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EU: Glass Makers Are Fined $1.7 Billion in Europe’s War on Price Fixing


by James KanterThe New York Times
November 12th, 2008

BRUSSELS — The European Commission fined companies controlling the Continent’s auto glass market a record 1.4 billion euros ($1.77 billion), on Wednesday for price-fixing over five years. Two of the companies have been caught engaging in cartel practices before.

A week earlier, investigators raided several big cement makers in Europe, including other repeat offenders. Antitrust specialists said such signs of chronic price fixing raised questions about whether European enforcement efforts could be effective without the threat of jail terms, as are routinely handed down in the United States.

The European Union competition commissioner, Neelie Kroes, insisted that stiff fines should be enough to dissuade executives from fixing prices, restricting supplies and dividing markets in Europe.

“If you cheat, you will get a heavy fine,” Ms. Kroes said at a news conference. The biggest fine, 896 million euros ($1.1 billion), on the French glass maker Saint-Gobain, was set so high — a record for a single company — partly because it was a repeat offender, she said. The other repeat offender, Pilkington, which is the British unit of Nippon Sheet Glass of Japan, was fined 370 million euros ($470 million).

Both were fined last year for fixing the prices of flat glass for buildings and homes. Saint-Gobain was also fined twice in the 1980s for cartel pricing in Belgium, Italy, Luxembourg and the Netherlands.

The fine for Saint-Gobain, though substantial, is not likely to cripple the company. It had net income of 2.1 billion euros ($2.6 billion) in 2007 on sales of 43.4 billion euros.

Sophie Chevallon, a spokeswoman for Saint-Gobain, said the employees involved with the cartel had been demoted. She was unable to say whether they might face further disciplinary or legal action.

In a statement, the company called the fine “excessive and disproportionate,” and said it planned to appeal the decision in European courts in Luxembourg. The fine represented “several decades” of profit for its automotive glass business in Europe, it said.

Other companies involved were Asahi, a Japanese company, fined 113.5 million euros ($144 million), and Soliver, a Belgian company, fined 4.4 million euros ($5.6 million).

The auto glass cartel came to light after an anonymous tip, Ms. Kroes said.

Executives had met at airports and hotels in Brussels, Frankfurt and Paris to discuss contracts with automakers and the allocation of glass supplies for new models, she said.

The result was that the European auto industry — currently struggling with plummeting sales as a global credit crisis tightens its grip — had been paying more than needed for windshields, windows and sunroofs.

Prices were also higher than they should have been for branded replacement glass sold to consumers, she said, although the commission did not say by how much.

European officials last week raided the offices of several big cement makers, including the French company Lafarge, fined in 2002 for participating in a plasterboard cartel, and HeidelbergCement, fined in 2003 by German authorities for rigging markets there.

The fine against the glass makers was the largest fine against a single cartel in the European Union, topping the 992 million euros ($1.2 billion) levied against elevator makers last year. Even so, experts said that the efforts by the European Commission to raise penalties to ever-higher levels showed the limits of their enforcement abilities.

Policy makers in the United States decided a decade ago that prison terms were the most effective way to deter cartel formation, said Julian Joshua, a former competition official at the commission.

“Perceptions of acceptable behavior change when people who are members of your country club end up behind bars,” he said.

Ms. Kroes said she was pressing to make it easier for consumers and industries that had been hurt by high prices from cartels to sue for damages, as in the United States. That could make discovery of price fixing even more costly for companies.

Yet even in European countries where prison is an option, authorities have shied away from using such a strong sanction.

Only Britain has imprisoned price fixers under a law passed in 2002 that makes cartel participation punishable by a sentence up to five years, Mr. Joshua said. France and Ireland have the option but have not imprisoned anyone.





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