against 21 corporations and 34 individuals and the imposition of 28 prison terms averaging two years. This presents a marked increase in the eight-month average jail term imposed against Antitrust Division defendants in the 1990s.

Over the past five years, the DOJ has, on average, obtained over $850 million in fines from cartels. Baer noted the success of the DOJ’s leniency program, as well as cooperation with state and federal agencies like the Federal Bureau of Investigation (FBI) in investigating cartels. The leniency program has increased the rate of self-disclosure by providing both corporations and individuals with incentives for investigating and reporting antitrust violations. The DOJ has also amped up efforts to collaborate with competition authorities in foreign countries worldwide to better coordinate cartel policies, detection efforts and investigations. As a result, the DOJ has obtained more sentences against foreign nationals, currently an average of 11 per year, as opposed to three per year in the 1990s. The DOJ recently obtained record criminal fines and jail time in prosecuting large, complex cartels involving price-fixing conspiracies in the liquid crystal television displays, air cargo and freight, and automobile parts markets.

Others testifying in front of the Subcommittee pressed the Senate to adopt stricter cartel punishments in light of the “steady stream of cartels” that they view as a persistent problem despite the DOJ’s leniency program. The panelists questioned the effectiveness of monetary penalties as a deterrent, noting that fear of jail time is only effective if individuals and corporations involved in cartels believe they are likely to be caught. They testified that steep fines and punishments may actually discourage individuals from self-disclosing violations, so a better deterrent may be imposing bans on corporations and individuals convicted of cartel violations, which would prevent them from conducting business in certain markets or preclude them from serving on boards or in other corporate functions.

As the DOJ, in conjunction with other federal agencies, continues to vigilantly investigate and prosecute cartels, individuals and corporations should evaluate policies and internal compliance measures in consideration of federal and state antitrust laws.

EU’s Top Court Rules That Blanket Ban on Access to Leniency Documents is not Permitted

by Emily Townsend | Jun 12, 2013 | Cartel Enforcement

by Philipp Werner and David Henry

The European Union’s top court rules that a national law which requires the consent of all parties before access to the file is given to third-party antitrust damages claimants is incompatible with EU law; a national court must be able to decide on disclosure weighing up the interests in doing so.

To read the full article, click here.

Criminalization of Antitrust Law in Europe: Greek Court Imposes Criminal Sanctions on Managers in Cartel Case

by Emily Townsend | Apr 13, 2011 | Cartel Enforcement

by Philipp Werner

Following a 2007 cartel decision of the Greek competition authority imposing a total fine of EUR 48.3m on seven companies for information sharing, price fixing and retail price maintenance, a Greek court handed down a criminal judgment yesterday (12 April 2011), imposing fines of 9,000 euros on each of the three managers of one of the firms. The case was brought by the public prosecutor.

While the amount of the fines is relatively low, this appears to be the first such criminal conviction in Greece. It shows that the criminalisation of antitrust laws in Europe gains ground.

The Greek law applicable at the time of the infringement made provision only for pecuniary sanction but has changed since and now includes the possibility of prison sentences.

First Cartel Fines in China Following New Regulations

by Emily Townsend | Feb 25, 2011 | Cartel Enforcement, Chinese Developments

by Henry L.T. Chen and Frank Schoneveld

China’s State Administration for Industry and Commerce has imposed the first fines for violation of the country’s Anti-Monopoly Law on a concrete cartel. The swift action indicates business operators should anticipate more widespread and vigorous investigations by the newly empowered Chinese competition regulatory authorities.

To read the full article, please visit: https://www.mwechinalaw.com/news/2011/chinalawalert0211c.htm.

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