EU, Italy Crack Down On Price Fixing

EU imposed $978 million in fines for 10 companies for heavy equipment price fixing, while Italy opened a probe on nine oil companies.

(AP) – EU regulators fined 10 companies a combined $978 million on Wednesday for running a cartel to fix prices for heavy equipment used by power utilities, with Siemens AG ordered to pay more than half the total.

Several of the other companies penalized in what the EU called the largest set of fines on a single cartel were Japanese businesses that struck a deal to stay out of Europe, while the Europeans steered clear of Japan’s market.

The European Commission said the companies rigged bids for contracts to supply power plants, fixed prices,  shared projects between themselves, carved up markets and exchanged commercially important and confidential information from 1988 to 2004.

It increased Siemens’ fine by half to $517 million, making this the second-highest cartel fine it has ever levied, because the company played a leadership role in fixing prices.

Siemens immediately said it would appeal the “exaggerated” fine, claiming the EU had made a “blanket” accusation” when price fixing had occurred only in isolated cases.

But EU spokesman Jonathan Todd said regulators were “extremely sure” their decision was legal.

Japan’s Mitsubishi Electric Corp. had the next biggest fine of $154.5 million, followed by Toshiba Corp’s $118.5 million.

Mitsubishi said it was considering its response, while Toshiba denied any wrongdoing. “Our own investigations show that we have not engaged in any actions that violate European competition laws, and we plan to fight this decision in European courts,” Toshiba said in a statement.

France’s Alstom SA must pay $84.7 million. Areva was fined $69.7 million for the actions of a subsidiary it bought from Alstom just four months before investigators launched surprise raids. Both fines were increased by 50 percent for the companies helping organize the cartel.

Hitachi Ltd. must pay $67.5 million. It had no immediate comment.

Siemens is also responsible for its Austrian unit VA Technologie AG’s $28.7 million fine. It bought the company at the end of the cartel.

The Commission said the parent company was responsible for the fine if it had “decisive influence over commercial behavior of its subsidiaries.”

Schneider Electric SA must pay $10.56 million, Fuji Electric Holdings Co. Ltd. must pay $4.9 million and Japan AE Power Systems – a joint venture between Fuji, Hitachi and Meidensha Corp.– was fined $1.76 million.

“These companies accounted for virtually all the supply of these products on the European market,” said Todd.

“The Commission regards this cartel as totally unacceptable behavior on behalf of the companies concerned and we sincerely hope that companies will see the large fines imposed as what awaits them if they were inclined to follow this bad example,” he said.

The basic fines are calculated on the companies’ share of the European market but the Japanese fines were based on total worldwide turnover.

ABB Ltd. received full immunity for blowing the whistle, escaping a potential $278.6 million fine. The Swiss-Swedish electrical engineering company said in 2004 that it discovered price-fixing during an internal audit and had dismissed two managers.

The companies all handled gas-insulated switchgear, heavy electrical equipment used to control energy flows in electricity grids that is an important part of auxiliary power stations where electrical current is converted from high to low voltage or the reverse.

The equipment is usually sold to utilities at public tenders where companies pitch bids and the lowest is chosen.

Regulators said the suppliers coordinated their bids to allow each company to get a certain quota of contracts or keep to a minimum bidding price. The deal to keep Japanese companies out of Europe ultimately hurt European consumers, the Commission said, fining several Japanese companies even though they sold no power gear in Europe.

Officials said management met regularly to discuss strategic issues while lower-level executives divided projects and prepared sham bids by companies who were not supposed to win the tender “in order to leave an impression of genuine competition.”

The cartel tried very hard to cover its traces, using code names for rival companies and communicating via anonymous and encrypted email, the Commission said. It published a message from one unidentified cartel organizer to another, forbidding email from home and company computers and urging the use of anonymous email addresses.

Italy’s antitrust watchdog has opened a probe into possible price-fixing by nine oil companies, including Eni SpA and the Italian units of Royal Dutch Schell PLC, Total SA and Exxon Mobile Corp., the regulator said Tuesday.

The nine companies could have been sharing information since the end of 2004 to set gasoline prices in the country’s service station network, limiting competition and keeping prices at the pump at one of the highest levels in the European Union, the Italian Competition Authority said.

The other companies being investigated are Italy’s Erg SpA, Kuwait Petroleum Italia SpA, Tamoil SpA, and local companies Ip and Anonima Petroli Italiana SpA, the authority said in a statement.

The watchdog said Italy’s gasoline retail network has entry barriers, limiting newcomers. It concluded that this results in pump prices being “higher than abroad.”

The Rome-based regulator said Eni may have acted as a “price leader” and that the others followed suit. Eni declined to comment, while nobody was immediately available to comment at Erg.

The antitrust said it would conclude its probe by March 31, 2008. On Monday, operators of Italy’s gasoline retail network agreed to a two-day strike, although they haven’t set a date to meet with the government before its plans to liberalize the sector by allowing supermarkets to pump gas.

Labor union representatives have said they hope to meet with the government soon, adding the strike could take place as soon as the first week of February.

The unions said Italy’s gasoline pumps network is already opened to competition.

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