EU Fines 'Paraffin Mafia' $1 Billion

European Union imposed one of its highest ever cartel fines on nine paraffin wax producers accused of fixing prices and markets for products like chewing gum, tires and candles.

BRUSSELS, Belgium (AP) -- The European Union on Wednesday imposed one of its highest ever cartel fines on a "paraffin mafia" accused of fixing prices and markets for everyday household products like chewing gum, tires and candles.

A group of nine paraffin wax producers were ordered to pay fines totaling almost euro700 million (almost $1 billion) for forcing European consumers to pay more because paraffin was kept at artificially high prices.

European Commission Neelie Kroes said the cartel leader was Sasol Ltd. of South Africa but also included such multinationals as ExxonMobil, Repsol, Shell and Total. Paraffin wax is obtained from petroleum and is used in candles, wax paper, cosmetics and many other products.

The overall total of euro676 million ($967 million) is the fourth highest fine ever and the fine slapped on Sasol of euro318.2 million ($455.12 million) was the fourth largest for an individual company.

"I hope that the harsh lesson of these high fines will encourage the management of these companies to look very carefully at what their staff is doing," Kroes said. "And I hope that in turn the shareholders of these companies look very carefully at the management."

"They should not be under any illusion — such illegal cartel behavior cannot and will not be tolerated," said the commissioner, who has turned cartel fighting into a priority issue.

The companies involved can still appeal the fine and Sasol intends to do so.

"Sasol is surprised by and does not understand the reasons for the magnitude of this fine and will be studying the reasons for the finding with a view to lodge an appeal against it," the company said in a statement.

"Sasol views this matter in a serious light and has intensified its competition and antitrust law compliance programs in all its businesses including joint ventures. It is Sasol's policy to comply with all applicable laws, including competition laws."

The European market for paraffin wax totals about euro500 million ($700 million) a year and the cartel covered about three quarters of that for 13 years. "The 'paraffin mafia' cartel ran from 1992 to 2005," Kroes said.

At first, Kroes said, the companies showed a common resolve to rig the market when they started meeting secretly in Hamburg's Blauer Salon under the code name "the blue saloon group."

Meetings all over Europe followed as the cartel flourished. But then Shell started informing the commission about the illegal practices.

"By being the first to bring us evidence, Shell avoided a fine of euro96 million ($137 million)," she said.

Sasol's fine was increased by 50 percent for being the cartel leader but the South African company also got a reduction for being the second company for cooperating with Kroes's office. Still, its fine was one of the highest ever.

Total of France was given a fine of euro128 million ($183 million) and the U.S. company ExxonMobil euro83.5 million ($119 million).

Other companies fined were Repsol of Spain, ENI of Italy, Tudapetrol, Hansen & Rosenthal and RWE of Germany and MOL of Hungary.

Associated Press writer Celean Jacobson contributed to this report from Johannesburg, South Africa.

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