Commission Decision

of 18 July 2001

relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement

Case COMP/E-1/36.490 - Graphite electrodes

(notified under document number C(2001) 1986)

(Only the English and German texts are authentic)

(Text with EEA relevance)

(2002/271/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 24 January 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 2842/98 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,

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:

- SGL Carbon AG ("SGL")

- UCAR International Inc. ("UCAR")

- VAW Aluminium AG ("VAW")

- Showa Denko K.K. ("Showa Denko")

- Tokai Carbon Co., Ltd ("Tokai")

- Nippon Carbon Co., Ltd ("Nippon")

- SEC Corporation ("SEC")

- Carbide/Graphite Group, Inc. ("C/G").

(2) The infringement consists in the participation of the producers of graphite electrodes in a continuing agreement and/or concerted practice contrary to Article 81(1) of the Treaty and (from 1 January 1994) Article 53(1) of the EEA Agreement, covering the whole of the Community and Norway, Austria, Sweden, Finland, by which they:

- fixed the prices of the product,

- agreed on and implemented a mechanism for implementing price increases,

- allocated markets and market share quotas,

- agreed not to increase production capacity,

- agreed not to transfer technology outside the circle of cartel participants,

- set up machinery for monitoring and enforcing their agreements.

(3) The undertakings participated in the infringement during the following periods:

- SGL: from May 1992 to March 1998

- UCAR: from May 1992 to March 1998

- VAW: from May 1992 to at least the end of 1996

- Showa Denko: from May 1992 to at least April 1997

- Tokai: from May 1992 to February 1998

- Nippon: from May 1992 to February 1998

- SEC: from May 1992 to February 1998

- C/G: from January 1992 to November 1996.

1.2. THE GRAPHITE ELECTRODES INDUSTRY

1.2.1. THE PRODUCT MARKET

(4) Graphite electrodes are ceramic-moulded columns of graphite used primarily in the production of steel in electric arc furnaces, also referred to as "mini-mills". The electric are process currently accounts for some 35 % of steel production in the Community and its share is increasing. Electric arc furnace steelmaking is essentially a recycling process whereby scrap steel is converted into new steel. Electrodes can be up to 700 mm (30 inches) in diameter and 2800 mm (9 feet) in length and weigh up to 2200 kg. The electrodes form part of the roof structure of the furnace. After the furnace is filled with selected scrap, the electrodes are lowered until the tips almost touch the scrap. Electricity is passed into the electrodes and jumps from the electrode tip to the scrap steel. As conductors of electricity, graphite electrodes generate sufficient heat (up to 3000 °C) to melt scrap steel and further refine molten steel into a finished product. Nine electrodes, joined in columns of three, are used in the average three-phase AC electric arc furnace to melt scrap steel. Because of the intensity of the melting process, one electrode is consumed approximately every eight hours.

(5) Graphite electrodes are produced using special "needle" coke, a by-product of the oil industry, and coal tar pitch. The manufacturing process has six steps, namely forming, baking, impregnation, rebaking, graphitising and machining. During graphitising the product is heated electrically to over 3000 °C and is physically transformed into graphite, the crystalline form of the carbon and a unique material with low electrical but high heat conductivity, high strength and performance at high temperature that makes it suitable for use in electric arc furnaces. The processing time for an electrode is approximately two months. There are no product substitutes for graphite electrodes.

1.2.2. SUPPLY OF GRAPHITE ELECTRODES

(6) The major producers of graphite electrodes in the Western world are multinational corporations. The business is essentially a global one and is characterised by an oligopolistic structure and high entry barriers.

Total world production of graphite electrodes in 1998 was around 1 million tonnes.

In the Community some 280000 tonnes of graphite electrodes were produced, a considerable proportion of which was exported to third countries.

(7) In 1998 graphite electrodes were produced in some 50 locations worldwide. The largest producer of graphite electrodes, UCAR, has a total production capacity of [...]*(4) at 12 locations; in the Community it has three production facilities (France, Spain and Italy), with a capacity of around [...]*. The second largest producer of graphite electrodes in the world is SGL Carbon, with a capacity [...]*. It has production sites in Europe and in North America.

Showa Denko is ranked third in the world: it produces in Japan and the United States, but has no manufacturing facilities in Europe.

1.2.3. DEMAND FOR GRAPHITE ELECTRODES

(8) The demand for graphite electrodes is directly linked to the production of steel in electric arc furnaces; the customers are principally steel producers, which account for some 85 % of demand. There are some 200 producers of electric steel in the Community and Norway. In 1998 world crude steel production was 800 million tonnes, of which 280 million tonnes (35 %) was produced in electric are furnaces. Community steel production totalled 160 million tonnes, of which 60 million (38 %) was electric steel. Germany has the highest steel production of any Member State (1997: 45 million tonnes), but only a quarter of output (11,8 million tonnes) is produced in electric are furnaces. Italy produces about 60 % (15 million tonnes) of its steel in mini-mills, that is to say, steelworks using electric arc furnaces to produce steel from scrap (as opposed to the "traditional" blast furnace/oxygen converter route from iron ore).

(9) In the past twenty years, electric are furnace production has become increasingly important (35 % of world output in 1998, up from 18 % twenty years ago).

During the 1990s mini-mills were constructed to produce flat-rolled steel as well as long products. In addition, a number of large integrated stell mills (using blast furnace/oxygen converters) in Europe have moved into electric steelmaking in preference to the traditional route for some of their production.

World electric are steel production grew from 196 million tonnes in 1987 to 270 million tonnes in 1997, an increase of 38 % over a ten-year period. In 1995, approximately 20 million tonnes of net new electric steel capacity was added worldwide. Some forecasts predict that global electric steelmaking capacity will catch up with oxygen steel in ten years.

(10) According to the cartel's own figures (see CMS Report/Forecast 1995 & 1996, points 72-73, Appendix 20(5)), demand for electrodes in the Community in 1996 was estimated at 160000 tonnes. Italy, the largest single national market, was estimated at 44000 tonnes; Germany 31000 tonnes, Spain 24000 tonnes, France 18500 tonnes and the United Kingdom 16000 tonnes. (For Norway demand was estimated at 1200 tonnes.)

(11) Graphite electrodes are priced in the appropriate national currency per tonne for the standard 24-inch diameter electrode on a delivered basis. The price as at 1 January 1998 was DEM 5600/tonne (or equivalent). For larger-sized electrodes (and for DC electrodes) the price is subject to a premium of 15 to 30 %.

1.2.4. INDUSTRY RESTRUCTURING

(12) During the 1980s improvements in both electrode and electric steelmaking technology led to a substantial decline in the specific consumption of electrodes per tonne of steel produced (from 6 kg/tonne in 1979 to 3 kg in 1991: the West European average is now some 2,4 kg).

The steel industry was also undergoing major restructuring in this period.

Up to and including the 1980s, the graphite electrode industry in Europe was characterised by a relatively large number of producers operating at national level. In Germany, the main manufacturers were Sigri, Conradty and VAW. In France and Belgium the local producers were Pechiney and UCF. The Italian producers were Union Carbide and Electrocarbonium. Anglo-Great Lakes and Union Carbide produced electrodes in the United Kingdom. Other producers were Genosa in Spain (owned by Pechiney) and in Austria Steeg, partly owned by Sigri. The American producers Airco (owned by BOC) and Great Lakes Carbon exported electrodes to the EEA market, as did Japanese producers including Showa Denko, Tokai and NCK.

As a result of the fall-off in demand for electrodes, a restructuring process in the worldwide electrodes industry began in the late 1980s/early 1990s. Several plants were closed. Sigri GmbH (100 % owned by Hoechst) was merged with the US-owned producer Great Lakes Carbon to form SGL, which acquired SERS, the graphite division of Pechiney, in 1993. In 1990/91, Union Carbide Corporation set up its carbon products division as a separate entity, UCAR. Airco was sold off and restructured as the Carbide/Graphite Group.

Western producers tried to expand their sales to the Asian market in order to occupy perceived overcapacity. The Japanese graphite electrodes industry was put under some pressure and the number of Japanese producers was reduced from six to four.

(13) Up to 1991, the two smaller German producers of graphite electrodes, VAW Carbon GmbH and C. Conradty Nürnberg GmbH, had a joint sales company, Cova GmbH. This company ceased trading in September 1991 but was not formally liquidated until 1994. Since 1991 the two companies have had their own separate sales organisation.

The global industry rationalisation reduced the number of Western producers from 16 to 9, with two global leaders UCAR and SGL holding more than [...]* of the market in western Europe and [...]* worldwide.

In 1982 the industry was operating at less than 60 % capacity. By 1996, as a result of the consolidation and restructuring, capacity utilisation was running at 85 %.

1.2.5. THE RELEVANT GEOGRAPHIC MARKET FOR GRAPHITE ELECTRODES

(14) The Commission considers that the market for graphite electrodes is at least EEA-wide. However, there are several indicators that point to a worldwide market.

(15) The restructuring process in the worldwide graphite electrodes industry which took place in the late 1980s and early 1990s led to a significant reduction in the number of Western producers. During the time period referred to in this Decision, the market was dominated by two global leaders, UCAR and SGL, holding more than [...]* of the EEA market and more than [...]* of the worldwide market.

(16) Transportation costs and tariff barriers might well lead to somewhat higher costs, but they do not prevent the producers from trading on a worldwide basis. This is demonstrated by the fact that the Carbide Graphite Group, without having any production sites outside the United States, was able to trade in Europe and to obtain a market share of approximately 7 %.

(17) Finally, the worldwide character of the market for graphite electrodes is also confirmed by the structure, organisation and operation of the cartel itself. The producers involved agreed on an overall scheme by which the world market for graphite electrodes was cartellised and held regular meetings that covered the world market (see in particular points 49, 51 and 55 below).

(18) The Commission therefore concludes that the market for graphite electrodes is global.

1.2.6. INTERSTATE TRADE

(19) The EEA market for graphite electrodes in 1998 was worth some EUR 420 million. All the Member States of the Community, plus Norway as a contracting party to the EEA are producers of electric steel and consumers of graphite electrodes. The two main producers of electrodes, SGL and UCAR, have production facilities in several Member States. SGL has plants in Germany, Italy, France, Spain, Austria and Belgium; UCAR's facilities are located in France, Italy and Spain. The two other European producers, Conradty and VAW Carbon, both produce in Germany only. The product is marketed in all the Member States plus Norway (see the table below). According to the data supplied to the Commission, some 44 % of the graphite electrodes supplied in the Community from European production facilities is shipped across Community national boundaries. There is therefore substantial trade between Member States and, since its creation, within the EEA.

The following table shows the combined shipments of SGL, VAW Carbon(6), Conradty and UCAR from Community production sites to each of the Member States for the year 1996(7) (imports from the United States, Japan and other countries not included).

>TABLE>

Norway is a steel producer but has no domestic electrode production. The Norwegian market for electrodes of 1200 to 2000 tonnes per year is supplied primarily from the Community by UCAR, SGL and VAW.

Prior to their accession to the Community in 1995, Finland and Sweden were also supplied entirely by imports. Austria (a relatively small producer of steel) had a domestic supplier (SGL) but some 300 tonnes of electrodes were imported each year from Member States.

1.2.7. THE PRODUCERS

(20) There are now effectively only nine Western producers which supply the European (EEA) market with graphite electrodes: the two leaders are SGL Carbon and UCAR, which between the supply [...]*. The two smaller European producers VAW and Conradty, both located in Germany, together have around [...]* of the market. C/G, with a market share of about [...]*, supplies the EEA market from the United States.

The Japanese producers between them have about 3 % to 4 % of the EEA market. Indian, Chinese and Russian producers supply the rest of demand in the Community and the EEA.

(21) SGL Carbon AG (SGL) is the world's largest producer of carbon and graphite products, with a global market share of roughly 20 %. It is the world's second largest producer of graphite electrodes, close behind UCAR. The company has its headquarters in Wiesbaden, Germany.

SGL's structure focuses on three business areas: carbon and graphite, speciality graphite and technical products. With a 55 % share of group sales, carbon and graphite is the company's most important business area. The core product in this area is graphite electrodes.

The company evolved from two mergers in 1992 and 1993. In February 1992, Sigri GmbH (as it was then), which was at the time wholly owned by Hoechst AG, merged its activities in the field of carbon and graphite production with the Great Lakes Carbon Group (GLC). In october 1993 the graphite activities of Pechiney SA, a major French packaging and aluminium producer, were transferred to SGL. In December 1994 SGL was transformed from a private limited liability company (GmbH) into a public company (AG). Since June 1996 the company has been fully independent of Hoechst AG.

SGL's total worldwide turnover in 2000 was DEM 2560 million (approximately EUR 1262 million). Its own estimates put its share of the European graphite electrode market in 1998 at [...]*. SGL's production facilities in the EEA are located in Germany, Italy, France, Spain, Austria and Belgium.

(22) UCAR International Inc. (UCAR) is the world's largest producer of graphite electrodes and one of the world's leading manufacturers of graphite and carbon products, with sales in virtually all consuming countries and manufacturing facilities in North and South America, Europe and Asia. The company had its principal place of business in Danbury, Connecticut, USA; the corporate headquarters are now located in Nashville, Tennessee. Its European headquarters are in Rungis, France.

UCAR was formerly the Carbon Products Division of Union Carbide Corporation. In February 1991 a 50 % interest in the company was sold by Union Carbide to Mitsubishi Corporation. In 1995 UCAR carried out a leveraged recapitalisation and completed an initial public offering of common stock.

(23) The company is engaged in the development, manufacture and marketing of carbon and graphite products for the steel, ferroalloys, aluminium, chemicals, aerospace and transportation industries. Its principal products are graphite electrodes, carbon electrodes, graphite specialities, carbon specialities, cathode blocks and flexible graphite. Graphite electrodes accounted for [...]* of UCAR's total revenues in 1999.

Graphite electrodes are manufactured in eight countries. The spread of its graphite electrode sales according to geographic region in 1998 was as follows: USA and Canada: [...]*; Africa and the Middle East: [...]*; Western Europe: [...]*; Eastern Europe: [...]*; Mexico: [...]*; South America: [...]* and Asia-Pacific: [...]*.

In the EEA, UCAR has production facilities in France, Italy and Spain.

UCAR's total turnover in 2000 was USD 776 million (approximately EUR 841 million). Its share of the European graphite electrodes market was around [...]* in 1998.

(24) VAW Aluminium AG is a large industrial group with diverse activities and a network of subsidiaries. The production facilities for carbon and graphite products are in Grevenbroich, Germany. VAW Aluminium AG produces aluminium, rolled products, flexible packaging, castings, etc.

Until 31 December 1995 VAW Carbon GmbH (hereafter "VAW Carbon"), a wholly owned subsidiary of VAW Aluminium AG, acted as the sales company for the carbon and graphite products manufactured by VAW Aluminium AG.

On 1 January 1996 the whole of VAW Aluminium AG's carbon and graphite production activities at Grevenbroich were transferred to another wholly owned subsidiary company which was renamed VAW Carbon GmbH and subsequently absorbed the "old" company of that name. Under a management buyout effective on 1 July 1998 all the assets of the "new" VAW Carbon GmbH were sold to a newly formed company, Erftcarbon, whose share capital was owned as to 85 % by NatWest Ventures (Nominees) Ltd of London and as to 15 % by management.

VAW Carbon's share of the market for graphite electrodes in Europe was around 6 % in 1997. The worldwide turnover of VAW Aluminium AG in 2000 was EUR 3693 million.

(25) Showa Denko K.K. (SDK), part of the Japanese Fuyo Group, is one of the leading companies in the Japanese chemical industry, consisting of five major business groups handling petrochemicals, chemicals, electronics, inorganic materials and aluminium. To further strengthen and expand the aluminium business, SDK merged with Showa Aluminium Corporation on 30 March 2001. SDK's head office is in Tokyo. A wholly owned subsidiary of SDK, Showa Denko Carbon, Inc. (SDC), is based in South Carolina, USA. A European subsidiary of SDK is located in Düsseldorf (Showa Denko Europe GmbH).

SDK's total group turnover in 2000 was JPY 747 billion (approximately EUR 7508 million) worldwide. SDK's sales of graphite electrodes in Europe from 1992 to 1996 were mainly in Germany. In 1995 it also had sales in France, Sweden and the United Kingdom.

(26) Tokai Carbon Co., Ltd. (Tokai) is one of the leading manufactures of carbon black, graphite electrodes and fine carbon in Japan. The company's head office is in Tokyo. Carbon products accounted for [...]* of 1998 revenues. The company has twelve consolidated subsidiaries, eleven in Japan and one in the United States. The company started in 1918 and merged with Tokyo Carbon in 1992.

Tokai supplied graphite electrodes to the United Kingdom (1991 to 1998), Germany (1996 to 1998), France (1997 only), Sweden (1991 to 1996) and Austria (1991 only).

Tokai's total turnover worldwide in 2000 was JPY 65 billion (approximately EUR 471 million).

(27) Nippon Carbon Co., Ltd. (Nippon) was established in 1915 and manufactures electrodes and carbon products. Artificial graphite electrodes, carbon black, carbon fibre and other carbon products accounted for 93 % of 1998 revenues. Its head office is in Tokyo.

The company's world turnover in 2000 was JPY 19 billion (approximately EUR 189 million). In the period from 1992 to 1996 Nippon sold graphite electrodes in Europe only to Finland, the United Kingdom and Ireland.

(28) SEC Corporation (SEC) was established in 1934 to manufacture electrodes for electric are furnaces. The company is affiliated to Ohtani Steel K.K., which holds 23,61 % of issued stock. SEC acquired Kyowa Carbon, a carbon products manufacturer, in 1986. Graphite electrodes accounted for 45 % of fiscal 1999 unconsolidated revenues. Its head office is in Amagasaki, Hyogo, Japan.

SEC's sales of graphite electrodes in Europe were confined to the German market and limited to the years 1992, 1994 and 1995.

The total worldwide turnover of SEC in 2000 was JPY 15,4 billion (approximately EUR 155 million).

(29) The Carbide/Graphite Group Inc. (C/G), the successor of Airco, is a US producer of graphite electrodes, needle coke and calcium carbide products. It was formed as the result of a leveraged buyout (LBO) by management of Airco in June 1988. C/G is the only manufacturer of graphite electrodes which produces its own needle coke, the principal raw material in the manufacture of graphite electrodes. needle coke is also sold to other manufacturers of graphite electrodes. The corporate offices of the company are in Pittsburgh, Pennsylvania.

C/G's total worldwide turnover in 2000 was USD 207 million (approximately EUR 225 million).

C/G has no production facilities outside the United States. In Europe it sells through agents. Its market share in graphite electrodes worldwide and in Europe is about 7 %.

(30) The following table gives an overview of the relative importance of each undertaking on the worldwide and EEA market and on their respective size:

>TABLE>

1.3. PROCEDURE

1.3.1. PREVIOUS COMMISSION INVESTIGATION

(31) The Commission conducted a previous investigation into the graphite electrodes market, beginning in 1983, after receiving information concerning a possible price cartel among the European producers. The companies concerned included European subsidiaries of Union Carbide Corporation, the two predecessors of SGL (Sigri and Great Lakes Carbon) and the then joint distribution company (Cova) of Conradty and VAW Carbon. The investigation revealed that prices offered by the major producers of graphite electrodes were nearly identical, but the evidence discovered was not considered sufficient to prove the existence of a price-fixing agreement and the file was closed in 1986.

1.3.2. THE COMMISSION'S INVESTIGATIONS OF JUNE 1997

(32) On 5 June 1997, acting under Article 14(3) of Regulation No 17(8) Commission officials, accompanied by representatives of the national competition authorities of the Member States concerned, carried out simultaneous and unannounced investigations at the following undertakings:

- SGL Carbon (Germany)

- VAW Carbon GmbH and VAW Aluminium AG (Germany)

- Conradty (Germany)

- UCAR (France).

No direct evidence of any cartel or illicit practices was found at the time. However, the Commission did obtain at SGL a series of tables showing past and future prices for graphite electrodes in each Community national market for the period from 1 October 1994 to September 1996, the evidential value of which became apparent only subsequently when identical or similar tables were obtained from other producers (UCAR, C/G, Showa Denko): see points 63 to 65 below.

(33) During the investigation at VAW Carbon, one of its representatives admitted that the undertaking had been warned by SGL to expect a Commission investigation. (Appendix 1: minute of notification of 6 June 1997). SGL itself confirmed in its reply under Article 11 dated 30 July 1997 that it had warned VAW and Conradty of the forthcoming investigations. UCAR also states [...]* that it was warned by SGL in advance; by the time the investigation started, all the relevant files had been "reviewed" and incriminating documents destroyed or moved to a safe location away from offices and private homes.

1.3.3. INVESTIGATIONS IN OTHER JURISDICTIONS

(34) In the United States, a Grand Jury subpoena was issued in May 1997 against C/G. Agents of the Federal Bureau of Investigation executed judicial search warrants at a number of producers on 5 June 1997. These investigations led to the bringing of criminal proceedings for conspiracy to fix prices contrary to Section 1 of the Sherman Act 1890 against SGL, AG, UCAR International Inc., Showa Denko Carbon Inc. and Tokai Carbon Co. Ltd: see point 42 below.

1.3.4. ARTICLE 11 REQUESTS

(35) In December 1997 the Commission addressed requests for information under Article 11 of Regulation No 17 to some 67 consumers of graphite electrodes, asking them to provide detailed information on suppliers, pricing and discounts.

A first set of requests under Article 11 was sent to SGL, VAW Carbon and Conradty between June 1997 and July 1998, requiring detailed explanations concerning contacts with competitors, SGL's warnings of the forthcoming investigation and travel expense records for certain employees.

In December 1997 requests under Article 11 (in general terms) were addressed to the Japanese producers SDK, SEC, Tokai and Nippon, which were not at the time suspected of direct involvement in the agreements. In their replies the last three named companies claimed that they set their prices in Europe according to "market information" and in negotiations with customers. Further requests for information were sent to them in April and May 1998 regarding their presence at meetings.

On the basis of information received during 1998 and early 1999, a further set of Article 11 requests was addressed by the Commission to SGL, VAW Carbon and Conradty in March 1999 and to C/G on 8 June 1999.

1.3.5. THE UNDERTAKING'S REACTIONS

(36) In February 1998 (after its receipt of the request for information) the Japanese producer SDK contacted the Commission, expressing an intention to cooperate fully with its investigations. During 1998 it supplied certain information (mainly orally but partly in document form) to the Commission. [...]* providing detailed information on the cartel, its structure and basic rules and the meetings between competitors.

In March 1998 UCAR also approached the Commission, admitting orally its participation in an illegal cartel and offering to cooperate with its investigations. In its response of 20 August 1998 to the Commission's request under Article 11, UCAR confirmed its involvement in "illegal contacts" between competitors. Certain documentary evidence was also provided by UCAR in the course of 1998. On 25 March and 22 April 1999, UCAR's legal advisers submitted on behalf of the company written statements made by its [...]* and [...]*, both of whom had represented UCAR at several cartel meetings. On 22 June 1999 UCAR provided a corporate statement incorporating the information disclosed earlier.

SGL indicated to the Commission in April 1998 that it was willing to admit the infringement and cooperate with the inquiries. Despite four meetings with Commission officials (on 16 April, 21 April, 3 August and 1 December 1998), no relevant information or documentation was however forthcoming from SGL. Finally, on 8 June 1999, and following the receipt of an Article 11 request of March that year, SGL provided a detailed statement on the operation of the cartel, but claimed to be under no legal obligation to do so under Article 11.

In June 1998 the United States producer Carbide/Graphite Group contacted the Commission offering its cooperation and subsequently provided certain documentation relevant to the cartel. On 11 October 1999 Carbide/Graphite provided the Commission with a corporate statement on the cartel.

VAW Carbon having initially claimed to be unable and in any case not obliged to provide detailed information in response to the Commission's request for information of 31 March 1999, announced by letter of 12 July 1999 that it wished to cooperate with the investigation and provided a statement as to its participation in the implementation of a cartel.

Conradty has never admitted participating in any collusive arrangements.

Apart from SDK, the Japanese producers originally denied all participation in arrangements to fix prices in Europe and provided non-committal and evasive responses. Although they confirmed some contacts with SGL, UCAR and SDK on relevant dates they explained that they were for the purpose of the general exchange of information (SEC Article 11 reply of 13 July 1998; Nippon Carbon Article 11 reply of 18 December 1998; Tokai Article 11 replies of 18 November 1998 and 1 March 1999).

1.3.6. THE ADMINISTRATIVE PROCEDURE

(37) On 24 January 2000 the Commission sent a Statement of Objections to the addressees of this Decision. In view of the insufficiency of direct documentary evidence against Conradty, and certain inconsistencies in the accounts of its possible participation, the Commission did not proceed against that undertaking.

(38) The companies had access to the Commission's investigation file between 14 and 23 February 2000. VAW Aluminium AG and Nippon did not participate in that exercise.

(39) SGL argues that it did not have complete access to the file as the Commission refused to disclose to SGL its internal documents. SGL maintains further that the Commission did not provide it with a list and description of its internal documents; it was therefore not possible for SGL to get a complete overview of contacts between the Commission and other companies in the context of their cooperation (SGL's letter of 9 March 2000, SGL's reply to the Statement of Objections, p. 23).

This argument must be rejected. According to well established case-law (see the judgments of the Court of First Instance in Case T-7/89 Hercules v Commission [1991] ECR II-1711, paragraph 54 and Joined Cases T-25/95 etc. Cimenteries CBR and others v Commission, not yet reported, paragraph 420), the Commission is under no obligation with regard to the rights of the defence to grant access to its internal documents during the procedure. A list and a description of internal documents, as requested by SGL, would thus not contribute to the exercise of the undertaking's right of defence.

As far as contacts with undertakings in the context of their cooperation are concerned, the Commission considers that SGL's reasoning is based on a fundamentally wrong premise. Those contacts with other companies are in fact not part of the internal file. The documents are kept in the normal investigation file to which the parties had access; several documents however were treated, at the request of the companies concerned, as confidential.

(40) Having replied in writing to the Statement of Objections, all the addressees of this Decision except Nippon Carbon took part in the Oral Hearing on the case, which was held on 25 May 2000. At the Oral Hearing the undertakings were also given the opportunity to comment on the written replies of the other parties which had been made available to them three weeks earlier.

(41) In their written replies to the Statement of Objections none of the producers substantially contested the facts on which the Commission based its Statement of Objections.

1.3.7. PROCEEDINGS IN OTHER JURISDICTIONS

(42) Following the investigations conducted by the Department of Justice and the Federal Bureau of Investigation, criminal charges were filed in the United States under Section 1 of the Sherman Act against four producers: SDK Carbon Inc., the US subsidiary of SDK; Tokai Carbon Co. Ltd. of Japan; UCAR International Inc.; and SGL Carbon AG. In addition, SGL's Chief Executive Officer was also charged personally with conspiracy.

C/G was granted immunity from prosecution under the Department's corporate amnesty programme.

All the accused pleaded guilty to the charges and agreed to pay fines which were set at USD 32,5 million for SDK, USD 6 million for Tokai Carbon, USD 110 million for UCAR and USD 135 million for SGL.

In November 1999 SEC and Nippon also pleaded guilty and agreed to pay fines which were set at USD 4,8 million and USD 2,5 million respectively.

In addition to the fine on the corporation, SGL's Chief Executive Mr Robert Köhler was personally fined and agreed to pay USD 10 million. In a subsequent round of cases, the former President and Chief Executive Officer of UCAR, Mr Robert Krass, agreed to plead guilty to conspiracy, serve a 17-month prison term and pay a fine of USD 1,25 million; UCAR's former Chief Operating Officer was also sentenced under a plea bargain agreement to a 9-month jail term and a fine of USD 1 million.

In January 2000 a criminal charge was filed against the Japanese company Mitsubishi Corporation which had owned 50 % of the stock of UCAR from 1991 to 1995. In February 2000 UCAR issued a civil complaint against Mitsubishi Corporation and Union Carbide in order to recover money wrongfully extracted in alleged violation of US company law. In February 2001 Mitsubishi was convicted after a two-week jury trial for aiding and abetting the conspiracy among graphite electrode producers. It was fined USD 134 million.

Civil proceedings were also filed in the United States District Court on behalf of a class of purchasers claiming triple damages against UCAR, SGL, C/G and SDK.

On 18 March 1999 UCAR was convicted and fined CAD 11 million for a criminal violation of Sections 45 and 46 of the Canadian Competition Act. On 18 July 2000 SGL also pleaded guilty and agreed to pay a fine of CAD 12,5 million.

Civil proceedings were instituted by purchasers (steel producers) in Canada on 18 June 1998 against UCAR, SGL, C/G and SDK claiming damages for conspiracy and violation of the Canadian Competition Act. In some cases restitution has been negotiated.

On 18 March 1999 the Japan Fair Trade Commission issued warnings to the four Japanese manufacturers (Tokai, SDK, Nippon and SEC) based on suspected violation of the Japanese Anti-monopoly Act.

1.4. DETAILS OF THE INFRINGEMENT

1.4.1. PRELIMINARY OBSERVATIONS: THE DOCUMENTARY EVIDENCE

(43) The facts set out below in points 44 to 93 are based principally on the following evidence:

- [...]*

- [...]*

- [...]*

- [...]*

- [...]*

- [...]*

- [...]*

- [...]*

- [...]*

- [...]*

1.4.2. INITIAL CONTACTS

(44) Contacts between the major producers with a view to concluding market-sharing and price-fixing agreements in Europe and elsewhere originated in 1991.

They took place initially on a bilateral basis between Sigri (later SGL) and UCAR. (The merger of Sigri and GLC to form SGL became effective in February 1992.) According to UCAR [...]*'s statement (indirectly confirmed by VAW), the initiative came from Sigri [...]*.

At the first known contact, in which the Sales Directors of Sigri and UCAR recognised a "need" to increase prices, it was agreed that when Sigri announced an impending price increase in Germany, UCAR would follow, which is indeed what occurred.

After this first bilateral contact, the same persons also held meetings with representatives of the other European producers, Pechiney and VAW Carbon [...]*.

(45) Contacts between the Western and Japanese producers had also begun in late 1991 and covered the global market.

Meetings took place in New York (between UCAR, SDK, Tokai, Nippon and SEC); in Milan in September 1991 (between UCAR and SDK, the latter representing all the Japanese producers); and in Tokyo in April 1992 (SGL, SDK, Tokai, Nippon and SEC).

The meetings included discussions of prices and conditions in the graphite market worldwide [...]*.

(46) The plan to set up a worldwide cartel involving UCAR, SGL and the Japanese producers was developed in March 1992. The [...]* UCAR and SGL met in Zurich on 15 March; the next day the two had a meeting in Wiesbaden and agreed to hold a "summit meeting" with their Japanese counterparts in order to agree a global system of market control. SGL blames UCAR's then for taking the initiative [...]*. Whether or not this was the case, it was in fact SGL [...]* who proposed the plan to the Japanese during his visit to Tokyo on 6 to 8 April 1992 and who actually sent out written invitations [...]*.

As a result of these contacts, the top executives of the world's major graphite electrode producers met in London at the invitation of SGL on 21 May 1992 and agreed on the structure, method of operation and organisation of a worldwide cartel to control the market (see points 49 and 50 below).

1.4.3. ORGANISATION AND PARTICIPANTS

1.4.3.1. Structure

(47) The producers recognised that the graphite electrode industry worldwide was now based on three "legs": SGL representing Europe, UCAR the United States and, for Japan, SDK, Tokai, Nippon and SEC as a group [...]*. The structure, organisation and operation of the cartel were based on that shared assessment of the market.

Cartel meetings were held at several different levels:

- periodic "Top Guy" meetings of the, [...]* or [...]* of UCAR, [...]* SGL and the Japanese producers (once a year or more frequently if necessary),

- regular "Working Level" meetings of the [...]* from the producers and sometimes VAW Carbon (twice or three times a year),

- group meetings of the "European" producers without the Japanese (once or twice per year),

- national or regional meetings for particular markets,

- bilateral contacts between companies.

1.4.3.2. Participants in meetings

(48)

>TABLE>

[...]*.

Details of the dates, locations and attendance for most of the cartel meetings are set out in [...]*; see also the [...]*.

The presence at meetings of representatives of Tokai, Nippon and SEC is either admitted or is demonstrated by their travel records: see replies by Tokai of 18 November 1998 and 1 March 1999, by Nippon of 18 December 1998 and by SEC of 13 July 1998 and their replies to the Statement of Objections.

1.4.4. THE BASIC PRINCIPLES OF THE CARTEL

(49) At the first "Top Guy" meeting, held in London on 21 May 1992, the major producers agreed the overall scheme by which the world market for graphite electrodes would be cartellised.

Participants were SGL, UCAR, Mitsubishi (then a major shareholder in UCAR and its sales agent, as well as a producer in its own right), SDK and Tokai (the latter also representing the interests of Nippon and SEC).

VAW Carbon and C/G were not invited and did not attend.

The meeting was led by [...]* SGL, who spoke also on behalf of UCAR: the two Western producers adopted a common position vis-à-vis their Japanese counterparts. Indeed, SDK and Tokai both claim that SGL and UCAR threatened the Japanese producers and acted quite aggressively towards them [...]* (Tokai's Reply to the Statement of Objections, p. 10).

(50) During the meeting the following basic principles were set out and agreed [...]*:

- prices for graphite electrodes should be set on a global basis,

- decisions on each company's pricing had to be taken not by the commercial managers but by the Chairman/General Managers only,

- the "home producer" (market leader) was to establish the market price in its home area and the other producers would then "follow" (in the United States and parts of Europe, UCAR was designated the leader; SGL led the rest of Europe and the four Japanese producers were the market leaders in Japan and parts of the Far East),

- for "non-home" markets (export markets where there was no "home" producer or market leader) prices would be decided by consensus,

- non-home producers should not compete aggressively; market shares would be allocated with non-home producers being required eventually to withdraw from the home markets of the others (the allocation of non-home or export markets was to be decided at the regular "Working Level" meetings),

- there was to be no expansion of capacity (the Japanese were supposed to reduce their capacity),

- there should be no transfer of technology outside the circle of producers participating in the cartel.

The subsequent meetings of the cartel involved implementing, monitoring and, if necessary, modifying the basic scheme that had been agreed by the "Top Guys" at this meeting.

1.4.5. IMPLEMENTATION OF THE CARTEL AGREEMENT

1.4.5.1. Cartel meetings

(i) "Top Guy" and "Working Level" meetings

(51) The London "Top Guy" meeting was followed almost immediately by a "Working Level" meeting in Zurich on 25 May 1992. The participants [...]* were from SGL, UCAR, SDK, Tokai, SEC, Nippon and VAW Carbon.

The world graphite market was reviewed region by region (these were the Far East; Middle East and Africa; Western Europe; Eastern Europe; Latin America and North America: see Appendix 20). Shares in different markets were allocated [...]*. The [...]* of SGL was designated to be the contact partner of the Japanese producers for the EEA market ([...]* SGL's Reply to the Statement of Objections, p. 11).

(52) The first European region price-fixing meeting took place in Berlin on 3 June 1992 and was attended by [...]* SGL [...]* and UCAR. The producers agreed, inter alia, on target prices for the EEA market [...]*. SGL contests the existence of such an agreement [...]* (SGL's Reply to the Statement of Objections, pp. 11 and 12). As SGL admits however the presence of its corporate officers in Berlin for a Trade Association meeting [...]*, the Commission considers that UCAR's [...]* Statement is more convincing on this point.

On 28 August 1992, another high level meeting covering the European market and pricing was held in Paris (Hotel Sofitel) between executives from SGL and UCAR [...]*.

There was a second "Working Level" meeting with the Japanese producers in Lugano on 19 September 1992; UCAR and SGL met shortly before to agree on minimum prices for the European market, prices were then communicated to the Japanese participants at the meeting in Lugano. At this same meeting volumes and quotas were set for the regions other than Europe (Middle and Far East, Latin America) [...]*.

(53) A further [...]* meeting between UCAR and SGL to discuss the European market took place in Milan on or around 27 to 30 October 1992: the somewhat furtive circumstances are described in the [...]* (the [...]* had not even been told about the meeting in advance by his superior); see also [...]*.

The next relevant meeting was again at "Working Level" and took place in Vienna on 3 March 1993. The participants were from SGL, UCAR, Tokai, SEC, Nippon and SDK. There was a general exchange of graphite electrode market information region by region. Information on prices and certain customers was also exchanged and discussed [...]*.

(54) Later known "Working Level" meetings between SGL, UCAR and the Japanese group took place in July 1993 in Singapore; on 8 September 1993 in Zurich; on 16 to 17 November 1993 in Zurich; on 25 July 1994 in Zurich; on 6 February 1995 in Tokyo; on 11 to 12 September 1995 in Rohrschach; in April 1996 in Kyoto; in July 1996 in Meitingen; on 12 to 13 September 1996 in Rohrschach; in April 1997 in Tokyo; in August 1997 in South-East Asia; in November 1997 in Hong Kong and in February 1998 in Bangkok [...]*.

UCAR, SGL and the Japanese producers went to all the "Working Level" meetings. VAW Carbon admits going to such meetings until the end of 1996, but its attendance was somewhat less frequent than that of the other participants; it did not attend meetings outside Europe [...]*.

(55) These "Working Level" meetings usually covered the world market, with each region (North America, Latin America, Western Europe, Eastern Europe, Asia-Pacific and Middle East/North Africa) being considered separately. In addition to discussions on pricing and on certain customers, the participants exchanged information on their individual sales volumes covering several years: the previous year, current year and projections for the coming year. The information was totalled by region and broken down country by country for each producer, with the Japanese forming one group: [...]*.

Volume data for all areas, including Europe, were updated and revised at each meeting.

(56) "Top Guy" meetings are known to have taken place on or around 20 August 1994 in Zurich; on 5 to 6 February 1995 in Tokyo; and on 14 to 15 March 1995 in Paris. (A meeting in London on 13 November 1993 may also have involved some "Top Guys": [...]*.)

At some of these meetings, the principles agreed in London in May 1992 were reaffirmed and the participants were reminded of the need to follow what had then been decided.

The "Top Guys" also agreed to charge certain premiums on the price of large-size electrodes, namely a surcharge on the price charged for standard 24-inch electrodes (for example, a 10 % premium for 28-inch electrodes and a 40 % premium for 30-inch electrodes).

Other matters covered included the production and marketing by Showa Denko's US subsidiary SDC of 28 3/4-inch electrodes, to which the other producers objected because although the SDC product competed with their 30-inch electrodes, it was priced by SDC in line with the cheaper 28-inch product. SGL and UCAR allegedly put pressure on SDK to either stop selling the product or price it in line with 30-inch rather than 28-inch electrodes. (Eventually production of this model by SDC was discontinued after assurances to that effect had been given by SDK in April 1995: [...]*)

(ii) European group meetings

(57) As from 1992, in addition to these "Top Guy" and "Working Level" meetings with the Japanese producers, "group" meetings with respect to West European pricing took place mainly in Zurich and Lugano and were attended by representatives of the two major producers UCAR and SGL, as well as of VAW Carbon.

According to UCAR, these "European group" meetings were discontinued after a year or so [...]*; following SGL's acquisition of the graphite electrode interests of Pechiney in 1993, there was (says UCAR) no longer any perceived need for all the European producers to meet as a group. According to UCAR, SGL had close contacts with the other two German producers, VAW Carbon and Conradty; although UCAR had no direct knowledge, it believed that SGL communicated directly with them when the need arose to coordinate pricing in Europe [...]*.

VAW Carbon states [...]*, that it took part in such meetings "once or twice a year" (which implies that they continued after 1993).

(iii) Bilateral contacts

(58) UCAR and SGL continued to have numerous bilateral contacts in both meetings and telephone conversations to coordinate their pricing and market conduct in Europe. These contacts were not only made regularly at the level of the European [...]*, but also involved frequent meetings and telephone conversations between the respective [...]* of UCAR and [...]* SGL [...]*.

For the specific purpose of keeping these contacts secret, SGL [...]* of Sales had a special dedicated telephone installed at his home with a fax machine. The conversations took place two or three times per month and involved agreement on "relevant market parameters" (as SGL puts it).

The bilateral telephone contacts between UCAR and SGL were supplemented by personal meetings which occurred two or three times each year, several times in the Hilton Hotel at Zürich airport, in a hotel close to Geneva airport, in the Holiday Inn Hotel and in the Sofitel in Paris. These meetings took place typically in the autumn when the price increases for the next year were being planned.

According to SGL, the meetings invariably followed the same agenda. Market data were exchanged, including information on sales volumes and price levels; the participants also discussed the prices that could be achieved and sales forecasts. On this basis UCAR and SGL developed the new target prices for each national market. They also agreed partly (Italy) on the respect of "home markets" and the maintenance of "key account clients" [...]*.

(iv) Precautions to conceal meetings and contacts

(59) In order to disguise or conceal their contacts and meetings, the participants took elaborate precautions [...]*:

- documents were either not distributed at the meetings or were destroyed afterwards,

- expenses for meetings were paid in cash with no explicit reference to those meetings in travel expense claims,

- telephone calls were initiated directly between the corporate officers without passing through secretaries (at an early stage [...]* SGL had inadvertently been identified by name in a telephone call to UCAR and always subsequently had to be referred to cryptically as "[...]*"),

- mobile telephones and home faxes (on separate dedicated lines) were used to contact competitors; once the authorities began their investigations, contacts were made only when strictly necessary (UCAR's [...]* obtained a mobile telephone operating on a Swiss network),

- a system of code names for the companies and some individuals was devised to cover their real identities. SGL was referred to as "BMW"; UCAR as "Pinot"; the Japanese group were dubbed "Cold", a derivation from the first letters of their individual code names "Chivas", "Ocean", "Lawn" and "Dry". VAW Carbon was known as "Wave". Individuals were also given code names: UCAR's [...]* was known as "Artemis"; others were given the names "Moustache" and "Taurus" [...]*.

1.4.5.2. Agreement on European prices

(60) During the period 1992 to 1998, there were frequent bilateral contacts between UCAR and SGL to agree and monitor pricing in Europe (these are listed in [...]*). The [...]* or [...]* for Europe of the two companies (they also attended the "Working Level" cartel meetings) developed price recommendations, usually on the basis of information received from the different country Sales Managers. These "recommendations" were discussed between UCAR and SGL during either their personal meetings or telephone conversations (see point 58 above). The discussions on pricing between UCAR and SGL also occurred at or on the sidelines of the "Working Level" meetings with the Japanese producers: the Japanese were informed about the European prices during the global meetings at which price discussions on the other parts of the world also took place.

SGL and UCAR agreed in their bilateral contacts the prices for Western Europe using the German mark as the reference currency; the corresponding prices for each national market were then fixed in the appropriate currency, the basic idea being to ensure that prices across Europe stayed within a five to ten per cent differential (see, for example, [...]*).

If [...]* SGL and UCAR could not agree on prices, the decision was referred to the [...]* of the two companies.

(61) UCAR provided the Commission with a table showing for each region and for each Member State the prices to be applied as of 1 July 1992 and 1 January 1993 (Appendix 4).

The prices are shown in the national currencies of most countries. For the Netherlands, Portugal and Greece the German mark is used; and for Denmark, Finland and Norway the price is the equivalent of the Swedish krona price in the appropriate national currency.

The document was probably faxed to UCAR by SGL. (It may well be however that this was also in fact the price list which had been agreed at the "Working Level" meeting of 25 May 1992 or the meeting in Berlin between SGL and UCAR on 3 June 1992.)

(62) If the real decision-makers on pricing in Europe were SGL and UCAR, the matter was also the subject of contacts and meetings between the two majors and the smaller producers supplying the West European market.

VAW Carbon in its Statement [...]* says that, at the European meetings which it attended, the participants exchanged views as to the amount of the price increase which the market would bear in the different countries (SGL was said to have always led the discussions). According to VAW Carbon, one or other of the two large producers took it upon itself to lead the price increase publicly.

It was SGL which communicated the prices to be applied and the "targets" for each national market in Europe to the other producers.

(63) During its investigation at SGL in June 1997, the Commission discovered several price tables for the period 1994 to 1997 giving electrode prices for the different countries and regions in the world. As part of the price-fixing exercise, targets for future price increases were set well in advance.

A price table (dated 12 August 1996) was found showing the prices that had come into effect or were to be applied on seven dates between 1 October 1994 and 1 July 1996.

The part relating to Western Europe is reproduced below:

>TABLE>

(64) The main evidential significance of this table (which did not, at face value, indicate any collusion between the producers and could be explained as a purely internal document) derives from the fact that virtually identical tables were in the possession of other producers and have now been supplied to the Commission.

An almost identical version of the table (reference 13-6-95/GV) was obtained by the Commission from SDK on 13 March 1998 [...]*. A later version dated 2 August 1995 was faxed to SDK by SGL on 23 August (Appendix 7).

Exactly the same table as had been sent to SDK on 23 August was faxed by SGL to UCAR's Chairman on 25 August 1995 (Appendix 8).

On 24 October 1995, the same document was faxed to Carbide/Graphite Group by its German sales agent who had received it by fax from VAW Carbon (Appendix 9; C/G's Article 11 reply of 22 July 1999, p. 6).

Similar price tables found during the investigation at SGL are annexed as Appendices 10 to 14.

These spreadsheets were clearly part of the exercise of fixing prices for the European markets and may be taken as typical of the documentation produced and used by the cartel during the whole of its operation.

(65) [...]* also provided handwritten tables made by [...]* (Appendices 15, 16) which it explains as follows: "These are examples of lists of world graphite electrode markets with current and future price objectives. [...]* The price lists were prepared by SGL on a periodic basis and distributed to the graphite electrode producers."

([...]*, Attachment II, p. 6)

The active role of SGL in promulgating the price to be applied in Europe is confirmed by Appendix 17, a note made by C/G's then Chief Executive Officer of a telephone conversation with [...]* SGL about target prices in the European market: see also pp. 3-4 of C/G's Article 11 reply of 22 July 1999.

1.4.5.3. Implementation of price increases

(66) In order to implement the prices agreed between them (and communicated to other producers), SGL and UCAR arranged in advance which of them would act first to announce the increase to customers. Once the price was established, it could not be undercut.

This device was agreed in principle at a meeting in Geneva in October 1992 between the two [...]* of SGL and UCAR. (They also agreed to respect the existing "customer structure" - that is, not to seek by attractive offers the "established" customers of the rival company.)

Which of the two was designated to "lead" the price increase in a particular national market in Europe depended on their respective positions in that market.

Since SGL had a more important presence in Germany and Scandinavia than UCAR, it had the responsibility for announcing and leading the price increase in those markets. UCAR generally led the price increases in France and United Kingdom. In the other two major Community markets for electrodes, Italy and Spain, where UCAR and SGL had roughly equal market shares, they decided on each occasion which one of them would "publicly" act as the price leader to get the new price established in the market [...]*.

(67) Price increases were announced to customers in each country by the national sales managers, who had contacts with some of their counterparts regarding the implementation of prices: [...]*

It was not normal practice to issue written price lists to customers (see, however, for Italy, point 77 below). Price increases were apparently announced orally, although sometimes at a customer's request they were confirmed by letter [...]*.

(68) UCAR and SGL invariably applied the agreed list price levels to their customers. In certain cases confidential discounts were given which were not shown on the invoice or referred to in writing.

According to UCAR, the price increases to customers generally "stuck" after 1992, in contrast with the period 1987 to 1991, before the establishment of the cartel [...]*.

(69) Price increases were often staggered and came into effect on different dates for different countries or groups of countries. In countries where the product was invoiced in German marks, the price would be increased at the same time as in Germany. The increase in France, Belgium and Luxembourg would normally be at a different date and would for a time bring prices into line across Europe (until the process started again and prices were moved up first in the DEM zone). On occasions, a planned price increase might be postponed. Thus in early 1997, UCAR proposed a price rise for Europe, to be effective on 1 July 1997. There had already been an increase on 1 January that year and SGL was "not enthusiastic" but nevertheless agreed to support UCAR if it instituted an increase. In the event however the increase was not implemented: [...]*.

As soon as the price increase announced by the market leaders was accepted by customers, the smaller producers would "follow" the major producers and apply the new prices [...]*.

1.4.5.4. Price increases 1992 to 1997

(70) At the beginning of the cartel (May 1992) the "European" price for graphite electrodes stood at DEM 3600/tonne (markets using the German mark were Germany, Scandinavia, the Netherlands, Greece, Portugal and Switzerland).

The price in German marks rose in a series of step increases (some nine can be identified) to reach DEM 5400 on 1 July 1996, an increase of 50 % in five years (see Appendix 14).

In 1997 with a view to the upcoming cartel investigation, the price increase planned for 1 July 1997 was postponed to 1998. During 1997/1998 the prices reportedly stagnated at a level of DEM 5500/tonne. As of 1 January 1998 the price was DEM 5600/tonne.

1.4.5.5. Market sharing

(71) The market share quotas assigned to the different producers had been agreed in Zurich in May 1992 [...]*.

There is no contemporaneous record of the actual quotas agreed at that meeting.

Significantly, however, an SGL internal paper of November 1996 setting out its strategy up to the year 2000 (Appendix 18) observes: "Market Share/Competition

Market shares will stay stable with 25 % for SGL, 31 % for UCAR and 24 % for Japanese"

and later recommends: "Follow equilibrium with stable market shares for SGL (25 %), UCAR (31 %) and Japanese (24 %)."

[They refer to worldwide market shares].

For Western Europe the predicted market shares for 1996 of each of the producers is SGL 40 %, UCAR 31 %, C/G 8 %, the Japanese 3 % and the "others" (namely Conradty and VAW Carbon) 13 % (Appendix 19). In the absence of other evidence and since they are not contested by the parties in their written replies to the Statement of Objections, it may be taken that these figures correspond to the quotas agreed.

(72) At their subsequent "Working Level" meetings, the participants reviewed their sales in the different markets and exchanged information in order to monitor observance of the quotas allocated.

According to UCAR, all the participants brought to the meetings information on their sales volumes which was then collated and tabulated in three columns: SGL, UCAR and the four Japanese producers together. The information was totalled by region and broken down by country within each region [...]*. This is confirmed by Tokai which says that these "demand forecasts" also showed the estimates for the near future (Tokai's Reply to the Statement of Objections, p. 8).

For the purpose of formalising the exchange of volume information and making the collection of data more efficient, SGL proposed at the "Top Guy" meeting in Tokyo in February 1995 the adoption of a "Central Monitoring System" (CMS). Tokai was designated by the cartel to collect the data from the Japanese producers, UCAR and SGL. Appendix 20 is an example of such a report. Headed "CMS Report/Forecast 1995 & 1996" it begins with a general overview on the global market and the positions on a regional basis of SGL, UCAR and the Japanese; the three "legs" of the world industry are likened to a triangle in which a balance of market shares has to be maintained: "The balance in market shares within this triangle in these 4 years inclines to Pinot ..." [meaning UCAR]. "There is a sign of enlarging distortion in the balance of market shares within the triangle which might result in some destructive reactions from the losing part. Though it is not easy to say what the just balance is, we have to be vary (sic) careful about the balance all the more we are more or less enjoying the fruit of the cooperation ...". "The coming years till 2000 will be very important and adequate for us to promote a new way of symbiosis in which we can all secure reasonable profits, while on the other hand from another point of view these years, by disorderly releasing the power accumulated and reserved under the cooperation, could be years of destruction of what we have so far formed into a shape."

Four tables are attached (a fifth, "Sales volume and share overview", is missing).

(73) For present purposes, the relevant tables are a "World Review of sales volume and demand as of end August 95" and a "World Forecast Sales Volume and Demand 1996 as of end August 95". For the West European region, all the steel producing countries including Norway are shown: Benelux is treated as a single entity and Ireland appears to be included under United Kingdom. The total is broken down for each country under the headings "Japan", "SGL", "UCAR", "VAW Carbon" and "Others". (UCAR's recollection of the information being tabulated in just three columns appears to have overlooked the data for VAW Carbon.)

While the text of the report itself employs the code names "BMW", "Cold", "Pinot" and "Wave", the disguise has slipped in the attached tables.

Although the "Sales Volume and Share Overview" table (on which the "General Overview" commentary on the world market is based) is missing, it would appear to have covered each of the years 1993 to 1996 and presumably followed a scheme similar to that shown in the table headed "Far East Review Market as of end August 1995" with a "guideline" market share for each of the producers and "adjustments" of actual sales to comply with quota.

The forecast market shares for 1995 on a worldwide basis come close to the "stable market shares" referred to by SGL in its strategy paper (see point 71 above): UCAR 32,1 % (as against 31 %); SGL 25,7 % (25 %) and the Japanese 23,5 % (24 %).

In Western Europe the forecast for 1995 is SGL 41 %, UCAR 32,7 %, VAW Carbon 6,6 % and the Japanese 3,2 %.

Tokai denies that detailed volume or market share allocations for the European market were specifically discussed with the Japanese producers (Tokai's Reply to the Statement of Objections, pp. 9 to 13). Even if that might be correct, it has to be stated that Tokai (as all the other Japanese producers) were informed of the relevant figures for the European market and did not object.

SGL claims that the Central Monitoring System was never realised (SGL's Reply to the Statement of Objections, p. 12). This is however to deny the express wording of the documentary evidence of Appendix 20. SGL's assertion is also contradicted by other producers' statements (Tokai's Reply to the Statement of Objections, p. 10 [...]*. According to UCAR, volume information was still being exchanged at the last group meetings in Hong Kong in November 1997 and in Bangkok in February 1998 [...]* (see points 91 and 92 below).

1.4.5.6. Local meetings and contacts

(i) General

(74) During the operation of the cartel, there were also frequent contacts and meetings between the participants at the level of individual countries for the purpose of implementing and monitoring the prices which had been agreed at the higher level in the working meetings.

Given that the individuals concerned were instructed to take precautions to conceal or disguise their contacts with competitors, there is no abundance of direct evidence: however the general pattern of the collusive behaviour is apparent from the [...]* and the [...]*.

These contacts and meetings covered Germany, France, Italy, Spain and the United Kingdom.

(ii) Germany

(75) SGL is the principal local producer and the clear market leader in Germany, but that country is also one of UCAR's most important markets. According to UCAR, customers for graphite electrodes typically prospected the market for prices twice a year, and would normally ask the producers for price quotes in the autumn for the following year. SGL communicated the level and the timing of its proposed price increases to UCAR, which applied the same basic prices (although it claims often to have given discounts). There were usually two price increases per year.

Occasionally meetings took place at "local" level. While SGL claims that these contacts were sporadic, usually unplanned and took place "by chance" on the occasion of trade association meetings ([...]* SGL's Reply to the Statement of Objections, p. 12), UCAR's account is indicative of something less spontaneous: representatives of the two companies met occasionally and discussed prices and exchanged summarised information on their respective sales in Germany (UCAR claims it generally understated its sales by 15 %). Specific customers were sometimes also discussed [...]*.

These meetings, which took place in restaurants or bars and on the occasion of the annual "Eisenhüttentag" in Düsseldorf, were also sometimes attended by a representative from VAW Carbon [...]*; VAW Carbon for its part now admits attending meetings for specific European national markets (Statement, p. 3). SGL has implied without being specific that there were also sporadic contacts with Conradty up to 1997 [...]* but there is no independent evidence to corroborate its statement.

(iii) France

(76) In around late 1994/early 1995, the [...]* UCAR France contacted his counterpart in SGL to check the prices being offered to customers.

These contacts took the form of telephone conversations (about every two months) and meetings (about four times a year).

UCAR is the "lead" producer in France (see point 62 above) and so established the prices in the marketplace. On the occasion of a concerted price increase, UCAR's representative would check with SGL that it was applying the same prices.

According to UCAR, the telephone contacts were made from a public call box [...]*.

(iv) Italy

(77) There is no substantial disagreement between UCAR and SGL about the time when the "basic rules" for collusion on the Italian market were determined, although each attributes the initiative to the other.

On 27 October 1992 the [...]* SGL and UCAR met in Milan, together with other company employees [...]*.

From then on, UCAR and SGL representatives were in contact to discuss the details of implementing the agreed prices in the Italian market. There were regular meetings, sometimes as frequently as once a month, between marketing managers; the venue was SGL's office or restaurants in Milan. The Managing Directors of UCAR's and SGL's Italian subsidiaries also met periodically. The purpose of the meetings was to coordinate measures for implementing price increases, as well as to analyse market developments and to ensure that the agreed market shares were respected and price undercutting avoided. Customers were then informed of forthcoming price increases in individual letters. Towards the end of November, price lists were dispatched to customers giving the prices that would be valid from 1 January [...]*.

(78) C/G has provided the Commission with documents from its Italian sales agent relating to a meeting between "our well known competitors", meaning the four manufacturers/suppliers active on the Italian market: Appendices 21 and 22.

According to C/G's sales agent (Appendix 22): "the announced meeting took place on Friday, 12 November (1993). Agreements and decisions as follows:

- on 22 November they are addressing to their customers a letter enclosing the new 1994 official list of prices as well as their selling terms

- official price from the official list: 5000 ITL/Kg

- net price they are going to quote 4350 ITL/kg."

According to C/G (Article 11 reply, p. 7), the "competitors" were probably SGL, UCAR, SDK and Cova. As Cova had not been active since 1991, C/G is probably referring to VAW Carbon and Conradty. There is no other evidence of SDK taking part in local meetings for Italy.

SGL has also stated (Statement, p. 21) that meetings on the Italian market took place with UCAR, Conradty, VAW Carbon and (at the beginning of the cartel) Pechiney: these meetings were held once or twice per year in a restaurant in Milan to determine pricing and to analyse market development.

(v) Spain

(79) The Managing Directors and Sales Managers of UCAR's and SGL's Spanish operations were also in regular (and clandestine) contact during the relevant period [...]*. After the cartel prices for the Spanish market had been fixed at European level, the Sales Managers for Spain were informed and made contact by telephone (using fictitious names) in order to decide on the practicalities: who would "announce" first, and when the price increase would take effect. Normally price increases were scheduled to come into force on 1 February, and needed some four months' warning, so these contacts were usually in the last quarter of the year.

In addition to the telephone calls, meetings were sometimes arranged to discuss the Spanish market, perhaps once a year. The meetings between the Sales Managers are also confirmed by SGL [...]*.

Besides bilateral (UCAR/SGL) meetings, there were occasional contacts between SGL and the two other German producers supplying the Spanish market. A VAW representative used to telephone SGL twice or so each year in order to find out when SGL was intending to announce a price increase and what the amount would be [...]*.

(vi) United Kingdom

(80) The marketing representatives of UCAR and SGL in the United Kingdom were periodically in telephone contact between 1995 to mid-1997 to cross-check on their prices to particular customers (who were suspected of giving deliberately misleading information to their suppliers so as to bring down the price).

Such calls were made from pay telephones. On at least two occasions in 1996/1997 short meetings took place in a hotel off the M1 motorway near Derby [...]*.

1.4.5.7. The involvement in the cartel of C/G and VAW Carbon

(i) C/G

(81) C/G as a United States producer which sells in the Community via agents has historically been in the position of a price follower: its policy was to set its prices slightly below those of the two major suppliers in the European market, reflecting the lack of after-sales support and its status as a second or third supplier to most accounts.

C/G did not attend either the "Top Guy" or the "Working Level" meetings of the cartel. However, it admits that it did become aware of contacts among competitors concerning the graphite electrode business [...]*. It admits further that it did take part in bilateral meetings and telephone contacts with competitors on prices and markets, principally with SGL, but also with UCAR, the Japanese companies and VAW Carbon [...]*. Contacts began in or around late 1991 when [...]* SGL took the initiative to meet the then Chief Executive Officer of C/G in New York. According to C/G, the discussions included profitability and pricing in the industry but did not cover specifics [...]*.

The first meeting in which a discussion of business conditions and prices took place was (by C/G's account) in January 1993. After a lunch at the Park Lane Hotel, [...]* SGL handed to the [...]* of C/G a price list (now lost or destroyed) with countries, columns and dates and told him that they were SGL's target prices (C/G Article 11 reply, p. 9; [...]*). It should however be noted that already by mid-1992 internal records of C/G suggest that it knew of arrangements to divide the market (see point 85 below).

C/G admits that it had further meetings and telephone conversations with SGL regarding volumes and prices (C/G Article 11 reply, pp. 8 and 9).

On 12 September 1995, an executive of C/G met [...]* SGL (Appendix 23). The subject matter of that meeting is not recorded but C/G had already been informed via VAW Carbon of the price increase planned for 1 January 1996 and later received the SGL price list from the same source (see point 64 above).

(82) C/G has remained vague in its accounts of its contacts with competitors. The following records of contacts with SGL for 1996 may however be taken to typify the subject matter of the contacts during the whole of the period.

In summer 1996 the [...]* SGL in a telephone call to C/G's then Chairman and CEO supplied him with current and target prices which he noted down at the time. There had already been several telephone contacts on the same subject [...]*.

Although SGL tries to deny it (SGL's Reply to the Statement of Objections, p. 13), it is apparent from C/G's record of the conversation (Appendix 17) that SGL was bringing pressure to bear on C/G to restrain its sales in Europe. A note at the bottom of the page reads:

"(1) not prepared to take hits anymore, keep volume under control (2) show restraint (3) Europe consumption of graphite - 24000 tonnes (4) SGL taking all the hits (5) [...]* (6) [...]* (7) [...]*."

(According to C/G, Nos 5 to 7 were important customer accounts which it feared might be targets for retaliation if it did not comply with SGL's wishes: C/G Article 11 reply of 22 July 1999, p. 4.)

[...]* SGL, who apparently on several occasions blamed C/G for selling too much in Europe [...]*, subsequently sent a fax to C/G's Chief Executive Officer on 25 September 1996 (Appendix 24) listing his estimation of C/G's sales in the different countries and regions of the world for 1993 to 1996. In response to this demand, C/G's Chief Executive Officer noted C/G's "real" sales against the estimates made by SGL and faxed them back to its [...]* (C/G Article 11 reply of 22 July 1999, p. 2).

In a later meeting between representatives of SGL and C/G at Frankfurt airport on or around 19 November 1996, C/G's General Manager for the Electrodes Business Unit of C/G's sales insisted that SGL's estimates of C/G's sales in the fax of 25 September were incorrect [...]*. In addition to its meetings and conversations with SGL, C/G now admits to have had periodic contacts with both UCAR and the Japanese producers [...]*. Fragmented or sporadic as such contacts may have been (and this is how C/G depicts them), they would have left its executives in no doubt of the expectation the other producers had of it.

SGL attempts to minimise these contacts with C/G by saying that they were necessitated by the fact that C/G wanted to sell needle coke to SGL (SGL's Reply to the Statement of Objections, p. 13). This is however contradicted by C/G in its Statement [...]* and its Article 11 reply of 22 July 1999 and by the abovementioned documents. In these it is clearly demonstrated that SGL volunteered information regarding graphite electrode target prices and implementation dates and complained about C/G's volume of sales in certain European markets.

(83) C/G for its part argues [...]* that it "did not use any of the information given to it by SGL's [...]* in setting its prices. Rather, C/G set its prices in export markets based on a variety of factors, including what customers told C/G's agents they were paying for graphite electrodes. C/G would not make any decisions with respect to pricing without getting information from the relevant customers. C/G's pricing was driven by that information, not by information given to it by SGL's [...]* about what might happen in the future".

(84) The Commission considers however that this explanation is disingenuous: C/G was informed in advance of the price increases and target prices decided by UCAR and SGL in the European markets and ensured that it did not hinder or upset their plans. It was well aware that the prices being paid by customers and the target prices that SGL had communicated to it were one and the same thing. Passing the target prices in advance to C/G gave the ringleaders of the cartel the security of knowing that their prices would be followed by C/G, which (as the following evidence shows) in any event adapted its behaviour to fit in with the wishes of the cartel and particularly of SGL.

(85) C/G argues further that the Commission's allegation in the Statement of Objections that certain executives were aware of the existence of the cartel is not supported by any facts (C/G Reply to the Statement of Objections, p. 2).

In this context the Commission states that as early as 22 July 1992, - two months after the "Top Guy" meeting in London - the weekly report to the Chairman observed (Appendix 25): "(We) have effectively booked 'our share' in Germany for the second half. All at DM 4000 +/MT."

The reference by C/G to "our share" is strongly indicative that some understanding already existed that its sales should be restricted in the particular market. Certainly VAW Carbon seems to have had the impression (Appendix 26) that C/G had agreed to limit its sales in Germany. Despite C/G's professed ignorance as to why VAW Carbon could have gained this impression (Article 11 reply, p. 7), such an understanding would be entirely consistent with SGL's repeated insistence that C/G had sold "too much" in Europe.

C/G employees also knew of the "unwritten promise" among the world graphite producers not to increase their capacity as decided in London in May 1992 (Appendix 27).

Indeed its agents in Brussels even referred openly to one major customer in France awarding its business to C/G instead of SGL: "We benefited of a negative action against one of the Biggies - SGL. They [meaning the customer in question] hope to destabilise the cartel in making one party very unhappy." (Appendix 28).

(86) C/G's policy towards the cartel is summed up in a fax letter of 11 November 1993 to its German agents. Explaining why the agents had to withdraw immediately an offer of a DEM 100 discount to Scandinavian customers (who are invoiced in German marks), the C/G senior executive writes: "Let me try and explain why we are taking this position. As I've told you before, we are a distant No 4 in Electrode production in the world. With UCAR, SGL and the Japanese as a group controlling over 85 % of the world's production, we are not in a position to do anything to disrupt their willingness and ability to increase prices in the world."

(Appendix 29).

C/G claims that the last contacts with SGL took place in November 1996 [...]*. There is no information which would indicate the contrary (see also point 115 below).

(ii) VAW

(87) In its initial reply to the Commission's request for information of 31 March 1999, VAW Carbon admitted that it had been present at "informal" meetings with representatives of SGL, UCAR and the four Japanese producers. According to VAW Carbon, the meetings which it attended were usually held in Switzerland and took place once or twice a year. However, it produced no relevant documentation and claimed to be unable to provide further details of dates, locations or participants at particular meetings. (Indeed, like the others involved, VAW Carbon's representative took steps to conceal his participation in meetings by deliberately not generating travel expenses claims.)

By letter of 12 July 1999 however, VAW Carbon admitted its participation during the period from 1 January 1992 to the end of 1996 in regular meetings which involved the planning and implementation of a cartel led by SGL and UCAR in which volume quotas and prices for graphite electrodes were fixed [...]*.

According to VAW Carbon, its position as a price "follower" was well known to the two majors and its participation in meetings should not even have been necessary for the success of the cartel. Whereas SGL claims that it "only informed" VAW Carbon on dates and locations of meetings (SGL's Reply to the Statement of Objections, p. 13), VAW Carbon indicates that SGL had insisted on VAW's participation in the regular meetings [...]*.

(88) VAW Carbon was present at the first "Working Level" meeting in Zurich on 25 May 1992 in which the various markets were allocated among the participants and a price list was produced.

Until the end of 1996, the Managing Director of VAW Carbon attended multilateral ("Working Level") sessions held in Europe [...]*. After that period the company was no longer invited (it does not explain why).

VAW Carbon also admits that it took part in separate European group meetings once or twice a year, as well as in meetings to discuss particular national markets.

VAW Carbon also acted as a link between the cartel and C/G through its German selling agents: see Appendices 9, 30 (VAW Carbon's Managing Director had presumably received the price lists from SGL).

The involvement of VAW Carbon in the monitoring of sales volumes (the CMS scheme) is demonstrated by Appendix 20.

VAW Carbon claims to have stopped attending "informal" meetings with competitors at around the end of 1996. There is no information from other cartel members which would indicate the contrary (see point 115 below).

1.4.5.8. Continuation of the cartel meetings after the investigations

(89) The simultaneous investigations conducted by the Commission and the United States Anti-trust authorities in June 1997 did not put an immediate end to the cartel.

(90) SDK claims that it had already announced its intention to cease participation in the meetings at the "Working Level" meeting in Tokyo in April 1997 [...]*. Indeed, by late 1996, customers in the United States had strongly resisted an announced price increase of 9 % due to take effect in early 1997 and had even publicly stated that they had complained to the Department of Justice. By some accounts, the possibility of an investigation had already been foreseen some months before the Commission carried out its visits.

(91) Immediately following the Commission inspections on 5 June 1997 - about which SGL had warned the other producers - SGL and UCAR discussed the outcome of the investigation. SGL assured UCAR that no incriminating documents had been found: [...]*.

A meeting was held in Malaysia in mid-July 1997, attended by representatives of SGL, Nippon, Tokai and SEC; SDK and UCAR declined to attend and the meeting was held in their absence. Details of the discussions and transactions are not available [...]*.

In November 1997 another meeting was held in Hong Kong and lasted a day and a half. The participants were SGL, UCAR, Tokai, SEC and Nippon. They discussed the stage reached by the Commission's proceedings and revised the CMS (Central Monitoring System) volume charts for each region and market ([...]* see also SGL's Reply to the Statement of Objections, p. 13).

(92) The last known tripartite meeting was held in Bangkok on 13 February 1998 [...]*. Participants came from SGL and UCAR and on the Japanese side from Tokai, SEC and Nippon. The Central Monitoring System tables were again updated in accordance with the usual practice. SGL and UCAR informed the Japanese companies of the then current European prices.

Outside the "Working Level" meetings with the Japanese, the European Sales Directors of UCAR and SGL remained in regular contact to coordinate their prices in the European markets.

UCAR had apparently not implemented a price increase in Europe on 1 July 1997 as planned. The increase was postponed to 1 January 1998. The telephone contacts and meetings were concerned, inter alia, with this matter.

(93) In addition to the frequent contacts on pricing between the European [...]*, [...]* of UCAR and SGL also had regular conversations (including one using a mobile telephone registered in Switzerland).

These bilateral contacts continued until at least March 1998 [...]*.

Whereas SGL in its reply to the Statement of Objections (p. 13) denies giving any such advice, both [...]* and SEC (Reply to the Statement of Objections, p. 12) confirm that the senior executives of SGL had told the Japanese producers not to cooperate with the Commission's investigations and not to reply to the Article 11 requests for information. Given that SGL had warned several other cartel members of the forthcoming inspections (see point 27 above), that apart from SDK none of the Japanese producers initially cooperated with the Commission and that their replies to the Commission's Article 11 requests remained very vague, these accounts appear credible to the Commission.

UCAR says [...]* that SGL's [...]* continued to phone UCAR's Director of Sales even after the latter had been dismissed by the company. Several contacts took place between April 1998 and October 1998.

2. LEGAL ASSESSMENT

2.1. THE EC TREATY AND THE EEA AGREEMENT

2.1.1. RELATIONSHIP BETWEEN THE EC TREATY AND THE EEA AGREEMENT

(94) The arrangements described applied to all steel producing countries in the EEA, that is, all the present Member States plus Norway (Iceland and Liechtenstein do not produce steel). The arrangements in question extended to Austria, Sweden and Finland prior to their accession to the Community on 1 January 1995.

The EEA Agreement (EEA), which contains provisions on competition analogous to the Treaty, came into force on 1 January 1994. This Decision therefore covers the application as from that date of those rules (primarily Article 53(1) of the EEA Agreement) to the arrangements to which objection is taken.

In so far as the arrangements affected competition and trade between Member States, Article 81 of the Treaty is applicable; as regards the operation of the cartel in Norway and its effect on trade between the Community and those EFTA States which were or are part of the EEA ("EFTA/EEA States") as well as between the EFTA/EEA States themselves, it falls under Article 53 of the EEA Agreement.

2.1.2. JURISDICTION

(95) According to Article 56(1) (c) and (3) EEA the Commission is competent in the present case to apply both Article 81(1) of the Treaty and Article 53(1) of the EEA Agreement, since the cartel had an appreciable effect on trade between Member States and competition within the Community.

2.2. APPLICATION OF ARTICLE 81 OF THE TREATY AND ARTICLE 53 OF THE EEA AGREEMENT

2.2.1. ARTICLE 81(1) OF THE TREATY AND ARTICLE 53(1) OF THE EEA AGREEMENT

(96) Article 81(1) of the Treaty prohibits as incompatible with the common market all agreements between undertakings, decisions by associations of undertakings or concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, 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.

(97) Article 53(1) of the EEA Agreement (which is modelled on Article 81(1) of the Treaty) contains an identical prohibition on agreements etc. but replaces the conditions of (a) affecting trade "between Member States" with "between contracting parties" and (b) preventing, restricting or distorting competition within the common market with "within the territory covered by ... (the EEA) agreement".

2.2.2. AGREEMENTS AND CONCERTED PRACTICES

(98) The prohibition in Article 81(1) of the Treaty and Article 53(1) of the EEA Agreement relates to agreements, decisions by associations and concerted practices.

An agreement can be said to exist when the parties adhere to a common plan that limits or is likely 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.

In its judgment in Joined Cases T-305/94, etc. Limburgse Vinyl Maatschappij NV and others v Commission (PVC II) [1999] ECR II-931, the Court of First Instance stated (at paragraph 715) 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".

(99) Article 81(1) of the Treaty(9) distinguishes "concerted practices" from "agreements between undertakings" and "decisions by associations of undertakings". The object 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 (Case 48/69 Imperial Chemical Industries v Commission [1972] ECR 619).

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 relating to competition, according to which each economic operator must determine independently the commercial policy which it 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 object or effect of which 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 (Joined Cases 40-48/73, etc. Suiker Unie and others v Commission [1975] ECR 1663.)

(100) Thus conduct may fall under Article 81(1) of the Treaty as a "concerted practice" even where the parties have not explicitly subscribed to a common plan defining their action in the market but knowingly adopt or adhere to collusive devices which facilitate the coordination of their commercial behaviour. (See also the judgment of the Court of First Instance in Case T-7/89 Hercules v Commission [1991] ECR II-1711, at paragraph 256.

Although in terms of Article 81(1) of the Treaty 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, that undertakings taking part in such 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: judgment of the Court of Justice in Case C-199/92 P Hüls v Commission, [1999] ECR I-4287, at paragraphs 158 to 166.

(101) It is not necessary, particularly in the case of a complex infringement of long duration, for the Commission to characterise the conduct as exclusively one or other of these forms of illegal behaviour. The concepts of agreement and concerted practice are fluid and may overlap. Indeed, it may not even be possible realistically to make such a distinction, as an infringement may present simultaneously the characteristics of each form of prohibited conduct, while when 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 of the present type: see again the judgment of the Court of First Instance in Case T-7/89 Hercules v Commission, at paragraph 264.

In its PVC II judgment (see point 98 above), the Court of First Instance stated (at paragraph 696) that "[i]n the context of a complex infringement which involves many producers seeking over a number of years to regulate the market between them, the Commission cannot be expected to classify the infringement precisely, for each undertaking and for any given moment, as in any event both those forms of infringement are covered by Article [81 EC] of the Treaty".

(102) An "agreement" for the purposes of Article 81(1) of the Treaty 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.

(103) As the Court of Justice (upholding the judgment of the Court of First Instance) pointed out in Case C-49/92 P Commission v Anic Partecipazioni SpA [1999] ECR I-4125, at paragraph 81, it follows from the express terms of Article 81(1) of the Treaty that an agreement may consist not only in an isolated act but also in a series of acts or a course of conduct.

A complex cartel may thus 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. The validity of this assessment is not affected by the possibility that one or more elements of a series of actions or of a continuous course of conduct could individually and in themselves constitute a violation of Article 81(1) of the Treaty.

(104) Although a cartel is a joint enterprise, each participant in the agreement may play its own particular role. One or more may exercise a dominant role as ringleader(s). Internal conflicts and rivalries or even cheating may occur, but will not however prevent the arrangement from constituting an agreement/concerted practice for the purposes of Article 81(1) of the Treaty where there is a single common and continuing objective.

The mere fact that each participant in a cartel may play the role which is appropriate to its own specific circumstances does not rule out its responsibility for the infringement as a whole, including acts committed by other participants but which share the same unlawful purpose and the same anti-competitive effect. An undertaking which takes part in the common unlawful enterprise through actions which contribute to the realisation of the shared objective is equally responsible, for the whole period of its adherence to the common scheme, for the acts of the other participants pursuant to the same infringement. This is certainly the case where it is established that the undertaking in question was aware of the unlawful behaviour of the other participants or could have reasonably foreseen or been aware of them and was prepared to take the risk (judgment of Court of Justice in Anic, at paragraph 83).

2.2.3. THE NATURE OF THE INFRINGEMENT IN THE PRESENT CASE

(105) There is evidence that the collusion between the producers of graphite electrodes affecting the Community began with contacts as early as 1990 and developed during late 1991 and the early part of 1992.

It is not necessary, in order for there to be an infringement of Article 81(1) of the Treaty, for the participants to have agreed in advance upon a comprehensive common plan. The concept of "agreement" in Article 81(1) of the Treaty would apply to the inchoate understandings and partial and conditional agreements in the bargaining process which lead up to the definitive agreement. Further, the process of negotiation and preparation culminating in the adoption of an overall plan to regulate the market may well also (depending on the circumstances) be correctly characterised as a concerted practice.

For the purposes of the present case, however, the Commission will begin its assessment with the definitive adoption and implementation by the producers of the common cartel plan.

(106) In the first "Top Guy" meeting in London on 21 May 1992, the major producers - SGL, UCAR and the Japanese "group" - agreed the basic principles by which they would cartelise the world market for graphite electrodes. They agreed to fix prices and to implement a price increase mechanism, to allocate national markets and market share quotas. Furthermore, they agreed not to increase production capacity and not to transfer technology outside the circle of cartel participants. A monitoring and enforcement scheme was set up (for details, see points 71 to 73 above).

This plan, to which they all subscribed, as indeed did VAW Carbon, was implemented over a period of several years employing the same mechanisms and pursuing the same common purpose of eliminating competition.

The working-out of the plan at regular meetings does not give rise to discrete "agreements" but constitutes the implementation of the same overall and illegal scheme.

Given the common design and common objective which the producers steadily pursued of eliminating competition in the graphite electrode industry, the Commission considers that with regard to the EEA market the conduct in question constituted a single continuing infringement of Article 81(1) of the Treaty and Article 53(1) of the EEA Agreement in which each participant must bear its responsibility for the duration of its adherence to the common scheme.

(107) Although the arrangements between the producers could correctly be considered as presenting all the characteristics of a full "agreement", some factual elements of the illicit venture could aptly be described as a concerted practice (were it appropriate or necessary to do so).

C/G was involved on the fringes of the cartel and indeed did not itself attend any group meetings. If it was on the periphery, it still however cooperated with and knowingly associated itself with the overall objectives of the cartel. Its contacts with the cartel via SGL and others enabled it knowingly to adapt its market conduct more closely to that of the other producers and permitted the others to operate on the assumption that it would follow their lead and would not disrupt their planned price initiatives.

Although it is not necessary as far as C/G is concerned to categorise the i