Commission Decision
of 11 December 2001
relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement
(Case COMP/E-1/37.027 - Zinc phosphate)
(notified under document number C(2001) 4237)
(Only the German, English and French texts are authentic)
(Text with EEA relevance)
(2003/437/EC)
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Community,
Having regard to the Agreement on the European Economic Area,
Having regard to Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty(1), as last amended by Regulation (EC) No 1216/1999(2), and in particular Articles 3 and 15 thereof,
Having regard to the Commission's decision of 2 August 2000 to initiate proceedings in this case,
Having given the undertakings concerned the opportunity to make known their views on the objections raised by the Commission, pursuant to Article 19(1) of Regulation No 17 and Commission Regulation (EC) No 2842 of 22 December 1998 on the hearing of parties in certain proceedings under Articles 85 and 86 of the EC Treaty(3),
Having consulted the Advisory Committee on Restrictive Practices and Dominant Positions,
Having regard to the final report of the Hearing Officer in this case(4),
Whereas:
1. THE FACTS
1.1. SUMMARY OF THE INFRINGEMENT
(1) This Decision imposing fines for an infringement of Article 81 of the Treaty and Article 53 of the EEA Agreement is addressed to the following undertakings:
- Britannia Alloys & Chemicals Limited (Britannia),
- Dr Hans Heubach GmbH & Co. KG (Heubach),
- James M. Brown Limited (James Brown),
- Société Nouvelle des Couleurs Zinciques SA (SNCZ),
- Trident Alloys Limited (Trident),
- Waardals Kjemiske Fabrikker A/S (Waardals).
(2) The infringement consists of the participation of the producers of zinc phosphate in a continuing infringement and/or concerted practice contrary to Article 81(1) of the Treaty and Article 53(1) of the EEA Agreement, covering the whole of the Community and Norway, Austria, Sweden and Finland, by which they:
- fixed the price for the product,
- agreed on and implemented a mechanism for implementing price increases,
- allocated markets and market share quotas,
- allocated specific customers.
(3) The undertakings participated in the infringement during the following periods:
- Britannia: from 24 March 1994 until 15 March 1997,
- Heubach: from 24 March 1994 until 13 May 1998,
- James Brown: from 24 March 1994 until 13 May 1998,
- SNCZ: from 24 March 1994 until 13 May 1998,
- Trident: from 15 March 1997 until 13 May 1998,
- Waardals: from 24 March 1994 until 13 May 1998.
1.2. ZINC PHOSPHATE INDUSTRY
1.2.1. THE PRODUCT
(4) The present proceedings concern zinc orthophosphates. Though they may have slightly differing chemical formulas (they can be "dihydrated" or "tetrahydrated"), zinc orthophosphates form a homogeneous chemical product hereafter generically referred to as "zinc phosphate".
(5) Zinc phosphate is derived from zinc oxide and phosphoric acid. It is a non-toxic product and usually comes in the form of a non-cohesive, micronised white powder.
(6) Zinc phosphate is widely used as an anti-corrosion mineral pigment in protective coating systems. Paint manufacturers use it for the production of anti-corrosive industrial paints such as automotive, aeronautic or marine paints.
1.2.2. THE PRODUCERS
(7) Zinc phosphate has traditionally been essentially manufactured in Europe. As it became a high performance product for export in the past years, five producers located in Western Europe hold virtually the whole of the world market. The rest is produced by two US-based companies and by a few small producers, generally located in Asian countries.
1.2.2.1. Dr Hans Heubach GmbH & Co. KG
(8) Dr Heubach GmbH & Co. KG (Heubach) is headquartered in Langelsheim (Lower Saxony), Germany. The company employs approximately 1000 people and is engaged in the manufacture and distribution of specialised organic and mineral pigments, mainly used as ingredients in the manufacture of inks, plastics and paints.
(9) Heubach's worldwide turnover was EUR 71,02 million in 2000.
(10) Heubach sells zinc phosphate, including modified types. Standard zinc phosphate is marketed under the name "ZP10". Modified types are marketed as "Heucophos". The production of zinc phosphate started in 1981.
1.2.2.2. James M. Brown Limited
(11) James M. Brown Limited (James Brown) is a small company located in Stoke-on-Trent, Staffordshire, United Kingdom. The company has approximately 100 employees.
(12) James Brown is engaged in the production of mineral pigments such as cadmium pigments, zinc oxide, metallic stearates or zinc phosphate. Whilst James Brown has been producing zinc oxide for many years, zinc phosphate represents a minor part of its production. The company entered this market in 1990 after the acquisition of a company named Diroval. James Brown's zinc phosphate is marketed under the Diroval brand name.
(13) James Brown's worldwide total turnover was GBP 7,38 million (EUR 12,12 million) in 2000.
(14) James Brown manufactures only standard zinc phosphate. The product is available as a standard grade, as a micronised grade or as a water-system grade.
1.2.2.3. Société Nouvelle des Couleurs Zinciques SA
(15) Société Nouvelle des Couleurs Zinciques (SNCZ) is headquartered in Beauchamp (Val d'Oise), France. SNCZ, which currently employs 40 people, was created in 1984 through the buy-out of the Société des Couleurs Zinciques (SCZ). The Société Chimique Prayon-Rupel SA (Prayon), a Belgian chemicals group, acquired a 50 % share and presently runs the company (the rest of the shares are privately owned by a family).
(16) Prayon comprises some 20 subsidiaries. It specialises in phosphoric acids, phosphate derivatives, fertilisers and pigments. With 10 manufacturing subsidiaries and 10 sales subsidiaries, Prayon had a consolidated turnover of BEF 11,32 billion (EUR 278,80 million) in 1998(5).
(17) Former SCZ produced zinc oxide, painting pigments and zinc dust. It enjoyed acknowledged know how in these activities. Today, SNCZ has abandoned the production of zinc oxide and produces mainly zinc phosphate, zinc chromates, strontium and barium chromates. All these products are mineral, anti-corrosive pigments used in the paint and coatings industry.
(18) SNCZ shares its offices in Beauchamp with a "sister" company named Silar SA (Silar) and controlled by the family holding a 50 % stake in SNCZ. The two companies share the same administrative staff, although they have distinct sales and marketing departments. Silar's main task is to market the zinc oxide produced by Silox SA (Silox), a subsidiary of Prayon located on its Belgian site.
(19) SNCZ is today the second largest anti-corrosive pigments producers in the world. Its worldwide turnover was EUR 17,08 million in 2000.
(20) SNCZ produces both standard and modified types of Zinc phosphate. Standard types are marketed under the name PZ20 (tetrahydrated) and PZ W2 (dihydrated). Modified types are marketed under the name Novinox PZ02; Phosphinal PZ04 and Phosphinox PZ06.
1.2.2.4. Trident Alloys Limited (formerly Britannia Alloys and Chemicals Ltd)
(21) Zinc-based activities currently conducted by Trident Alloys Limited (Trident) have been carried out for over a hundred years at a site in Bloxwich, near Walsall in the West Midlands of the United Kingdom.
(22) During this period, zinc-based activities have undergone several ownership changes. During the 1980s, the zinc-based business was owned by the Australian metal and mining group Rio Tinto Zinc Corporation plc (RTZ). Within RTZ, it was run by ISC (Alloys) Ltd. In 1990, part of RTZ (including the zinc-based business) was floated on the Australian stock exchange and dissociated from the group. It was then taken over by the Australian group Pasminco and became Pasminco Europe (ISC Alloys) Ltd (Pasminco Europe-ISC Alloys). As Pasminco group withdrew from Europe in the early 1990s, the zinc business of Pasminco Europe-ISC Alloys was sold in October 1993 to MIM Holdings Ltd (MIM), another Australian company, which assigned it to its wholly owned British subsidiary Britannia Alloys and Chemicals Ltd (Britannia). Britannia's zinc business was put on sale by MIM in 1996. In early 1997, the management team of the zinc business unit of Britannia launched a management buy-out funded by Lloyds Development Capital, a venture capital subsidiary of the Lloyds TSB group. The management buy-out was successfully completed on 15 March 1997, via the acquisition of the Bloxwich site and related business by the newly incorporated company Trident Alloys Limited(6).
(23) Britannia, which carried out the zinc products business at the Bloxwich site from 29 October 1993 to 15 March 1997 is still in existence, as a wholly-owned subsidiary of MIM.
(24) Trident is an independent company. Its original management team included six directors, owning together 45 % of the share capital, the majority of the remaining capital being held by the Lloyds group. Since the management buy-out, several directors have left the company. The current Managing Director took over his position in February 1999.
(25) Trident produces commodities derived from zinc metal(7). Its three areas of business are die-casting alloys, sacrificial anode cathodic protection products, and-zinc based pigments, collectively referred to as "zinc products". These products include zinc oxide, zinc dust, zinc phosphate and zinc powder.
(26) Trident currently employs 170 people. The company had a worldwide consolidated turnover of GBP 48,75 million (EUR 76,07 million) in financial year 1999 to 2000(8).
(27) Trident supplies four formulations of Delaphos zinc phosphate: "D2", "D4" (higher water content), D2 with a low lead content and micronised D2. These types are all used as paint pigments but cater for specific needs of the customer. Trident does not produce modified types of Zinc phosphate.
1.2.2.5. Waardals Kjemiske Fabrikker A/S
(28) Waardals Kjemiske Fabrikker A/S (Waardals) is headquartered in Bergen, Norway. It was founded in 1947 and currently employs around 30 people.
(29) Waardals originally produced organic pigments used in the paint and ink industry. Later, the company shifted to inorganic substances and produced primarily zinc chromate. Because of the negative effects on the environment, the importance of this product has progressively decreased. In 1975, the company started to produce zinc phosphate and modified types of zinc phosphate. Waardals also produces zinc borate.
(30) The worldwide turnover of the company was NOK 57,52 million (EUR 7,09 million) in 2000.
(31) Waardals produces both standard and modified types of zinc phosphate. Standard types are the so-called ZP-BS-M and ZP-M. Modified types are marketed under the names Wacor ZBP-M, Wacor ZBA and Wacor ZAP.
1.2.2.6. Other producers of zinc phosphate in the world
(32) Beside the abovementioned companies, a few small companies sell small quantities of zinc phosphate at a local level(9). These sales can be deemed to be insignificant at the EEA level.
(33) American companies Mineral Pigments Limited and Wayne Pigment Limited also produce zinc phosphate (including modified types) but are essentially confined to their domestic market.
(34) Asian zinc phosphate producers include Hanil (Korea), Kikuchi (Japan), and some Chinese producers. Together, these producers hold an insignificant share of the EEA zinc phosphate market.
1.2.3. TRADE ASSOCIATIONS
(35) Over the time period considered in this Decision, the five main European producers of zinc phosphate exchanged information and met within trade associations. These trade associations collected and compiled the sales data of each individual company and informed them in return about the size of the market. Meetings also aimed at discussing a number of subjects of common interest such as environment protection, transportation or regulatory issues.
1.2.3.1. The Zinc Phosphates Producers Association (ZIPHO).
(36) The Zinc Phosphates Producers Association subgroup (ZIPHO) was informally established in May 1994, as a "statistical sub-group" of the Zinc Oxide Producers Association (ZOPA), a sector group of the European Chemical Industry Council (CEFIC)(10). A representative of CEFIC was in charge of ZIPHO as a sector group manager.
(37) ZIPHO was originally and primarily created as for the collection and monitoring of statistical figures on the zinc phosphate market. ZIPHO collected and processed statistical data for zinc phosphate until 1997, when the zinc phosphate producers decided to stop resorting to CEFIC.
(38) Zinc phosphate producers also met within ZIPHO to discuss subjects of common interest. During the period considered in this Decision, three ZIPHO technical meetings were organised, taking place in the CEFIC Offices in Brussels(11). ZIPHO members discussed the implications for zinc phosphate of Community initiatives to examine the risks of existing chemicals to humans and the environment.
1.2.3.2. Verband der Mineralfarbenindustrie e.V. (VdMI)
(39) The Verband der Mineralfarbenindustrie e.V (VdMI) is the German producers' association for inorganic pigments, printing ink and printing ink additives, carbon black, white reinforcing fillers, chemicals for enamels, glass and ceramics, artists and school colours and food colorants. It is located in Frankfurt, Germany.
(40) For many of the abovementioned products, VdMI compiles internal statistics. VdMI processed the zinc phosphate producers' sales figures from 1997 to 1999.
(41) In 1998, VdMI convened three meetings between zinc phosphate producers. The first two meetings took place on 31 July 1998 and 6 October 1998 in the VdMI offices. The third meeting took place in Barcelona, Spain, on 9 November 1998. At this occasion, zinc phosphate producers discussed the setting-up of a new trade association named European Manufacturers of Zinc Phosphate (EMZP).
1.2.3.3. European Manufacturers of Zinc Phosphates Association (EMZP)
(42) The association was established on 31 July 1998 by Heubach, SNCZ, Trident and James Brown. According to its Statutes, the objectives of the EMZP are "to promote the common welfare of those engaged in the manufacture of zinc phosphates and their employees and customers; to promote the safe production and use of these pigments and to do such other things in the interests of its members and of the trade as may be lawful and proper"(12).
(43) The EMZP was organised by the VdMI, whose Secretary also held the position of secretary of EMZP. A representative from Heubach was the chairman of the newly created association, a representative of Trident being appointed as deputy-chairman.
1.2.4. RELEVANT MARKET
1.2.4.1. Relevant product market
(44) In the past, the most efficient and most commonly used anti-corrosion pigment in the paint industry was zinc chromate. Consumption of this product has strongly declined in the past two decades, as it is a toxic, environmentally unfriendly product. As a non-toxic and efficient substitute, zinc phosphate has encountered growing success in the industry and has progressively replaced zinc chromate, which is almost no longer used in the Western countries, except for the production of paints destined for export to the Far East or Latin America countries.
(45) A number of mineral or even organic products are partially substitutable to zinc phosphate for anti-corrosive purposes(13). Today, the main substitute for zinc phosphate is calcium phosphate, whose paint grade is approximately 30 % cheaper than zinc phosphate(14).
(46) Modified (or activated) types of zinc phosphate(15) can also be substituted for standard zinc phosphate. These modified grades are usually 30 % to 60 % more expensive than normal zinc phosphate(16), but their anti-corrosive properties are better and smaller volumes are required as a paint addition for the equivalent performance. Modified types of zinc phosphate are produced in limited quantities and were not subject to the anti-competitive behaviours this Decision refers to. Therefore, unless otherwise indicated, subsequent figures and considerations will refer exclusively to standard zinc phosphate.
1.2.4.2. The relevant geographical market
(47) As indicated above, five European producers control the quasi-totality of the worldwide production of zinc phosphate. Most of the product in manufactured in Europe. The relevant geographical market can therefore be deemed to be global, and is in any event at least EEA-wide.
1.2.4.3. Supply of zinc phosphate
(48) During the five years 1994 to 1998, the size of the EEA-wide standard zinc phosphate market in volume was in the region of 9400 metric tonnes(17). The world market can be estimated at 13000 to 14000 tonnes(18) and the US market at 1600 tonnes. Over the same years, average price in the EEA was in the range of ECU 1600/tonne; therefore total European market value approximates EUR 15 to 16 million. At western European prices, the world market value approximates EUR 22 million.
(49) The European market for zinc phosphate is mature. There was no significant growth in the past years.
(50) The following table presents the overall size, in year 2000, of each of the five main producers of zinc phosphate, as well as an indication of their relative importance on the EEA-wide zinc phosphate market during the last year of their respective infringement(19). The figures provided are based on the companies' responses to request for information from the Commission(20).
>TABLE>
1.2.4.4. Demand for zinc phosphate
(51) Customers for zinc phosphate are the main paint manufacturers. The paint market, though highly specialised and segmented, is dominated by a few multinational chemical groups. The sector has recently undergone a major process of concentration, with 10 major players controlling approximately 80 % of the worldwide paint production(21). In the medium term, it is foreseen that Europe's top 10 producers will increase their market share substantially from the current 50 % to a concentration of nearly 80 %.
(52) In western Europe today, the main paint producers are Akzo Nobel, ICI, Dupont, BASF, SigmaKalon (belonging to TotalFinaElf), Becker, Tikkurila, Jotun and Teknos.
(53) Worldwide sales of paint in 1997 amounted to 25 million tonnes, representing a global market value of approximately ECU 50 billion. In Western Europe, the paint market was estimated to 6.2 million tonnes in 1997, representing a value of ECU 17,7 billion(22).
1.3. PROCEDURE
(54) On 13 to 14 May 1998, simultaneous and unannounced investigations under Article 14(2) of Regulation No 17 were carried out by the Commission at the premises of Heubach, SNCZ and Trident.
(55) On 13 to 15 May 1998, at the request of the Commission under Article 8(3) of Protocol 23 to the EEA Agreement, a simultaneous and unannounced investigation under Article 14(2) of Chapter II of Protocol 4 to the Agreement between the EFTA States on the establishment of a Surveillance Authority and a Court of Justice, was carried out by the EFTA Surveillance Authority (ESA) at the premises of Waardals.
(56) Documents indicating that the zinc phosphate producers participated in arrangements infringing Article 81 of the EC Treaty and/or Article 53 of the EEA Agreement were found during the investigations.
(57) Waardals approached the Commission on 17 July 1998 and announced its intention to fully cooperate with the Commission under the Commission Notice on the non-imposition or reduction of fines in cartel cases(23), (hereinafter; the Leniency Notice). At a meeting on 2 September 1998 the company gave the Commission an oral account of the cartel, record of which was taken by the Commission. By letter of 30 October 1998, the company provided additional documents. By fax of 13 November 1998, the Commission sent to Waardals its draft minutes of the meeting of 2 September 1998. By fax of 23 December 1998 and 27 September 1999, Waardals gave its comments on the draft minutes. On 3 December 1999, the Commission received from Waardals a declaration on the content of the minutes.
(58) On 5 March 1999 the Commission addressed requests for information under Article 11 of Regulation No 17 to Heubach, James Brown, SNCZ and Trident. The requests required the undertakings in question to provide additional information and documentation.
(59) Following the receipt of the request for information, Trident informed the Commission by letter of 12 April 1999 of its intention to cooperate fully with the investigation. This letter was followed by a statement of 23 April 1999 supplementing Trident's reply to the Commission's request for information.
(60) On 8 October 1999 the Commission addressed additional requests for information to Heubach, James Brown, SNCZ, Trident and Waardals.
(61) On 2 August 2000, the Commission initiated proceedings in the present case and adopted a Statement of Objections against the undertakings to which this Decision is addressed. All parties submitted written observations in response to the Commission's objections.
(62) At the request of certain addressees of the Statement of Objections, an oral hearing was held on 17 January 2001.
(63) On 12 October 2001, additional requests for information were sent to Britannia, Heubach, James Brown, SNCZ, Trident and Waardals, in order to collect additional turnover figures.
1.4. THE CARTEL
(64) This Decision is based on the documentary evidence found at some of the addressees' premises during the Commission and ESA investigations, on documents provided by the undertakings in reply to the Commission's requests for information, as well as on the declaration of Waardals and the written statement submitted by Trident.
1.4.1. SUMMARY OF THE INFRINGEMENTS OBJECTED TO BY THE COMMISSION
(65) A cartel of five zinc phosphate producers, namely Britannia (Trident as from 15 March 1997 onwards), Heubach, James Brown, SNCZ and Waardals, existed from 24 March 1994, until 13 May 1998. The aim pursued was the elimination of competition in the EEA-wide zinc phosphate market. This was to be obtained by means of a market sharing agreement (allocation of and adherence to market shares to/by each producer), by the fixing of bottom and/or "recommended" prices and, to some extent, by the allocation of specific customers.
(66) The allocation of sales quotas was the cornerstone of the cartel. Respective market shares were initially calculated in 1994 on the basis of the figures for the years 1991 to 1993. Each cartel member had to adhere to its allocated market share. Sales quotas were in principle allocated at the European level.
(67) The cartel members also agreed on "bottom" or "recommended" prices to be charged for zinc phosphate. At each meeting a price per tonne was set in GBP for the market in the United Kingdom and in DEM for the German market. The German price was then converted into local currency prices for the other European countries. The leading company in a particular territory had the main input in deciding what the appropriate price for that country should be, for instance Trident for the United Kingdom, Heubach for Germany and SNCZ for France. This lead was generally followed(24).
(68) During the meetings, information about specific customers was exchanged. On some occasions, this resulted in customer allocation. There were in particular regular discussions about the Finnish customer Teknos Winter (Teknos) which was successively "allocated" to the respective members of the cartel(25).
(69) In order to ensure that allocated market shares were adhered to, a monitoring system was set up. Each producer sent its sales volumes data on a monthly basis to the CEFIC and later to the VdMI, which compiled the figures and sent them to all the five producers concerned. Being in possession of the exact size of the market, the producers met and provided each other with their individual sales volumes, thereby verifying via this exchange of information their mutual adherence to the agreed market shares.
(70) From March 1994 onwards until May 1998, the cartel members held regular multilateral meetings. During this period, sixteen such cartel meetings have been identified.
(71) The usual representatives of the companies in the cartel meetings were the following individuals(26):
- Heubach: the Managing Director and a Sales Executive,
- James Brown: the Managing Director,
- SNCZ: the successive Chairmen, and Commercial Directors, (a Commercial Director became Managing Director in 1995 to 1996),
- Britannia Alloys/Trident: the General Manager (1994 to 1997), who became Managing Director (1997 to 1998); the Sales & Marketing Manager (1993 to 1997), who became Commercial Director (1997 to 1998); the Sales Executive Zinc products (1994 to 97) who became Sales Manager Zinc products (1997 to 1998),
- Waardals: the Director and the International Sales Manager.
(72) The agreement on sales and quotas was in the nature of a "gentlemen's agreement", in that the members did not put into practice any specific kind of enforcement mechanism. Enforcement of the sales quotas was achieved through pressure brought to bear on the members during cartel meetings. Customer allocation was used as a form of compensation in the event of a company not having achieved its allocated quota(27). On an annual basis, the real market shares of the five producers closely followed their allocated share(28).
1.4.2. BACKGROUND AND PRE-1994 ANTI-COMPETITIVE CONTACTS
(73) Prior to 1994 the zinc phosphate market was undergoing a period of low prices and aggressive price cutting and targeting of mutual competitor's traditional customers.
(74) Waardals, for instance, which enjoyed a 55 % share of the market in the United Kingdom and a 80 % share of the Nordic market in the 1980's, was confronted in 1990 with two simultaneous phenomena: a reduction in the zinc phosphate consumption in the Nordic countries, as many Scandinavian companies decided to build up their production plants in the United Kingdom, and a severe economic decline in Finland following the collapse of the Soviet Union. In addition, Pasminco Europe had started to enter the Norwegian market in 1990 with very low prices. Waardals declares that it was consequently "forced to protect its market"(29).
(75) In this context competitors began to contact each other in order to work out a "solution" and put an end to price-cutting practices.
(76) According to Trident's statement, there was already regular communication between Pasminco Europe-ISC Alloys and its competitors in the zinc phosphate market in the period 1989 to 1994. A sales executive of Pasminco Europe-ISC Alloys had a direct telephone line which was not routed through the switchboard and which he used for contacting competitors. Trident believes that these conversations with competitors involved discussion about the market and price levels(30).
(77) It is further believed that a Pasminco Europe-ISC Alloys sales executive met competitors on a one-to-one basis. One sales executive of Trident, a former employee of Pasminco-Europe-ISC Alloys and later of Britannia, remembers taking part in a meeting involving a higher executive from Heubach(31). The purpose of the meeting was to complain about aggressive behaviour by another competitor.
(78) Documents found during the investigation also indicate that improper, anti-competitive contacts between the European zinc phosphate producers already took place in the period from 1980 to 1994.
(79) A "visit report" found during the investigation at Waardals shows that as early as 1980 meetings between competitors took place, during which sensitive information was exchanged. The report, written by a sales executive of Waardals after he met the Managing Director and the Marketing Manager of Pasminco Europe-ISC Alloys, reads as follows(32): "Visit report ISC Alloys - Visit 18.12.1980: - (...) Alloys asked us not to offer lower than
630.- in the first quarter of '81, which should be raised to
650-660 in the second quarter. They promised to go up to that level themselves when old contracts had been fulfilled. If we would not raise our prices, Alloys would drastically decrease its own prices on all markets, including Scandinavia. In return for our higher prices they are willing to do the following: 1. to buy 60 tonnes of ZP from us in 1981 2. to buy 100 tonnes of ZP from us in 1982".
(80) Another report, written at the end of 1991 and reporting on a meeting having taken place at the Resins and Pigments Exhibition in November 1991 in Brussels reveals similar contacts, as it reads(33). "(...) Our competitors in ZP: Alloys, SNCZ and Heubach all had stands of their own and agreed that the price level was at an unacceptably low level. They blamed each other and the bad times in general. I got the impression that they defend their market shares by all means and would hold out as long as possible. Just before the Exhibition ZP had been sold in Germany at DM 2.- per kg, presumably both by Heubach and SNCZ. In comparison our price to [...]* is at the time [...]*. (Name of SNCZ chairman) expressed deep concern - maybe because of problems? I replied that a voluntary reduction in produced quantities was, in my opinion, the only way to obtain stability in the market - and thus better prices. He seemed to agree with this argument and will take the initiative for a meeting with the other producers. (...)".
1.4.3. MARKET SHARING, PRICE FIXING AND CUSTOMER ALLOCATION FROM 1994 TO MAY 1998
(81) As far as the Commission is aware, the zinc phosphate cartel was set up in March 1994. Regular meetings between competitors ensued over a period of at least four years. In May 1998, the Commission and ESA investigations led the cartel members to cancel a further cartel meeting that had been planned for July 1998 in Amsterdam.
1.4.3.1. The set-up of the cartel in 1994
(82) Prior to 1994 there was no organised forum for the zinc phosphate manufacturers to meet to discuss matters of common interest. Zinc dust and zinc oxide manufacturers had trade associations organised by the CEFIC but there was no equivalent sector group for zinc phosphate manufacturers.
(83) According to Trident(34), it is not quite clear how the first meeting of all the five manufacturers came about or when this meeting occurred. It seems that a representative of Pasminco Europe-ISC Alloys suggested to James Brown, SNCZ, Waardals and Heubach that they meet to discuss the benefits of forming a trade association. The first meeting was held around October 1993 and was attended by representatives of Heubach, James Brown, Pasminco Europe-ISC Alloys, SNCZ, and Waardals.
(84) Trident states that the purpose of the initial meeting was to discuss ways in which some order could be brought into the market with a view to ending the prevailing price wars. The representative of Pasminco-Europe-ISC Alloys suggested that one way this could be done was to develop a system whereby the companies could obtain information about their individual market share. He suggested using a system such as that organised by CEFIC for the zinc dust producers. CEFIC acted as an "honest broker" for the zinc dust producers. Each producer provided information about the volumes produced and sold. CEFIC would draw this information together and provide the producers with a picture of the total market from which each producer could then derive its own market share.
(85) Trident continues that the view of the representative of Pasminco-ISC Alloys, as expressed at the initial meetings in late 1993 and early 1994, was that if the producers knew their own individual market share then, provided that no one was losing significant market share, prices would naturally drift upwards as the need for aggressive targeting of customers at low prices would no longer exist. Having access to accurate information about a company's own market position would prevent a company from taking aggressive action on the basis of mistaken belief that it had lost market position.
(86) Waardals contests its participation in the meeting of October 1993 and states on its part that it was contacted by the Managing Director of Heubach in early 1994. The representative of Heubach invited Waardals to London for an informal meeting to talk about zinc phosphate. The invitation was made also on behalf of Britannia(35).
1.4.3.2. The Cartel in operation: March 1994 to May 1998
(87) It is established from documentary evidence as well as from the declaration of Waardals and the statement of Trident that the first multilateral meeting between the five zinc phosphate producers was held at the latest on 24 March 1994.
(88) Regular meetings were held between representatives of Britannia (Trident as from 15 March 1997), Heubach, James Brown, SNCZ and Waardals from 24 March 1994 until 13 May 1998. This has been confirmed by all the five undertakings concerned in their respective replies to the Commission's requests for information or statements. Sixteen different multilateral cartel meetings have been identified by the Commission.
(89) Waardals says that information exchanged was limited to Europe, as the "club" was not concerned about the American market and the rest of the world, where the club would have little influence due to local competitive contexts.
(90) As to the contents of these meetings, Trident states that they followed essentially the same format. The meetings lasted about an hour to an hour-and-a-half and involved comparison of each participant's West European market share(36) for the last quarter (or annually at the first meeting in each year) by reference to historic market shares; discussion of price levels, in GBP for the market of the United Kingdom and in DEM for Germany, the German prices being converted into local currency for other European countries; discussion of supplies to Teknos; and general discussions about who was new in the market, such as new importers, new entrants or new competing products such as dicalcium phosphate(37).
(91) The market shares of each company were definitely agreed upon and assigned at the meeting of 9 August 1994. At each subsequent meeting each participant revealed its west European market share, which was compared with the figure initially agreed. The annual west European market shares of each participant were discussed at the first meeting of each year (usually in January or February)(38).
(92) Price levels were also discussed at each meeting, where a price per tonne was set in GBP for the market of the United Kingdom and in DEM for the German market. At the initial meetings local currency prices for each territory were set. Later the DEM price was converted into local currency for the other European territories. Reference prices discussed were applicable to quantities of one to five tonnes and represented the price "delivered to customer" (that is to say, including freight costs). At some meetings the discussions were limited to "no change". Trident states that its internal price lists reflected the price discussed at the last meeting(39).
(93) According to Trident, the discussions varied little over the years except in relation to pricing. Latterly the view was taken that pricing levels were of less importance as long as market shares did not vary. Trident states that this view was originally put forward by the representative of James Brown and was not contradicted by other participants. Trident believes that this change in attitude happened during 1997.
(94) Waardals declares(40) that year after year, the "results" of the cartel turned out to be a better coherence in prices, except in the Nordic countries. Prices in the Scandinavian countries were lower than the "recommended" prices. The "recommended" prices were prices, modelled on the German market, which were used as standard "recommended" prices for the remaining countries.
(95) The notion of "recommended" prices aimed at preventing the risk of major shifts of products across national borders. There was an implicit agreement that prices should be broadly in line with the German prices(41).
(96) Trident declares that during the meetings, there was regular discussion about sharing the Finnish customer Teknos. It was agreed that the producers would share this account. The price to be quoted to this customer was agreed and it was agreed that no one other than the particular producer whose turn it was to have this business would quote a price below that agreed(42).
(97) According to Trident's statement, this arrangement arose because historically Teknos was one of Waardals' main customers in Scandinavia and that they were sensitive about losing this customer, in particular to Britannia. Therefore, in order to avoid a price war over Teknos it was agreed that Britannia, Heubach, SNCZ and Waardals would take it in turns to supply this customer. The supplier for the next period was discussed at each meeting.
(98) Waardals give on its part a slightly different account of the sharing out of Teknos. It says that it did not initially participate to the sharing of this customer, but that it suspected the three other companies of such a collusion. Waardals states that in was only after a meeting in 1995 "where Heubach, (Britannia), and SNCZ admitted that they had shared Teknos, that supplies to Teknos became the subject of regular discussions at meetings attended by Waardals"(43).
(99) Waardals further submits that it participated only exceptionally in the Teknos arrangement. It states that it was "only once that the three decided unilaterally that Waardals should deliver a container to Teknos in order to make sure that Teknos did not become suspicious of the arrangement"(44).
(100) This last statement is in any event consistent with Trident's one that "the companies were aware that Teknos could become suspicious of the collusion in this respect if a regular rotation was put in place. The cartel participants companies therefore followed a more flexible system, for example at one stage SNCZ was the Teknos designated supplier three times in succession"(45).
(101) Over the period 1994 to 1998, there were two types of cartel meetings "full group informal meetings" and producers' "ad hoc meetings". The cartel members also regularly met under other lawful auspices, such as "technical CEFIC meetings". Market sharing, prices fixing and customer allocation agreements were usually concluded during the "full group informal meetings".
1.4.3.3. Full group cartel meetings 1994 to 1998
Year 1994
(102) The foundation for the market sharing, price fixing and customer allocation agreements was set in 1994 between the zinc phosphate producers. The first meeting of the cartel (sometimes referred to by the cartel participants as the Club) took place on 24 March 1994 in London at the Holiday Inn Heathrow Airport Hotel. Representatives of Britannia, Heubach, James Brown, SNCZ and Waardals attended the meeting(46).
(103) One of the reasons for the organisation of the meeting was that low prices in the Nordic countries and in the United Kingdom started to be felt all over Europe, due to increasing internationalisation of prices and purchasing policies.
(104) During the discussion, it was decided to fix a "status quo" on quantities of zinc phosphate supplied in Europe. According to Waardals, the cartel was based on the principle "only quantities, no prices", but it was also decided that prices should not be too different from one country to another, so that products would not be shifted across borders(47). Handwritten notes of later meetings put in evidence that national "recommended" prices were widely used(48).
(105) For the monitoring of the system, it was decided to send all figures to CEFIC, which would aggregate the sales data and send back overall figures. The reference shares would be agreed upon on the basis of the 1991 to 1993 figures regarding Germany, the United Kingdom, Scandinavia and France(49).
(106) A report of 21 April 1994 written by a representative of Waardals concerning a visit by Waardals to clients [...]* on 11 to 13 April 1994, also shows contacts between producers and refers to a general suspicion of price cooperation between the zinc producers(50): "As a reply to the direct question why we could not offer [...]* delivered in [...]*, I answered that this is due to the higher freight from [...]* to [...]* compared to [...]*. This was accepted. [...]* stressed that he would like to have W. as main supplier of ZP provided, of course, that we were competitive. I think this is due to a general suspicion of the zinc producers regarding agreed price-cooperation. [...] Finally, it can be mentioned that [...]* on purpose plays the suppliers off against one another by showing data-outprints of competitors' offers. From oral conversations with Alloys/J. Brown I know that the above-mentioned offers are correct."
(107) The next meeting took place in London on 3 May 1994 at the Hotel Excelsior Heathrow Airport. Representatives of Britannia, Heubach, James Brown, SNCZ and Waardals attended the meeting.
(108) The final agreement on sending the sales figures to CEFIC was reached at the latest at this meeting as on the following day, on 4 May 1994, a representative of Britannia sent a fax to CEFIC confirming the acceptance of the producers of CEFIC's quotation, giving names and contact details of the five producers and asking CEFIC to send questionnaires to each of them concerning the years 1991, 1992, 1993 annually and 1994 monthly(51).
(109) By letter of 26 May 1994 addressed to representatives of Britannia, Heubach, James Brown, SNCZ and Waardals, CEFIC referred to the creation of the zinc phosphate statistical group in the frame of CEFIC Sector Groups and asked for "historical statistics 1991, 1992, 1993" to be provided to it by 15 June 1994(52). On 15 June 1994 CEFIC sent a reminder to Waardals to provide the information requested for the years 1991 to 1993 and for the months January to May 1994(53).
(110) All five producers sent their respective figures to CEFIC. For instance, Waardals did so by fax of 15 June 1994 and SNCZ by letter of 14 June 1994(54).
(111) A letter of 28 July 1994 addressed to representatives of Britannia, Heubach, James Brown, SNCZ and Waardals and titled "Statistics - historical investigation 1991 - 1993" confirms that CEFIC had produced an analysis of the total market size for those years and sent it to the five zinc phosphate producers by the end of June 1994(55).
(112) The respective market shares of each of the cartel members were allocated at the meeting held on 9 August 1994 in London at the Hotel Ramada Heathrow Airport. Representatives of Britannia, Heubach, James Brown, SNCZ and Waardals attended the meeting(56).
(113) Contemporaneous notes of a representative of Britannia and of a representative of Waardals (both notes on Ramada Hotel paper) show a table of each undertaking's market share for the years 1991, 1992, 1993 and 1994. These market shares were rounded up for the allocation of market shares as follows: Heubach 24 %, Britannia 24 %, SNCZ [...]*, Waardals [...]* and James Brown 6 %. The similarities between the two documents are particularly striking:
Extract of original document No 1: handwritten notes of Britannia's representative
>PIC FILE= "L_2003153EN.001201.TIF">
Extract of original document No 2: handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001202.TIF">
(114) Britannia's representative expressed the view at the meeting of 9 August 1994 that if all the companies were satisfied with their existing market shares and if these market shares had been consistent over a number of years, then, as long as these shares were not substantially altered, there would not be need for the aggressive price cutting of earlier years(57).
(115) According to Trident this view was accepted by all the participants at the meeting. The result was that each of the five undertakings agreed to use their historic European market share levels as benchmark for their future market position(58).
(116) Another cartel meeting was held 25 November 1994 in London at the Novotel Heathrow Airport Hotel. It was attended by representatives of Britannia, Heubach, James Brown, SNCZ and Waardals(59).
1995
(117) At the beginning of 1995, a "trilateral" meeting was held on 9 January 1995 at the Manchester Airport Forte Crest Hotel (United Kingdom). Representatives of James Brown, Britannia and Waardals attended this meeting. James Brown had arranged the meeting to attempt to broker better relations between Britannia and Waardals.
(118) James Brown attempted to broker an arrangement whereby Waardals would agree to stop targeting customers in the United Kingdom with low prices, in particular International Paint, and Britannia Alloys would restrict its activities in Scandinavia, particularly in respect of a Norwegian customer, Jotun. According to Trident, no such agreement was reached.
(119) Waardals confirms the meeting and its content, as well as the failure to find the agreement that was sought. Waardals adds as a result, it "lost Jotun, its biggest customer, to Britannia Alloys"(60).
(120) The first "full group" cartel meeting in 1995 took place in London at the Novotel Heathrow Airport Hotel on 27 March 1995. Waardals was in charge of the organisation(61). Representatives of Britannia, Heubach and Waardals took part in the meeting. According to Waardals, also a representative of James Brown and SNCZ respectively attended all meetings(62). James Brown states that its representative was not present at this meeting(63). SNCZ has not indicated that its representative attended this meeting. However, an agenda for this cartel meeting was found in SNCZ's premises during the Commission investigation(64). The document has many scribbles on it indicating the presence of the person who made them at the meeting where the document was discussed. It can therefore be concluded that also SNCZ was represented at this meeting.
(121) The agenda of the meeting reads as follows: "AGENDA - MEETING 27.3.95 - (1)1994: Total sales and market shares in West Europa; (2) 1994: Sales, competition, price development in Germany, France, Benelux, UK, Nordic countries, USA, Rest of the world; (3) Development 1st Quarter -95 and prospects for rest of -95; (4) New production of phosphate in Australia by Larvik- capacity?; (5) Question/answers; (6) Summary; (7) Date for new meeting".
(122) A note dated 30 March 1995(65) found in Waardals and addressed to the higher management of the company gives an account of the meeting and reveals that Waardals has claimed for an increase of its allocated market share. The note says: "In our last meeting, 27.03.95, they were not willing to discuss larger market share for our company"(66). "They" in this quote means obviously the other cartel members. Indeed, Waardals had apparently planned to make the following request: "(1) [...]*; (2) [...]*;(3) [...]*; (4) full member with allocation of clients"; (5) our contribution: reduced activity ton for ton(67). These words refer obviously to the possibility to sell to [...]*, to getting [...]* of the market share of Finland and a market share of [...]* of the total market, and to becoming a full member of the cartel with allocated customers.
(123) However, the request for an increase in market share was opposed by the other participants, and the rest of the proposals were not communicated during the meeting(68).
(124) The meeting and negative attitude of the other companies gave Waardals additional reasons to believe that the others were cheating on them. Waardals says that during the meeting of 27 March 1995, it was explicitly admitted that Heubach, Britannia and SNCZ had shared the Finnish customer Teknos, each supplier delivering in turn the quantities corresponding to one quarter of the year(69). The note of Waardals' representative of 30 March 1995 reports: "(3) Our market share, [...]*, is too low. Alloys, Heubach and SNCZ have [...]* each. The remaining 6 % go to James Brown. (4) Our competitors, who are all manufacturers of ZnO, have an internal cooperation within the 'club'. They have shared customers/markets between them at our cost. They have themselves admitted that this cooperation has taken place a.o. in Finland and this is also the reason why all three have [...]*(70)."
(125) The note of 30 March 1995 also evaluated the advantages (e.g. "have obtained higher prices in 1st quarter -95") and disadvantages (e.g. "Illegal. Can have large, negative consequences for us if we are discovered.")(71) of being a member of the cartel. Resentment vis-à-vis the other producers led to Waardals' temporary withdrawal of the cartel in April 1995, when Waardals announced to CEFIC that they would no longer communicate their sales figures(72).
(126) CEFIC informed the other zinc phosphate producers of Waardals' decision not to provide sales figures on 3 May 1995(73). SNCZ sent a fax(74) to CEFIC on 2 June 1995 stating that it would inform CEFIC of its position as to continuing sending the statistics on 13 June 1995, i.e. one day after the date on which the following cartel meeting was to be held. The documentary evidence shows that it continued sending information to CEFIC(75).
(127) According to Trident, another cartel meeting was held in London on 12 June 1995 at a hotel at Heathrow Airport, with two of its representatives participating(76).
(128) The Commission has evidence that representatives of Waardals were in London, at Hotel Novotel, Heathrow on 11 to 12 June 1995(77). According to the notes of an employee of Waardals who wrote in his diary that a representative of Heubach was also present at this meeting.
(129) Waardals confirms in its reply to the statement of objections that it actually took part in a meeting with a representative of Heubach in London on the said date, but Waardals adds that it "did not attend any club meeting that day"(78).
(130) The documentary evidence shows that Waardals finally sent the requested market figures to CEFIC for 1995. Waardals and the other producers sent to CEFIC compiled figures for the period running from January to June 1995(79). From July 1995 onwards, the sales volumes were once again provided on a monthly basis. Thus, Waardals' withdrawal from the cartel, if it occurred at all, lasted only for a very limited period of time. This is admitted by Waardals in its reply to the statement of objections.
(131) Waardals further submits however that "after having pulled out of the Club in April 1995, Waardals did obtain an order from Teknos, on its own and outside the sharing agreement operated by the others, and delivered a container to Teknos on week 16"(80).
(132) The next cartel meeting was held in London on 15 September 1995 at the Novotel Heathrow Airport Hotel. Representatives of Waardals, Britannia, Heubach, James Brown and SNCZ participated in this meeting(81).
Year 1996
(133) In 1996, cartel meetings were held, on 22 January(82) in Paris at Hotel Mercure, on 21 May(83) and on 10 September(84) in London at the Novotel Heathrow Airport Hotel. They were all attended by representatives of Britannia, Heubach, SNCZ and Waardals. James Brown was represented at the meetings of 22 January and 10 September 1996(85). The discussions at these meetings followed the normal format, including, inter alia, the disclosure and comparison of each participant's individual sales and the set up of "recommended" prices(86).
(134) Handwritten notes(87) found at the investigation in a folder titled "Cefic 21.5.96" show a calculation of zinc phosphate sold by Waardals in 1995 and concludes with the total amount of zinc phosphate sold by it in Europe [...]*. It then sets out the total figure of zinc phosphate sold by all the producers in Europe during that year [...]*, which matches with CEFIC's statistics for 1995) and breaks it further into volumes sold by each of the five producers, as well as states their respective market shares. The figures stated before "SNCZ" and "(Alloys)" (Britannia) match exactly with the figures that these companies sent to CEFIC concerning the year 1995(88). The notes also contain bottom prices for various European countries. A date "21.5." (that is to say, the date of the meeting) is written at the bottom of the page.
Extract of original document No 3(89): handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001401.TIF">
(135) In 1996, CEFIC informed the companies that ZIPHO, under which the compilation of the statistics was done, needed to be formally established. The companies were unwilling to incur the additional expense resulting from this(90), which led them to look for other possibilities for compiling the statistics.
Year 1997
(136) The next cartel meeting had initially been planned for 22 January 1997: on 5 December 1996, Waardals made a reservation for a meeting room for eight people in the Hotel Novotel Heathrow. However, the meeting had to be postponed and the reservation was cancelled by Waardals on 9 January 1997(91).
(137) The meeting was finally organised on 4 February 1997 at the Holiday Inn Crowne Plaza, London Heathrow(92). The boardroom was booked by Britannia. Representatives of Britannia, Heubach, James Brown, SNCZ and Waardals took part in the meeting(93).
(138) Notes handwritten on Holiday Inn paper(94) reveal that the European sales of zinc phosphate in 1996 were discussed and that the respective market shares of the companies were calculated. In his statement during the investigation, a representative of Waardals indicated that this document was probably written in London in January 1997, during a meeting with the five producers of zinc phosphate. The figures stated after "SNCZ" and "BA" (for Britannia) match with the figures that these companies had sent to CEFIC concerning the year 1996(95).
Extract of original document No 4(96): handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001501.TIF">
(139) SNCZ seemed to have undersold and was "allocated" Teknos for 6 months. SNCZ's price to Teknos was to be [...]* and Waardals' [...]*.
(140) Bottom prices were suggested for various European countries. In Germany, it was suggested to apply immediately DEM 3,30/kg (DEM 3,40/kg under five tonnes). In the United Kingdom, suggested price was GBP 1,20 (1,24 for less than five tonnes). In France it was FRF 10,80 (11,10 for less than five tonnes). In Belgium the price to be charged was BEF 62 immediately, then BEF 65 from the second quarter onwards. Similarly in the Netherlands immediate price of NLG 3,35 (3,65 under five tonnes) was set to be increased to NLG 3,50 (3,80 under five tonnes) during the second quarter. Whereas Denmark was to follow the German price, suggested price was FIM 10 in Finland and ITL 3000 in Italy. No price was apparently suggested for Norway.
(141) The said prices match exactly with Britannia's internal price instructions for February 1997(97) regarding sales of zinc phosphate for "1000 to 4999 kilos" and "above 5000 kilos". It is also indicated in these instructions that the prices are "minimum price levels" and that they "should not be reduced without prior discussions with (name of employee)", whose name refers to the person who attended the cartel meetings on behalf of Britannia.
(142) In addition to the matters related to zinc phosphate, other topics such as calcium phosphate or zinc oxide prices were also discussed, as indicated in the handwritten notes(98).
(143) Another undated handwritten note(99), of the representative of Waardals concerning market share calculations was also found at the investigation. It was in all likelihood written just before or at this meeting. It shows a comparison of the actual and allocated market share of Waardals in 1996. The table first sets out the total sales of zinc phosphate for each calendar month, together with Waardals' sales and then shows that Waardals has sold 25 tonnes above its market share of [...]*, as allocated to it at the meeting of 9 August 1994.
Extract of original document No 5(100): handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001502.TIF">
(144) Following the initial provision of "historical figures" to the CEFIC in June 1994, the zinc phosphate producers regularly sent data to CEFIC concerning their zinc phosphate sales volumes at least until January 1997. The deadlines set by CEFIC for the producers to send in their monthly data were very short. In return, the zinc phosphate producers received the compiled data from CEFIC very quickly, in most cases around the 20th of the following month. Thus, the producers were at all times well informed of the volumes sold on the market.
(145) The disagreements with CEFIC in 1996 concerning the extra cost for its service resulted, on 14 February 1997, in a representative of Heubach sending a fax to Britannia, James Brown, SNCZ and Waardals informing that Heubach had decided to stop transmitting any further data to CEFIC and asking the other producers to do the same(101). At the same time Heubach asked for the other producers' views on assigning the statistical processing task to VdMI. A representative of Heubach and a representative of VdMI were due to discuss the details shortly(102).
(146) Heubach sent on 6 March 1997, a fax to CEFIC informing that it did not wish to continue any activities in ZIPHO neither on a statistical nor on a sector group basis and that it would therefore not submit any further statistical data from that day on. A copy of this fax was sent to Waardals, Britannia, SNCZ and James Brown(103).
(147) Trident informed CEFIC by fax of 25 March 1997 that it did not wish to continue any activities in ZIPHO(104).
(148) On 29 March 1997, Heubach sent a fax to Waardals informing the latter of the address and name of an employee of VdMI, the organisation to which the market data from then on was to be sent. Data concerning the first quarter of 1997 was to be sent there at the beginning of April(105).
(149) The task previously fulfilled by CEFIC was taken over by the VdMI in April 1997. Already on 1 April 1997, the VdMI asked by fax that the producers send their figures for the first quarter of 1997 by 14 April 1997(106).
(150) On 14 April 1997, a representative of VdMI sent a fax to Trident (copied to all the other zinc phosphate producers) introducing the association and explaining its tasks(107).
(151) The following cartel meeting took place on 22 April 1997 in Paris at the Hotel Novotel of Roissy-Charles de Gaulle Airport. The boardroom was booked under the name of "Silar", the "sister" company of SNCZ. Silar also booked rooms for two representatives of Waardals in the Roissy Charles De Gaulle Airport Ibis Hotel(108). Representatives of Heubach, James Brown, SNCZ, Trident and Waardals took part in the meeting(109).
(152) Notes and travel documents show that the two Waardals' representatives were in Paris Hotel Ibis on 21 to 22 April 1997 and met representatives of Trident and Heubach(110).
(153) Handwritten notes(111) taken by a representative of Waardals found at the investigation show that sensitive sales information was exchanged during this meeting. The figures and market shares concern sales during the first calendar quarter of 1997.
Extract of original document No 6: Handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001601.TIF">
(154) In his statement regarding these notes made during the course of the investigation of 13 May 1998, a representative of Waardals confirms they refer to a meeting in Paris, Charles de Gaulle Airport, Hotel Novotel on 22 April 1997.
(155) The figures given under "SNCZ", "Trident" and "Heubach" in these notes correspond exactly with the numbers these companies had sent to VdMI for the relevant quarter for the compilation of the statistics(112).
(156) Handwritten notes of a representative of SNCZ dated 6 March 1997 read "Réunion 22.4.97 de coordination à Paris"(113).
(157) On 17 July 1997 the zinc phosphate producers held a meeting at Hotel Skandinavia in Copenhagen(114). Representatives of Heubach, James Brown, SNCZ, Trident and Waardals took part in the meeting(115).
(158) A representative of Waardals had the following notes in his diary of 1997 concerning this meeting(116):
(159) 16 July 1997: "Departure to Copenhagen, Hotel Skandinavia"
(160) 17 July 1997: "ZP meeting in Copenhagen. We are the hosts! No critics."
(161) Handwritten notes(117) show that sensitive sales figures were exchanged and discussed and that minimum prices were fixed at this meeting. The first two rows of the notes refer to the first and second calendar quarter of 1997. Individual sales volumes for the same year indicated in these notes after "H." (Heubach), "T.A." (Trident) and "SNCZ" match exactly with the figures that these companies had sent to VdMI for the compilation of the statistics(118).
Extract of original document No 7(119): handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001701.TIF">
(162) The same notes indicate that bottom prices were fixed for various European countries (Germany, France, the United Kingdom, the Netherlands, Belgium, Sweden, Norway, Finland, Denmark and Italy). The first price column concerns volumes above 5 tonnes.
Extract of original document No 8: Handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001702.TIF">
(163) Exactly the same prices are indicated on Trident' internal price instructions for July to August 1997(120). It is also indicated in these instructions that the prices are "minimum price levels" and that they "should not be reduced without prior discussions with (name of employee)", whose name refers to the person in Trident who attended the cartel meetings.
(164) According to the same notes, Teknos was allocated to Heubach at the price of DEM 3,35: "Teknos: Heub.: Dem 3,35".
(165) The last cartel meeting of year 1997 was held at the Airport Hotel Gavinchi, in Hamburg on 16 October. It was attended by representatives of Heubach, James Brown, SNCZ, Trident and Waardals(121).
(166) Waardals' representative's handwritten note on a file folder indicates: "Hamburg, 16.10.97..."(122).
(167) Handwritten notes(123) found at the investigation show that sensitive sales information was exchanged by the producers. The notes compare zinc phosphate sales figures for the first three calendar quarters of 1996 and 1997, first for Waardals and then the total figures. At the bottom of the document, each of the five companies' individual sales volumes for the third quarter of 1997 are indicated, together with a market share calculation for each of them. Individual sales volumes indicated after "Trident" (Trident), "Heub" (Heubach) and "SNCZ" correspond exactly with the figures that these companies had sent to VdMI for the compilation of the statistics(124).
Extract of original document No 9(125): handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001703.TIF">
Year 1998
(168) The cartel meetings continued with the next one being held in London on 19 January 1998 at the Jarvis Hotel at Heathrow airport. A boardroom was booked and invoiced to Trident(126). James Brown, Heubach, SNCZ, Trident and Waardals attended this meeting(127).
(169) A note in the diary of the representative of Waardals on 2 January 1998 reads: "Meeting in London, Monday 19.1"(128). He informed another representative of Waardals on 12 January 1998 of this meeting: "Meeting in London Monday 19.1.98. ... The meeting starts at 10 o'clock and the meeting room is reserved under the name Trident"(129).
(170) Waardals' representative's handwritten note on a file folder indicates: "... London 19.1.98..."(130).
(171) The diary of a representative of SNCZ on 19 January 1998 reads: "London, coordination"(131).
(172) Pocket diary of 1998 of a representative of Heubach reads on 19.1.1998: "London, Jarvis"(132). Also, another diary reads on the same date states "UK"(133).
(173) Information on quantities of zinc phosphate respectively sold in Europe in the fourth calendar quarter of 1997 was also exchanged and the market share of each competitor was calculated. A document handwritten on Jarvis Hotel paper(134) contains calculation of market shares regarding zinc phosphate and apparently compare real market shares to previously agreed market shares. Individual sales volumes indicated after "Trident" (Trident), "Heubach" and "SNCZ" correspond exactly with the figures that these companies had sent to VdMI for the compilation of the statistics(135).
Extract of original document No 9(136): handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001801.TIF">
(174) Another handwritten document(137) found at the investigation at the office of the representative of Waardals reads as follows:
Extract of original document No 10(138):
>PIC FILE= "L_2003153EN.001802.TIF">
(175) The first column on the top left of the document sets out the aggregated total volumes of zinc phosphate sold by the five producers during each calendar quarter in 1997, and the total aggregated amount sold in 1997. The right-hand column of the table sets out the corresponding volumes sold by Waardals and the percentage they represent of the total volumes sold.
(176) The table shows that the total volumes sold by all the five producers in 1997 is [...]* (tonnes). Waardals had sold [...]* (tonnes) which represents [...]* of the total. Then follows a calculation of [...]* of the total volumes [...]* equalling [...]*; and a conclusion "too much sold 83 t".
(177) According to the calculation made by the cartel members at the meeting of 9 August 1994, Waardals was allocated a [...]* share of the market(139). The [...]* mentioned in the present handwritten notes refers to that figure and it is concluded that Waardals has exceeded its share by 83 tonnes [...]*.
(178) It is also clear from documents found at the investigation that the companies also fixed bottom zinc phosphate prices at this meeting for various European countries (the United Kingdom, France, Sweden, Norway, Finland, Denmark, Italy, Belgium and the Netherlands). Handwritten notes(140) found at Waardals first state that January was unstable:./. DEM 0,20, and then sets out bottom prices:
Extract of original document No 11(141): handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001803.TIF">
(179) Trident's internal price instructions for February 1998(142) contained exactly the same prices as the abovementioned Waardals' note for the sale of zinc phosphate of "1000 to 4999 kilos" and "above 5000 kilos". It is also indicated in these instructions that the prices are "minimum price levels" and that they "should not be reduced without prior discussions with (name of employee)", whose name refers to the employee of Trident who attended the cartel meetings.
(180) Customer allocation also took place at this meeting; small customers and International Paint were allocated to James Brown (reference to the name of an employee). The price for the latter was also fixed (at GBP 1240)(143), as the document shows: "United Kingdom - (small customers to)(144) (name of employee) + Intern. 1240".
(181) The next cartel meeting was held on 20 April 1998 in Paris at Hotel Novotel of Roissy-Charles de Gaulle airport. The boardroom reservation was made under the name of Silar. Heubach, James Brown, SNCZ, Trident and Waardals attended this meeting(145).
(182) A handwritten note on a file folder of the representative of Waardals indicates: "... Paris 20.4.98"(146).
(183) Pocket diary '98 of a representative of Heubach reads on 20 April 1998: "Paris (Novotel)"(147). Also, the diary of another usual representative of Heubach indicates on Monday 20 April 1998: "WE + (name of above mentioned Heubach's employee), Paris"(148).
(184) Handwritten notes found at the investigation contain market share calculations for the first quarter of 1998 and show that sensitive information was exchanged by the producers(149).
Extract of original document No 12: handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001901.TIF">
(185) Individual sales volume indicated after "Trident" (Trident Alloys) and "SNCZ" match exactly with the figures that these companies sent to VdMI for the compilation of the statistics(150).
(186) The same notes indicate that bottom prices were fixed for various European countries (the United Kingdom (the first row), Germany, France, Belgium, the Netherlands, the Nordic countries and Italy). The first price column concerns volumes above five tons. Where two prices have been fixed, the latter concern small quantities (1000 to 4999 kilos).
Extract of original document No 13(151): handwritten notes of Waardals' representative
>PIC FILE= "L_2003153EN.001902.TIF">
(187) The said prices correspond exactly with Trident's internal price instructions for May 1998(152) for the sale of zinc phosphates of 1000 to 4999 kilos and above 5000 kilos. It is also indicated in these instructions that the prices are "minimum price levels" and that they "should not be reduced without prior discussions with (name of employee)", whose name refers to the employee of Trident who attended the cartel meetings.
(188) A meeting of the cartel had been planned for 22 July 1998 in Amsterdam. Waardals was in charge of the organisation and had booked a meeting room in the Schiphol Airport Hilton Hotel.(153). However, after the Commission and ESA investigations were carried out, the reservation was cancelled(154).
2. LEGAL ASSESSMENT
2.1. COMPETENCE
(189) The arrangements set out above applied to the whole territory of the EEA, as the cartel members had sales in practically all the Member States and in the EFTA countries which were parties to the EEA Agreement(155).
(190) The EEA Agreement, which contains provisions on competition analogous to the Treaty, came into force on 1 January 1994. This Decision therefore includes the application of the rules on competition of the EEA Agreement (in particular Article 53(1)) to the arrangements to which objection is taken(156).
(191) In so far as the arrangements appreciably affected competition and trade between Member States, Article 81 of the Treaty is applicable. In so far as the cartel operations had an appreciable effect on trade between EFTA countries being parties to the EEA Agreement and the Community, Article 53 EEA is applicable.
(192) If an agreement or practice affects only trade between Member States, the Commission retains competence and applies Article 81 of the Treaty. On the other hand, if an agreement affects only trade between the EFTA States, the EFTA Surveillance Authority (ESA) alone is competent and will apply the EEA competition rules under Article 53 of the EEA Agreement(157).
(193) In this case, the Commission is the competent authority to apply both Article 81(1) of the Treaty and Article 53(1) of the EEA Agreement on the basis of Article 56 of the EEA Agreement since the cartel had an appreciable effect on trade between the Member States of the Community(158).
2.2. APPLICATION OF ARTICLE 81 OF THE EC TREATY AND ARTICLE 53 OF THE EEA AGREEMENT
2.2.1. ARTICLE 81(1) OF THE EC TREATY AND ARTICLE 53(1) OF THE EEA AGREEMENT
(194) Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement respectively prohibit as incompatible with the common market and with the functioning of the EEA Agreement, all agreements between undertakings, decisions by associations of undertakings or concerted practices which may affect trade between Member States or trade between the Contracting Parties and which have as their object or effect the prevention, restriction or distortion of competition within the common market or the territory covered by the EEA Agreement and in particular those which directly or indirectly fix purchase or selling prices or any other trading conditions, limit or control production and markets, or share markets or sources of supply.
2.2.2. AGREEMENTS AND CONCERTED PRACTICES
(195) Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement prohibit agreements, decisions of associations and concerted practices.
(196) An agreement can be said to exist when the parties adhere to a common plan which limits or tends to limit their individual commercial conduct by determining the lines of their mutual action or abstention from action in the market. It does not have to be made in writing; no formalities are necessary, and no contractual sanctions or enforcement measures are required. The fact of agreement may be express or implicit in the behaviour of the parties.
(197) In its PVC II judgment, the Court of First Instance(159) stated that "it is well established in the case-law that for there to be an agreement within the meaning of Article 81(1) of the Treaty it is sufficient for the undertakings to have expressed their joint intention to behave on the market in a certain way"(160).
(198) Thus, an agreement for the purposes of Article 81(1) of the Treaty or Article 53(1) of the EEA Agreement does not require the same certainty as would be necessary for the enforcement of a commercial contract at civil law. Moreover, in the case of a complex cartel of long duration, the term "agreement" can properly be applied not only to any overall plan or to the terms expressly agreed but also to the implementation of what has been agreed on the basis of the same mechanisms and in pursuance of the same common purpose.
(199) Article 81 of the Treaty and Article 53 EEA distinguish between "agreements between undertakings", "concerted practices" and "decisions by association of undertakings". The object of the notion of concerted practice is to bring within the prohibition of that Article a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition(161).
(200) The criteria of coordination and cooperation laid down by the case-law of the Court, far from requiring the elaboration of an actual plan, must be understood in the light of the concept inherent in the provisions of the Treaty and the EEA Agreement, according to which each economic operator must determine independently the commercial policy which he intends to adopt in the common market. Although that requirement of independence does not deprive undertakings of the right to adapt themselves intelligently to the existing or anticipated conduct of their competitors, it strictly precludes any direct or indirect contact between such operators the objet or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market(162).
(201) Thus conduct may fall under Article 81(1) of the EC Treaty or under Article 53(1) of the EEA Agreement as a "concerted practice" even where the parties have not subscribed to a common plan defining their action in the market but adopt or adhere to collusive devices which facilitate the coordination of their commercial behaviour(163).
(202) Although in terms of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement the concept of a concerted practice requires not only concertation but also conduct on the market resulting from the concertation and having a causal connection with it, it may be presumed, subject to proof to the contrary to be provided by the parties concerned, that undertakings taking part in such a concertation and remaining active in the market will take account of the information exchanged with competitors in determining their own conduct on the market, all the more so when the concertation occurs on a regular basis and over a long period(164).
(203) It is not necessary that the Commission be obliged to categorise an infringement as exclusively an agreement or a concerted practice. The concepts are fluid and may overlap. Indeed, it may not even be possible realistically to make any such distinction, as an infringement may present simultaneously the characteristics of each form of prohibited conduct, while considered in isolation some of its manifestations could accurately be described as one rather than the other. It would, however, be artificial analytically to subdivide what is clearly a continuing common enterprise having one and the same overall objective into several discrete forms of infringement. A cartel may therefore be an agreement and a concerted practice at the same time(165).
(204) Each participant in the agreement and/or the concerted practice may play its own particular role. One or more may exercise a dominant role as ringleader(s). Internal conflicts and rivalries, or even cheating, will not, however, prevent the arrangement from constituting an agreement or concerted practice for the purposes of Article 81(1) of the EC Treaty or Article 53(1) of the EEA Agreement where there is a single common and continuing objective. A complex cartel may properly be viewed as a single continuing infringement for the time frame in which it existed. The agreement may well be varied from time to time, or its mechanisms adapted or strengthened to take account of new developments.
(205) Whilst not contesting the facts set out in the Statement of Objections, Heubach contends in its written reply that the Commission has not sufficiently established the existence of an agreement in the meaning of Article 81 of the EC Treaty and Article 53 of the EEA Agreement. According to Heubach, the Commission has demonstrated that there was an intention to behave in a certain way and that it resulted in a restriction in the independence of the undertakings concerned.
(206) This contention must be emphatically rejected. In the light of the facts, which are not contested by Heubach, nor by any other addressee of this Decision, there was, as early as on 24 March 1994, an explicit joint intention to cartellise the zinc phosphate market and to act accordingly. This resulted in the concrete implementation, over four years, of an overall plan to eliminate competition in the product market, which as described below constituted a single continuing infringement.
2.2.3. NATURE OF THE INFRINGEMENT IN THE PRESENT CASE
(207) Following preliminary contacts in early 1990's, the five producers of zinc phosphate - Britannia, James Brown, Heubach, SNCZ and Waardals - met on 24 March 1994 in London and agreed the basic principles by which they would cartelise the European market for zinc phosphate. They subsequently met on 3 May and on 9 August 1994 in the same city and agreed on the details of the implementation of the cartel.
(208) This plan, to which they all subscribed, was implemented over a period of more than four years employing the same mechanisms and pursuing the same common purpose of eliminating competition.
(209) The working out of the plan in regular meetings did not give rise to discrete "agreements" but constitutes the implementation of the same overall and illegal scheme.
(210) Given the common design and common objective which the producers steadily pursued of eliminating competition in the zinc phosphate industry, the Commission considers that the conduct in question constituted a single continuing infringement of Article 81(1) of the EC Treaty and of Article 53(1) of the EEA Agreement.
2.2.4. RESTRICTION OF COMPETITION
(211) The agreement in the present case had the object and effect of restricting competition.
(212) Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement expressly mention as restrictive of competition agreements which, inter alia:
- directly or indirectly fix selling prices or any other trading conditions,
- limit or control production, markets or technical development,
- share markets.
(213) These are the essential objectives and characteristics of the horizontal arrangements under consideration in the present case. Price being the main instrument of competition, in particular with respect to homogenous products, the various collusive arrangements and mechanisms adopted by the producers were all ultimately aimed at increasing the price to their benefit and above the level which would be determined by undistorted market conditions. Market sharing and price fixing by their very nature restrict competition within the meaning of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement.
(214) The present cartel has to be considered as a whole and in the light of the totality of the circumstances, but the principal aspects of the complex of agreements and arrangements which can be characterised as restrictions of competition are:
- allocating market share quotas,
- fixing of prices,
- allocating customers.
(215) These principal aspects were implemented by the cartel members mainly by:
- devising and applying a reporting and monitoring system to ensure the implementation of restrictive agreements, notably through the mutual exchange of individual sales data,
- adapting individual conduct and pricing in order to ensure the maintenance of the agreed quotas,
- participating in regular meetings and having other contacts in order to agree the above restrictions and to implement and/or modify them as required.
(216) The argument, put forward by Heubach, that the goals of the cartel were not systematically achieved in the way the cartel participants would have liked, and that no specific enforcement mechanism was set up, other than the mutual pressure brought to bear on the respective members of the cartel, must be considered as irrelevant. Even if the cartel members have not at all times respected their agreement, it does not mean that the agreement did not exist. As the Court of Justice has confirmed in its case-law, the participation by undertakings in meetings that have an anti-competitive object has the effect de facto of creating or strengthening a cartel and the fact that an undertaking does not act on the outcome of those meetings is not such as to relieve it of responsibility for the fact of its participation in the cartel, unless it has publicly distanced itself from what was agreed in them(166).
(217) In any case, in the present case, the cartel members did enforce, monitor and respect their agreement.
2.2.5. EFFECT ON TRADE MEMBER STATES AND BETWEEN EEA CONTRACTING PARTIES
(218) The continuing agreement between the producers had an appreciable effect on trade between Member States and between EEA contracting parties.
(219) Western Europe has traditionally been the most important market for zinc phosphate. Sales in Europe represent more than 60 % of the worldwide output. With the exception of James Brown, who sells most of its production in three Member States, the four other European zinc phosphate producers sell in virtually all countries of the EEA. Heubach, SNCZ and Trident all export over 60 % of their total zinc phosphate turnover(167).Waardals being an important producer of zinc phosphate with a market share of over 20 % of the west European market and significant sales in many Member States of the Community(168), there is also significant zinc phosphate trade between the contracting parties to the EEA.
(220) As between the cartel members themselves, the allocation of sales quotas must have resulted, or was likely to result, in the automatic diversion of trade patterns from the course they would otherwise have followed.
(221) Therefore, over the period considered, the continuing cartel agreement between the zinc phosphate producers had an appreciable effect upon trade between the Member States and between the Contracting Parties to the EEA.
2.2.6. PROVISIONS OF THE COMPETITION RULES APPLICABLE TO AUSTRIA, FINLAND, ICELAND, LIECHTENSTEIN, NORWAY AND SWEDEN
(222) In the period from 1 January to 31 December 1994, the provisions of the EEA Agreement applied to the four EFTA Member States which had joined the EEA; the cartel thus constituted an infringement of Article 53(1) of the EEA Agreement as well as of Article 81(1) of the EC Treaty, and the Commission is competent to apply both provisions. The operation of the cartel in these four EFTA States during this one-year period falls under Article 53(1) of the EEA Agreement.
(223) After the accession of Austria, Finland and Sweden to the Community on 1 January 1995, Article 81(1) of the EC Treaty became applicable to the cartel in so far as it affected those markets. The operation of the cartel in Norway remained an infringement of Article 53(1) of the EEA Agreement.
(224) In practice, it follows from the foregoing that in so far as the cartel operated in Austria, Finland, and Sweden, it constituted a violation of the EEA competition rules for the first months of operation of the cartel (i.e from March 1994 to 31 December 1994) and a violation of the Community competition rules from 1 January 1995.
2.2.7. DURATION OF THE INFRINGEMENT
(225) Although there are indications that anti-competitive contacts between zinc phosphate producers did take place before the initial multilateral meeting on 24 March 1994, the Commission has in the present case limited its assessment under the competition rules and the application of any fines to the period from 24 March 1994, the date of the first multilateral cartel meeting, until 13 May 1998, the date of the Commission and ESA investigations.
(226) The participation in the infringement of Britannia (until 15 March 1997, when it was replaced by Trident), Heubach, James Brown, SNCZ and Waardals from 24 March 1994 onwards is established by the participation in the first multilateral cartel meeting of their respective higher executives, including Chairmen, General Managers and Managing Directors and Managers as the case may be (see recital 71).
(227) On 24 March 1994, it was decided to fix a "status quo" on quantities of zinc phosphate supplied in Europe. It was also decided that the allocated market shares would be agreed upon with reference to the sales figures of 1991 to 1993. The setting-up of a monitoring system that would allow to control the respect of the agreement was also decided. It was also decided that prices should not be too different from one country to another, so that the product would not be shifted across borders. Finally, there was an agreement to have another meeting in the future.
(228) The Commission concludes from the foregoing that the addressees of this Decision entered into an anti-competitive agreement on 24 March 1994.
(229) The cartel continued at least until the simultaneous Commission and ESA investigations on 13 May 1998. All five producers were present at the last identified cartel meeting in April 1998. The fact that the next cartel meeting was due to take place in Amsterdam on 22 July 1998 demonstrates that the infringement continued in any event until the date on which the investigations took place.
(230) Waardals contends that it pulled out from the cartel in April 1995 "and was out of the club for five or six months"(169). The company contends that this should be taken into consideration by the Commission, although "admittedly it did not take long before Waardals concluded it had to cooperate and started providing sales volumes again"(170). Waardals further submits however that "after having pulled out of the Club in April 1995, Waardals did obtain an order from Teknos, on its own and outside the sharing agreement operated by the others, and delivered a container to Teknos on week 16"(171).
(231) The Commission takes the view that the arguments put forward by Waardals in respect of its temporary withdrawal do not suffice to get to the conclusion that Waardals did not infringe Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement during that period of time.
(232) First, Waardals took part in a meeting with Heubach on 12 June 1995, on the same date as a cartel meeting, the existence of which is not contested by the other addressees of this Decision. Whilst it is true that the date in question corresponds with the period during which Waardals claims it pulled out of the meeting, the presence of a representative of Waardals on the same date in London, and the fact that he met a representative of Heubach show that Waardals did not really withdraw from the cartel.
(233) Secondly, in any event, the "withdrawal" of Waardals, if it occurred at all, was of very short duration. The sole cartel meeting which, allegedly, was not attended by Waardals was that of 12 June 1995, as Waardals attended the preceding (27 March 1995) and subsequent (15 September 1995) cartel meetings. Moreover, as already mentioned in the preceding paragraph, its non-attendance was not real. Moreover, the company has not established that it resulted in a totally autonomous commercial behaviour. The knowledge that the zinc phosphate cartel was still in place, must have had a bearing, over this period, on the commercial decisions made by Waardals.
(234) The Commission therefore concludes that Waardals participated in the infringement from 24 March 1994 until 13 May 1998.
2.2.8. ADDRESSEES
(235) In order to identify the addressees of this Decision, it is necessary to determine to which legal entities the responsibility for the infringement should be imputed.
2.2.8.1. Principles applicable
(236) In order to determine whether a parent company should be held responsible for the unlawful conduct of a subsidiary, it is necessary to establish that the subsidiary "does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company"(172).
(237) When an infringement of Article 81(1) of the Treaty or Article 53(1) of the EEA Agreement is found to have been committed over a given period of time, it is necessary to identify the natural or legal person who was responsible for the operation of the undertaking at the time when the infringement was committed, so that it can answer for it.
(238) When an undertaking committed an infringement of Article 81(1) of the EC Treaty or Article 53(1) of the EEA Agreement and when this undertaking later disposed of the assets that were the vehicle of the infringement and withdrew from the market concerned, the undertaking in question will still be held responsible for the infringement if it is still in existence(173).
(239) If the undertaking which has acquired the assets carries on the violation of Article 81(1) of the EC Treaty or Article 53(1) of the EEA Agreement, liability for the infringement should be apportioned between the seller and the acquirer of the infringing assets(174).
2.2.8.2. Addressees
(240) Over the entire period of reference for the establishment of the infringement, Heubach, James Brown, SNCZ and Waardals participated directly in the cartel. They will consequently be addressees of this Decision.
(241) From 15 March 1997 onwards, Trident participated actively in the cartel. Therefore, the latter will be an addressee of this Decision.
(242) Prior to 15 March 1997, Britannia, the predecessor of Trident, was actively involved in the cartel operations. Although Britannia sold its zinc phosphate business on 15 March 1997, it is still in existence. Over the period March 1994 to 15 March 1997 Britannia's zinc phosphate business did not have any separate legal personality. The company can therefore not claim that it was not aware of anti-competitive activities in the zinc phosphate business. Consequently, Britannia will be held responsible for the infringement from March 1994 until 15 March 1997 when the zinc phosphate business was divested and acquired by Trident.
(243) In its reply to the Statement of Objections, Britannia says that it ceased all economic and trading activities after the business assets were transferred to Trident. Britannia says it continued to exist as a legal entity, but claims to be a mere shell company, an not a functioning economic entity. Britannia says that in accordance to the "succession" principle to be applied in such case, pursuant to Community case-law, the economic and functional successor Trident should be held liable for the entire period of infringement.
(244) In addition, Britannia purports that any contrary conclusion from the Commission would amount to unfair and unequal treatment: if instead of operating a transfer of assets, Britannia had been merged into the newly created Trident, the legal personality of Britannia would have disappeared, thus passing on the totality of the liability to Trident. Furthermore, if the management buy-out had been structured as a share sale, so that the management of the zinc phosphate business had purchased the shares of Britannia, then the Trident would have been held responsible for the entire period of the infringement.
(245) Trident opposes Britannia's analysis. According to Trident, in view of the continuing legal existence of its predecessor Britannia and in conformity with the current case-law of the Court, liability for the infringement should be apportioned between Britannia and Trident on the basis of the duration of their respective involvement in the infringement.
(246) Trident submits nevertheless that even if the Commission took the view that the basic amount of any fine should be set separately with regard to Trident and Britannia, "it would be unfair if it meant that the sum of the two fines were higher than any fine which would have been imposed on a single owner for the whole period of Trident and Britannia's combined alleged infringements"(175).
(247) The Commission must reject the arguments put forward by Britannia. It is clear from the case-law of the Court that the "economic continuity" test is to be applied exclusively in the case where the entity which committed the infringement has ceased to exist in law. When such entity is still in existence, it must be held liable for the infringement, irrespective of the nature of its current activities in the market.
(248) Over the period where it actively took part in the infringement, Britannia and its shareholders benefited from its illegal behaviour. Although Britannia ceased to trade after 15 March 1997, it still has assets. It must therefore bear responsibility for the infringement committed over the relevant period of time. The fact that the transfer of the "infringing assets" could have been operated in a different way, leading to differing conclusions as to the attribution of liability, has no bearing on that conclusion.
(249) The argument of Trident according to which the sum of the two fines that might be imposed should not be higher than any single fine which would have been imposed on a single owner for the whole of the infringement must also be rejected. In setting the amount of any fine, the Commission takes into account the period of time during which the infringment was committed by each undertaking. Moreover, when two distinct undertakings commit an infringement, even in the case where one undertaking had succeeded to the other, they must separately endorse responsibility for the infringement committed, and the fine applicable to them must be calculated in accordance to the normal practice of the Commission. Any "splitting" of the fine between the two would confer on them an unjustifiable advantage.
(250) When the management buy-out of the zinc phosphate business was completed and as Trident was created on 15 March 1997, a new legal entity was formed and a business strategy was defined. The management of Trident could at this occasion have decided to put an end to the participation of the business into the cartel. It did not do so. A new decision to keep on with the illegal behaviour was then at least implicitly made. This fully justifies the imposition of a fine on both Britannia and Trident.
(251) On the basis of the considerations set out above, this Decision will be addressed to the following undertakings:
- Britannia Alloys & Chemicals Limited,
- Dr. Hans Heubach GmbH & Co. KG,
- James M. Brown Limited,
- Société Nouvelle des Couleurs Zinciques SA,
- Trident Alloys Limited,
- Waardals Kjemiske Fabrikker A/S.
2.3. REMEDIES
2.3.1. ARTICLE 3 OF COUNCIL REGULATION No 17
(252) Where the Commission finds that there is an infringement of Article 81 of the EC Treaty or Article 53 of the EEA Agreement it may require the undertakings concerned to bring such infringement to an end in accordance with Article 3 of Council Regulation No 17(176).
(253) In the present case the participants in the cartel went to considerable lengths to conceal their unlawful conduct. Virtually all documentary traces of the activities of the cartel were suppressed: no minutes, records, lists of participants or invitations were maintained.
(254) The participants in the cartel continued to provide the trade association with statistical information for months after the Commission had carried out its investigations. Four of the five cartel members (Heubach, SNCZ, Trident and James Brown) established a new association in which market outlooks and statistics were discussed.
(255) In these circumstances, the Commission stated in its Statement of Objections that it was not possible to say with certainty that the infringement had ceased as regards all the participants in the cartel.
(256) In their replies to the Statement of Objections, Heubach, SNCZ and Trident claim that they put an end to their participation in the cartel as soon as investigations were carried out. Heubach and SNCZ also state that the meeting that took place after the investigation had perfectly legitimate goals and were totally lawful.
(257) Notwithstanding these assertions and for the avoidance of doubt, it is necessary for the Commission to require the undertakings to which this Decision is addressed to bring the infringement to an end, if they have not already done so, and henceforth to refrain from any agreement or concerted practice which may have the same or similar object or effect.
2.3.2. ARTICLE 15(2) OF COUNCIL REGULATION No 17
2.3.2.1. General considerations
(258) Under Article 15(2) of Council Regulation No 17(177), the Commission may by decision impose upon undertakings fines of from one thousand to one million euro, or a sum in excess thereof not exceeding 10 % of the turnover in the preceding business year of each of the undertakings participating in the infringement where, either intentionally or negligently, they infringe Article 81(1) of the EC Treaty or Article 53(1) of the EEA Agreement.
(259) In fixing the amount of any fine the Commission must have regard to all relevant circumstances and particularly the gravity and the duration of the infringement, which are the two criteria explicitly referred to in Article 15(2) of Regulation No 17.
(260) The role played by each undertaking party to the infringement will be assessed on an individual basis. In particular, the Commission will reflect in the fine imposed any aggravating or mitigating circumstances and will apply, as appropriate, the Notice on the non-imposition or reduction of fines in cartel cases (the "Leniency Notice")(178).
2.3.2.2. Basic amount of the fines
(261) The basic amount is determined according to the gravity and duration of the infringement.
Gravity
(262) In assessing the gravity of the infringement, the Commission will take account of its nature, its actual impact on the market and the size of the relevant geographic market.
Nature of the infringement
(263) It follows from the foregoing that the present infringement consisted mainly of market-sharing and price-fixing, which are by their nature very serious violations of Articles 81(1) of the Treaty and 53(1) of the EEA Agreement.
(264) The cartel constituted a deliberate infringement of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement. With the full knowledge that their actions restrict competition, the producers combined to set up a secret and institutionalised system designed to restrict competition in the zinc phosphate market. In any event, to conclude that an infringement was intentional, it is not even necessary for an undertaking to have been aware that it was infringing Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement(179). It is sufficient that it could not have been unaware that the contested conduct had as its object the restriction of competition. This was doubtless the case as far as the zinc phosphate cartel is concerned.
(265) The cartel arrangements involved all major operators in the EEA and were conceived, directed and encouraged at high levels in each participating company and operated entirely to the benefit of the participating producers and to the detriment of their customers.
(266) In their replies to the Statement of Objections, the addressees of this Decision have put forward a number of arguments according to which the Commission should conclude that in view of its nature, the anti-competitive agreement constituted only a serious, but not a very serious infringement of the competition rules.
(267) Britannia, Heubach and Trident submit that the Commission should take in consideration the fact that that market share quotas were not allocated in the EEA on a country-by-country basis. Volume allocations were in the form of western Europe-wide quotas, and there was no subdivision for different countries within Europe.
(268) Heubach contends that it is only from 1996 onwards that the cartel participants discussed and fixed the prices for the product. In support of this assertion, Heubach quotes a sentence of paragraph 99 of the Commission's Statement of Objections, which reads: "Handwritten notes of later meetings put in evidence that national 'recommended' prices were widely used". As the first contemporaneous document showing specific prices fixed country by country quoted by the Commission consists of handwritten notes taken at a meeting on 21 May 1996, Heubach jumps to the conclusion that price-fixing started only from that date.
(269) Britannia states on its part that the cartel generally aimed at setting a European benchmark price, by reference to the DEM price, which was converted into local currency: "the general aim was to create a uniform European benchmark price and not separate national prices"(180). As to Trident, it contends that "the exact prices for zinc phosphate were not rigidly fixed", although it "agrees that prices were discussed and that it reflected the recommended prices discussed at the meetings in its internal price list"(181).
(270) Britannia, Heubach and Trident, also submit that the allocation of customers was not a systematic feature of the cartel agreement, and that this practice occurred only with regard to one customer, namely Teknos. Heubach submits that this customer was shared out because it was a traditional customer of Waardals, which did not accept that the other cartel participants supplied it. However, Trident submits that "allocation of Teknos at the meetings arose partly because Teknos demanded particularly low prices"(182).
(271) Finally, Britannia, Heubach, SNCZ and Trident submit that no "enforcement" mechanism was used and that this should be taken into account in so far as this made it easier for some cartel participants to cheat upon the others.
(272) The Commission rejects the contention that the above elements should lead to the conclusion that the infringement was only of a serious nature.
(273) It is clear that price-fixing and market-sharing cartels by nature jeopardise the proper functioning of the single market and therefore constitute one of the worst infringements of competition law. There can be no distinction, with regard to their gravity, between price and sales quotas fixed on a transnational/European basis and those fixed on a national basis.
(274) Heubach's assertion that price-fixing occurred only from 1996 onwards must be rejected. Firstly, the quotation of the Commission's sentence referred to in recital 268 is clearly misleading. The Commission stated here that concrete illustrations of the price-fixing practice can be found in contemporaneous handwritten notes of later cartel meetings. This in no way contradicts the Commission's finding that discussion on prices was a feature of the cartel agreement as early as in 1994. Secondly, whilst it is true that the initial rationale of the cartel was to secure price rises through compliance to the allocated market shares, Waardals declares that as early as the first cartel meeting on 24 March 1994 it was "decided that prices should not be too different from one country to another so those products would not be shifted across borders"(183). As for Trident, it says in its statement that "price levels were also discussed at each meeting. At each meeting a price per tonne was set in sterling for the market of the United Kingdom and a price in deutschmarks was set for the German market. At the initials meetings, local currency prices for each territory were set (...)"(184).
(275) The fact that the prices agreed upon during the cartel meetings might have been, from time to time, subject to negotiations with customers can in no way lead to the conclusion that the infringement was of a lesser gravity. The implementation of a cartel agreement, which is a plan to artificially raise prices above the level they would have attained under normal competitive conditions, inherently meets resistance from customers.
(276) The absence of a mechanism of enforcement does not mitigate the gravity of the infringement. Even if the cartel agreement was of the nature of a "gentlemen's agreement", the cartel participants were clearly expected to strictly adhere to their market shares and a rather sophisticated system was put in place, via successive trade organisations, to render possible the mutual control of each member's behaviour on the market. The fact that the enforcement of the sales quotas was solely achieved through pressure brought to bear on the members during the cartel meetings does not allow to draw the conclusion that the infringement was of a lesser gravity.
(277) Finally, the fact that customer allocation may have happened sporadically, or indeed only in the case of one single customer, does not detract from the conclusion that the cartel agreement in question was of a very serious nature. Moreover, there is evidence that customers allocation did not occur solely in the case of Teknos. For example, as mentioned in recital 122, notes of Waardals show that allocation of customers and the possibility of selling to Jotun were discussed in that meeting. Also, as referred to in recital 180, handwritten notes from the cartel meeting of 19 January 1998 reveal that small customers as well as International Paint were allocated to James Brown.
(278) The Commission therefore considers that the present infringement constituted by its nature a very serious infringement of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement.
The actual impact of the infringement on the zinc phosphate market in the EEA
(279) The actual impact in the market of an anti-competitive arrangement cannot always be measured in a reliable manner. In the case of a collusion consisting, inter alia, of a collaborative strategy of higher pricing, the fact that a number of external factors may simultaneously have affected the price development of the product makes it extremely difficult to draw conclusions of the relative importance of all possible causal effects.
(280) In any event, the actual impact of a complex of agreements in the market depends on, firstly, whether these arrangements where implemented and, secondly, whether the implementation of these arrangements produced an effect in the market.
(281) In so far as the complex of agreements were implemented, the Commission is well founded to consider that this had an actual impact in the market. There is no need to quantify in detail the extent of this actual impact when this is not feasible in regard of the facts concerned.
(282) To the greatest extent possible, a distinction is drawn between the question of the implementation of the agreements and the question of their actual impact in the market. None the less, there is, understandably, some overlap between the evidence used to reach conclusions on these two points.
Implementation of the illegal scheme
(283) The cartel agreements considered above were carefully implemented.
(284) From 9 August 1994 onwards (the day on which the market shares were allocated) and at the occasion of each subsequent cartel meeting, the actual sales of each company were disclosed and compared to the quotas initially agreed. The first meeting of each year was the occasion of updating the annual western European market share allocated to each cartel participant.
(285) Price levels were discussed at each cartel meeting, where a price per tonne was set in the local currency of each relevant territory. Initially a price was set for each country, but later on the price in DEM set for Germany was simply converted into the relevant currencies. Trident confirmed that its internal price list reflected the price agreed at the latest cartel meeting.
(286) The allocation of at least a customer was implemented: the account of the Finnish company Teknos was effectively shared out by the cartel participants (see recital 277).
(287) The parties devised and applied a detailed reporting and monitoring system to ensure implementation of the quotas. Each individual firm's level of compliance was regularly monitored.
Effect of the infringement on the zinc phosphate market
(288) With regard to what precedes and in the light of the efforts put by each participant into the organisation of the cartel, the effectiveness of the practical implementation cannot be questioned.
(289) Since it was carefully implemented, the Commission considers that the infringement, committed by undertakings which during the period covered by this Decision covered over 90 % of the EEA-wide market, had a real impact on this market. As the arrangements were specifically aimed at restricting sales quantities, and raising prices higher than they would otherwise have been and restricting sales to certain customers, they must have altered the normal pattern of market behaviour and therefore have had an actual impact in the market.
(290) Britannia and Trident, however, contend that the infringement has a very limited impact on the market as the cartel participants did not respect the market-sharing agreement.
(291) Failure to adhere to the agreed prices is also put forward by Britannia, Heubach, SNCZ, Trident and Waardals. All of them contend that there was no impact on the market, as the fixed prices were not respected and competition continued to prevail. Waardals states in particular that its price war with Britannia (later Trident) never really stopped.
(292) Britannia, Heubach and Trident submit that the setting of the prices for zinc phosphate was largely dependent on the variations in price of metal zinc, used as a raw material for the production of zinc phosphate. Given that the raw material represents some 50 % of the sales price, the strong variation in the price of metal zinc would have made it impossible to artificially increase the sales margin.
(293) Britannia, Heubach, James Brown, SNCZ and Trident submit that their clients, which are primarily multinational companies, enjoy strong buying power. This allegedly had a "capping effect" on the prices, which made their increase virtually impossible.
(294) Trident further submits that exchanges rate fluctuations may have hindered the control of prices.
(295) Heubach contends that the infringement had no impact on the final consumers, as zinc phosphate represent only a small ingredient in paints.
(296) Finally, SNCZ submits that the potential substitutability of other products to zinc phosphate demonstrates that the infringement has no actual impact.
(297) All these arguments must be dismissed. The fact that the results sought by the cartel participants were not entirely achieved does not prove in any way that the implementation of the cartel agreements had no effects in the market. In particular, the potential substitutability of other products for zinc phosphate is not demonstrated. SNCZ refers merely to the fact that one customer would have replaced zinc phosphate by calcium phosphate, but does not support this assertion by any concrete elements. SNCZ even acknowledges at the same time that though the use of calcium is developing, it is still "used in relatively small quantities"(185).
(298) Finally, it is inconceivable that the parties would have repeatedly agreed to meet in locations across the world to allocate sales quotas, fix prices and allocate customers over such a long period, having regard, inter alia, to the risks involved, if they had perceived the cartel as having no, or only a limited, impact on the zinc phosphate market.
The size of the relevant geographic market
(299) The cartel covered the whole of the EEA, nearly every part of which was under the influence of the collusion. For the purposes of calculating gravity, the Commission therefore considers the entirety of the EEA to have been affected by the cartel.
Conclusion of the Commission on the gravity of the infringement
(300) Taking into account the nature of the behaviour under scrutiny, its actual impact on the zinc phosphate market and the fact that it covered the whole of the common market and, following its creation, the whole EEA, the Commission considers that the undertakings concerned by this Decision have committed an infringement of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement, which was very serious.
(301) Britannia, Heubach, SNCZ Trident and Waardals contend in their replies that the product market is of very small size, with an annual value of approximately EUR 15 to 16 million annually. Britannia submits in particular in this respect that the infringement should be considered as serious, and not very serious.
(302) The Commission underlines that a clear distinction must be made between the question of the size of the product market and that of the actual impact of the infringement on this product market. It is not the practice of the Commission to consider the size of the product market as a relevant factor to assess gravity.
(303) Nevertheless, without prejudice to the very serious nature of an infringement, the Commission will in this case take into consideration the limited size of the product market.
Differential treatment
(304) Although the infringement constitutes a very serious infringement, it is possible for the Commission to apply differential treatment to undertakings in order to take account of the effective economic capacity of the offenders to cause significant damage to competition, as well as to set the fine at a level which ensures it has sufficient deterrent effect.
(305) In the circumstances of this case, which involves several undertakings, it will be necessary, in setting the basic amount of the fines, to take account of the specific weight and therefore the real impact of the offending conduct of each undertaking on competition.
(306) For this purpose, the undertakings can be divided into two categories according to their relative importance in the market concerned.
(307) As the basis for comparing the relative importance of an undertaking in the market concerned, the Commission considers it appropriate in the present case to take the EEA-wide product turnover. The comparison is made on the basis of the EEA-wide product turnover in the last year of the infringement.
(308) It is clear from the table at recital 50 and from the information available to the Commission that Britannia (before 15 March 1997), Trident (from March 1997 onwards), Heubach, SNCZ and Waardals were the major producers of zinc phosphate in the EEA, with rather similar market shares above or around [...]* %. They will therefore be placed in the first category. James Brown, which had a significantly lower market share in the EEA market, will be placed in the second category.
(309) On the basis of the foregoing, the appropriate starting point for a fine resulting from the criterion of the relative importance in the market concerned is for each category as follows:
- Britannia, Heubach, SNCZ, Trident and Waardals: EUR 3 million,
- James M. Brown: EUR 750000.
Duration of the infringement
(310) As mentioned in recitals 225 to 229, the Commission considers that Heubach, James Brown, SNCZ and Waardals infringed Article 81(1) of the Treaty and Article 53(1) of the EEA Agreement from 24 March 1994 until 13 May 1998. They committed an infringement of medium duration, of four years and one month. The starting amount of the fines determined for gravity is therefore increased by 40 % for each company.
(311) Britannia infringed Article 81(1) of the Treaty and Article 53(1) of the EEA Agreement from 24 March 1994 until 15 March 1997. It committed a infringement of medium duration, of two years and eleven months. The starting amount of the fine determined for gravity is therefore increased by 25 %.
(312) Trident infringed Article 81(1) of the Treaty and Article 53(1) of the EEA Agreement from 15 March 1997 until 13 May 1998. It committed an infringement of medium duration, of one year and one month. The starting amount of the fine determined for gravity is therefore increased by 10 %.
Conclusion on the basic amounts
(313) The Commission accordingly sets the basic amounts of the fines as follows:
- Britannia: EUR 3,75 million,
- Heubach: EUR 4,2 million,
- James Brown: EUR 1,05 million,
- SNCZ: EUR 4,2 million,
- Trident: EUR 3,3 million,
- Waardals: EUR 4,2 million.
2.3.2.3. Aggravating circumstances
Role of leader in, or instigator of, the infringement
(314) The Commission is in possession of elements indicating that certain of the addressees of this Decision took initiatives to launch the cartel.
(315) As mentioned in recital 79, it appears that as early as 1980, Pasminco Europe-ISC Alloys, the predecessor of Britannia, suggested setting up anti-competitive price arrangements in the zinc phosphate market. It seems also, as was seen in recital 84, that Pasminco Europe-ISC Alloys was the initiator of the first meeting in October 1993, whose aim was to end the price war and bring some order in the market.
(316) On the other hand, in a written report of a meeting at the end of 1991, an employee of Waardals, confesses that he said to the chairman of SNZ "that a voluntary reduction in produced quantities was in [his] opinion, the only way to obtain stability in the market - and thus better prices"(186).
(317) The same document reports that the Chairman of SNCZ would then have indicated that he would "take initiative for a meeting with the other producers"(187).
(318) Waardals, contends that, for its part, it was contacted by the Managing Director of Heubach in early 1994, and that the latter invited representatives of Waardals in London to an informal meeting (the cartel meeting of 24 March 1994) to talk about zinc phosphate. Waardals mention that "the invitation was also made on behalf of Britannia"(188).
(319) In the light of the above, the Commission considers that the cartel was a joint initiative of most of the competitors in the zinc phosphate sector, and that no specific ringleader can therefore be identified.
2.3.2.4. Attenuating circumstances
Exclusively passive, or "follow my leader" role in the infringement
(320) James Brown submits that it was "in the position of a very minor producer approached and pressurised to join the trade association" and that the Commission should bear in mind "the obvious repercussion if [it] had not done so"(189). However, James Brown has not provided the Commission with any evidence to show that it was subject to any pressure or coercion by the other cartel participants.
(321) The Commission likewise has no reason to consider that James Brown played a passive or "follow my leader" role in the infringement. James Brown participated in the vast majority of the cartel meetings that have been identified and took part directly and actively in the infringement.
(322) For example, on 9 January 1995, James Brown organised a meeting in Manchester with Britannia and Waardals, in an attempt to broker better relations between the two firms, which were often in conflict in the cartel meetings. As already described in recital 118, the representative of James Brown tried to persuade Waardals to stop targeting customers in the United Kingdom with low prices, whilst Britannia would restrict its activities in Scandinavia. This has not been contested by James Brown.
(323) The Commission therefore concludes that James Brown is not in a position of benefit from a reduction in fine in respect of its allegedly purely passive of "follow my leader" role in the cartel.
Non-implementation in practice of the offending agreements
(324) As already mentioned in recitals 290 to 298, Britannia, Heubach, SNCZ, Trident and Waardals claim that they did not fully implement the cartel agreements, in particular with respect to the minimum prices set, which were allegedly rarely complied with.
(325) SNCZ claims that it kept some "margin of manoeuvre" throughout the cartel and declares that it purposely underestimated, by 15 % approximately, the sales figures that were reported to the trade associations(190).
(326) Trident declares for its part that from the start of its activity on 15 March 1997 (after completion of the management buy-out), it developed a new strategy of increasing sales and was not restrained any more by the cartel agreements.
(327) As discussed above, even if on the hypothesis that the parties to the cartel did not always charge the minimum prices they had agreed, it cannot be considered by the Commission as an attenuating circumstance. It is inherent in a cartel that its participants do not fully trust each other and, assuming for the sake of argument that some companies sold under the recommended price, it simply illustrates a willingness to maximise individually the gain obtained from the unlawful agreement.
(328) The fact that SNCZ reported "false" figures to the trade association in charge of collecting sales data, or that Trident did not feel constrained any longer by the agreement after March 1997 cannot be considered a mitigating factor. As the Court of First Instance underlined in its Cascades judgment, "an undertaking which despite colluding with its competitors follows a more or less independent policy on the market may simply be trying to exploit the cartel for its own benefit"(191).
Other attenuating circumstances
(329) Trident submits that it has not made any significant profit from its involvement in the cartel and that this should constitute a mitigating circumstance.
(330) The Commission, however, does not consider that, in general, either non-benefit from a cartel or any economic disadvantage suffered due to participation in a cartel constitutes attenuating circumstances in the fixing of a fine. The argument of Trident must therefore be dismissed.
(331) Britannia and Trident submit that they have adopted antitrust law compliance programmes and that this should be taken into account as an attenuating circumstance.
(332) The Commission welcomes the fact that the above companies set up antitrust law compliance policies. It cannot, however, as a prevention tool, release the Commission from its duty to punish the infringement of the competition rules that Britannia and Trident committed in the past.
(333) Heubach submits that zinc phosphate can damage human health and the environment when not properly handled, and that zinc phosphate producers have to comply in this regard with numerous laws. It further states that this leads to very frequent, legitimate contacts between the competitors in the market, which would have as a consequence that "the step towards unlawful contacts is easily made"(192).
(334) The Commission must vigorously dismiss this argument. The fact that the industry has a duty to comply with the legislation regarding the handling of a given product can in no way exonerate those companies operating in the market from their obligation to comply strictly with the existing rules on competition.
(335) Trident finally says that it participated in the infringement only from March 1997 until May 1998, and therefore that its participation had an insignificant impact on the cartel and on the market.
(336) The Commission must reject this argument. Firstly, over the period in question, Trident was actively involved in the cartel and participated in the cartel meetings as a full member. Secondly, the duration of the infringement is duly taken into account by the Commission in the calculation of any fine, and cannot in any case be construed to constitute a mitigating circumstance.
2.3.2.5. Specific economic context
(337) Heubach, SNCZ and Trident submit that the Commission should taken into account, in determining the fines to be imposed, the poor economic context in which the infringement took place.
(338) Heubach submits that the zinc phosphate market is a mature market in a critical situation, and that the producers are currently confronted with cheap imports from Asia, CEEC(193) and Australia. Heubach, Trident and SNCZ also say that the strong fluctuations of the price of zinc metal, combined with the buying power of multinational customers renders, the situation even more critical, all the more so since calcium phosphate tends increasingly to compete with zinc phosphate as a substitutable product. Heubach and Trident conclude that [...]* and Heubach submits that the Commission should take this into account as it did in Decision 98/247/ECSC (Alloy Surcharge)(194).
(339) The Commission accepts that in view of the maturity of the market, of its strong dependence on the price of zinc metal and of the buying power enjoyed by the customers, the economic context in which the infringement took place was difficult.
(340) Nevertheless, the Commission takes the view that some of those elements should not be overestimated. Firstly, according to Waardals' declaration, imports from third countries are still limited, notably due to the cost of freight, and the quality of the product is significantly lower(195). Secondly, the fluctuations of the zinc metal during the period of infringement do not necessarily constitute a relevant argument as the strong increase in the price of zinc metal occurred only in 1997, whereas the cartel was in force from 1994 onwards.
(341) The argument relating to the bad economic context must therefore be dismissed.
2.3.2.6. Specific characteristics of the undertakings in question
(342) All the addressees of this Decision submit that they are very small companies and that this should be taken into account by the Commission when setting the fines.
(343) The Commission rejects this argument. The fact that the addressees of this Decision are small or medium enterprises does not exempt them from their strict duty to comply with the competition rules. Setting up a cartel can under no circumstances be considered a legitimate way to compensate for the difficulty of doing business with customers enjoying strong purchasing power.
Conclusion on the amounts of fines prior to any application of the Commission notice on the non-imposition or reduction of fines in cartel cases (The Leniency Notice)
(344) The Commission accordingly sets the amounts of the fines prior to any application of the Leniency Notice as follows:
- Britannia: EUR 3,75 million,
- Heubach: EUR 4,2 million,
- James Brown: EUR 1,05 million,
- SNCZ: EUR 4,2 million,
- Trident: EUR 3,3 million,
- Waardals: EUR 4,2 million.
(345) However, since the final amounts calculated according to the above method may not in any case exceed 10 % of the worldwide turnover of the addressees (as laid down by Article 15(2) of Regulation No 17), the fines will be set as follows, in order to not exceed the permissible limit:
- Britannia: EUR 3,75 million(196),
- Heubach: EUR 4,2 million,
- James Brown: EUR 1,05 million,
- SNCZ: EUR 1,7 million,
- Trident: EUR 3,3 million,
- Waardals: EUR 700000.
2.3.2.7. Application of the Leniency Notice
(346) Certain addressees of this Decision have cooperated with the Commission, at different stages of the investigation into the infringement for the purpose of receiving the favourable treatment set out in the Leniency Notice. In order to meet the legitimate expectations of the undertakings concerned as to the non-imposition or reduction of fines on the basis of their cooperation, the Commission examines in the following section whether the parties concerned satisfy the conditions set out in the notice.
Opportunity to file an application under the Leniency Notice
(347) Britannia and James Brown submit that they were not informed of the proceedings before they received the Statement of Objections. In this regard, they claim that they have not been put in a position to be able to file an application under the leniency Notice.
(348) This argument must be dismissed. The fact that certain addressees of this Decision were subject to on-the-spot investigations or received requests for information from the Commission did not confer on them any advantage, not did that hinder Britannia's or James Brown's right of defence. Inspections and request for information are investigatory steps which, as such, are not meant to be any specific vehicle of the exercise by an undertaking of its right of defence.
(349) Britannia also contends that it could not have been aware of the infringement because all the people involved in the infringement at the time where Britannia participated in the cartel were transferred to Trident as a result of the management buy-out.
(350) This argument must equally be dismissed. As Britannia rightly points out in its reply to the Statement of Objections, the objective of the Leniency Notice is to encourage enterprises involved in cartel activities to come forward and cooperate on a voluntary basis. The argument according to which the undertaking was no longer aware of the infringement cannot exempt it from its responsibilities. Whilst it was active in the cartel, Britannia had every opportunity to file an application under the Leniency notice
Non-imposition of a fine or very substantial reduction of its amount ( Section B)
(351) During the investigations carried out on 13 and 14 May 1998 pursuant to Article 14(2) of Regulation No 17, the Commission and the ESA collected sufficient information to established the evidence of the zinc phosphate cartel.
(352) None of the addressees of this Decision was therefore in a position to fulfil condition (b) of Section B of the Leniency Notice, which is therefore not applicable.
Substantial reduction of a fine (Section C)
(353) As mentioned above, the Commission collected decisive evidence of the cartel's existence before any undertaking filed an application under the Leniency Notice. None of the addressees of this Decision was therefore in a position to fulfil condition (b) of Section B of the Leniency Notice. Section C of the Leniency Notice is therefore not applicable.
Significant reduction of a fine (Section D)
Waardals
(354) Waardals approached the Commission on 17 July 1998, and announced its intention to cooperate fully with the Commission under the Leniency Notice. At a meeting on 2 September 1998, Waardals provided the Commission with a detailed oral account of the cartel's activities. The Commission sent to Waardals the draft minutes of the meeting, the content of which was finally confirmed by a written declaration from Waardals on 3 December 1999.
(355) The account of the cartel given by Waardals, which included, inter alia, a list of the cartel meetings held between 1994 and 1998, allowed the Commission to form a clearer idea of the history and mechanisms of the cartel, and to interpret the documents in its possession in a more accurate way. The explanations given by Waardals enabled the Commission to send to the other cartel participants very detailed requests for information.
(356) On the basis of the above, the Commission concludes that Waardals fulfils the conditions as set out in Section D(2), first indent, of the Leniency Notice and grants Waardals a 50 % reduction of the fine that would have been imposed if it had not cooperated with the Commission.
Trident
(357) It was only after it had received the first request for information from the Commission, dated 5 March 1999, that Trident informed the Commission, by letter of 12 April 1999, of its intention to cooperate fully with the investigation under the Leniency Notice. Trident then provided the Commission with a written statement giving a detailed account of the cartel, as well as a number of documents relevant to the case.
(358) The Commission accepts that the statement and the documents submitted by Trident enabled the Commission to cross-check the information in its possession and to get a clearer picture of some factual aspects of the cartel. The Commission notes, however, that Trident approached the Commission only after it had received a request for information under Article 11 of Regulation No 17, sent on 5 March 1999. This reluctance to come forward to the Commission spontaneously and before any further investigatory measure was taken will be taken into account. The Commission also takes note that at least one of the documents provided under the Leniency Notice corresponded in fact to the type of information that Trident was requested to supply to the Commission in response to the request for information of 5 March 1999, pursuant to Regulation No 17(197).
(359) On the basis of the above, the Commission concludes that Trident fulfils the conditions as set out in Section D(2), first indent, of the Leniency Notice and grants Trident a 40 % reduction of the fine that would have been imposed if it had not cooperated with the Commission.
Britannia, Heubach, SNCZ
(360) Britannia, Heubach and SNCZ stated in their written replies to the Statement of Objections that they do not substantially contest the facts as set out in the latter.
(361) Britannia submits that "Trident has cooperated with the Commission in respect of the business operated by [Britannia] and then by Trident as a whole, and [that Britannia] should benefit from this cooperation and receive at least the same amount of reduction in any fine as is granted to Trident"(198). For its part Trident puts forward the same argument and states that any reduction in fine arising from its cooperation should also extend to benefit Britannia because Trident's cooperation also related to Britannia's period of operation in the zinc phosphate market(199).
(362) The Commission must dismiss this argument. The fact that Trident submitted to the Commission information regarding Britannia's involvement in the cartel does not create any entitlement on the part of Britannia to benefit from the same reduction in fine as Trident. As already mentioned, Britannia had the opportunity the file an application under the Leniency Notice at any time and did not do so.
(363) Britannia, Heubach and SNCZ will therefore receive, pursuant to Section D(2), second indent of the Leniency Notice, a reduction of their fine of 10 %.
James Brown
(364) It is quite unclear from the correspondence received from James Brown whether or not it contests the facts as set out in the Statement of Objections. Nevertheless, the Commission concludes from a careful reading of such correspondence that the responses from James Brown imply that this company does not, as a matter of fact, contest the facts as set out in the Statement of Objections.
(365) James Brown will therefore receive, pursuant to Section D(2), second indent of the Leniency Notice, a reduction of its fine of 10 %.
Conclusion of the application of the Leniency Notice
(366) In conclusion, with regard to the nature of their cooperation and in the light of the conditions set out in the Leniency Notice, the Commission will grant to the addressees of this Decision the following reductions of their respective fines:
- Waardals: a reduction of 50 %,
- Trident: a reduction of 40 %,
- Britannia: a reduction of 10 %,
- Heubach: a reduction of 10 %,
- James Brown: a reduction of 10 %,
- SNCZ: a reduction of 10 %.
2.3.2.8. Ability to pay
(367) [...]*(200).
(368) [...]*.
(369) [...]*.
2.3.2.9. The final amounts of the fines imposed in the present proceedings:
(370) In conclusion, the fines to be imposed, pursuant to Article 15(2)(a) of Regulation No 17, are to be as follows:
- Britannia Alloys & Chemicals Limited: EUR 3,37 million,
- Dr Hans Heubach GmbH & Co. KG: EUR 3,78 million,
- James M. Brown Limited: EUR 940000 EUR,
- Société Nouvelle des Couleurs Zinciques SA: EUR 1,53 million,
- Trident Alloys Limited: EUR 1,98 million,
- Waardals Kjemiske Fabrikker A/S: EUR 350000 EUR.
HAS ADOPTED THIS DECISION:
Article 1
Britannia Alloys & Chemicals Limited, Dr Hans Heubach GmbH & Co. KG, James M. Brown Ltd, Société Nouvelle des Couleurs Zinciques SA, Trident Alloys Ltd. and Waardals Kjemiske Fabrikker A/S have infringed the provisions of Article 81(1) of the Treaty and Article 53(1) of the EEA Agreement by participating in continuing agreement and/or concerted practice in the zinc phosphate sector.
The duration of the infringement was as follows:
(a) in the case of Dr Hans Heubach GmbH & Co. KG, James M. Brown Limited, Société Nouvelle des Couleurs Zinciques SA and Waardals Kjemiske Fabrikker A/S: from 24 March 1994 until 13 May 1998;
(b) in the case of Britannia Alloys & Chemicals Limited: from 24 March 1994 until 15 March 1997;
(c) in the case of Trident Alloys Limited: from 15 March 1997 until 13 May 1998.
Article 2
The undertakings referred to in Article 1 shall immediately bring to an end the infringements referred to in that Article, in so far as they have not already done so.
They shall refrain from repeating any act or conduct referred to in Article 1, and from adopting any measure having equivalent object or effect.
Article 3
For the infringement referred to in Article 1, the following fines are imposed:
(a) Britannia Alloys and Chemicals Limited: EUR 3,37 million,
(b) Dr Hans Heubach GmbH & Co. KG: EUR 3,78 million,
(c) James M. Brown Limited: EUR 940000,
(d) Société Nouvelle des Couleurs Zinciques SA: EUR 1,53 million,
(e) Trident Alloys Limited: EUR 1,98 million,
(f) Waardals Kjemiske Fabrikker A/S: EUR 350000.
Article 4
The fines imposed in Article 3 shall be paid, within three months of the date of notification of this Decision, to the following bank account:
Account No 642-0029000-95
European Commission
Banco Bilbao Vizcaya Argentaria (BBVA)
SWIFT code: BBVABEBB - IBAN code: BE 76 6420 0290 0095
Avenue des Arts/Kunstlaan, 43
B-1040 Brussels
After expiry of that period, interest shall automatically be payable at the interest rate applied by the European Central Bank to its main refinancing operations on the first day of the month in which this Decision is adopted, plus 3,50 percentage points, namely 6,77 %.
Article 5
This Decision is addressed to:
(a) Britannia Alloys & Chemicals Limited Botany Road
Northfleet
Gravesend,
Kent DA11 9BG United Kingdom;
(b) Dr Hans Heubach GmbH & Co. KG Heubachstraße 7 D - 38685 Langelsheim Germany;
(c) James M. Brown Limited Napier Street
Fenton
Stoke-on-Trent
Staffordshire ST4 4NX United Kingdom;
(d) Société Nouvelle des Couleurs Zinciques SA F - 59111 Bouchain France;
(e) Trident Alloys Limited Alloys House
Willenhall Lane
Bloxwich
Walsall
West Midlands WS3 2XW
United Kingdom;
(f) Waardals Kjemiske Fabrikker A/S Strandgaten 223 N - 5004 Bergen Norway.
This Decision shall be enforceable pursuant to Article 256 of the Treaty.
Done at Brussels, 11 December 2001.