Commission Decision

of 21 November 2001

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

(Case COMP/E-1/37.512 - Vitamins)

(notified under document number C(2001) 3695)

(Only the English, French, German and Dutch texts are authentic)

(Text with EEA relevance)

(2003/2/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 Article 3 and Article 15(2) thereof,

Having regard to the Commission decision of 6 July 2000 to initiate a proceeding 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 regard to the final report of the Hearing Officer in this case,

Having consulted the Advisory Committee on Restrictive Practices and Dominant Positions,

Whereas:

1. FACTS

1.1. SUMMARY OF THE INFRINGEMENT

(1) This Decision imposing fines for infringements of Article 81(1) of the Treaty and Article 53 of the EEA Agreement is addressed to the following undertakings:

- F. Hoffmann-La Roche AG (hereafter "Roche"),

- BASF AG (hereafter "BASF"),

- Aventis SA (formerly Rhône-Poulenc) (hereafter "Aventis"),

- Lonza AG (hereafter "Lonza"),

- Solvay Pharmaceuticals BV (hereafter "Solvay"),

- Merck KgaA (hereafter "Merck"),

- Daiichi Pharmaceutical Co. Ltd (hereafter "Daiichi"),

- Eisai Co. Ltd (hereafter "Eisai"),

- Kongo Chemical Co. Ltd (hereafter "Kongo"),

- Sumitomo Chemical Co. Ltd (hereafter "Sumitomo"),

- Sumika Fine Chemicals Ltd (hereafter "Sumika"),

- Takeda Chemical Industries Ltd (hereafter "Takeda"),

- Tanabe Seiyaku Co. Ltd (hereafter "Tanabe").

(2) For the periods and for the different vitamin products specified in this decision, the manufacturers of vitamins A, E, B1, B2, B5, B6, C, D3, H, folic acid, beta-carotene and carotinoids supplying the Community and the EEA entered into and participated in a series of continuing agreements contrary to Articles 81(1) of the Treaty and Article 53 EEA by which they fixed prices for the different products, allocated sales quotas, agreed on and implemented price increases, issued price announcements in accordance with their agreements, sold the products at the agreed prices, set up a machinery to monitor and enforce adherence to their agreements, and participated in a structure of regular meetings to implement their plans.

(a) Participants, product, duration

>TABLE>

(b) Participants by product

>TABLE>

1.2. THE INDUSTRY

1.2.1. VITAMINS

(3) Vitamins are a group of micronutrients of various types of organic compounds required in small amounts in human and animal diet for normal growth, development and maintenance of life. Their physiological function in the organism and mode of action are diverse. Some vitamins are essential sources of certain coenzymes necessary for metabolism; others are involved in the metabolism of other vitamins. All known vitamins can be synthesised chemically.

(4) With very few exceptions, the living organism cannot itself synthesise vitamins. They have to be supplied in the diet or in dietary supplements. There are some 15 major vitamins.

(5) Vitamins are often grouped according to their solubility properties: of the products relevant for this case vitamin C and the B complex vitamins are water soluble; vitamins A, E and D are fat soluble.

(6) Compound animal feeds contain the vitamins required for the health and growth of particular species. Vitamins are added to human food products to replace losses in processing, to fortify the product, and also to act as antioxidants or colourants. Vitamins for pharmaceutical purposes are marketed to the public as diet supplements in tablet or capsule form. In the cosmetics industry, vitamins are added to skin and healthcare products.

(7) Bulk vitamins are sold in different forms according to the product and the application: crystalline, in oil, with a protective coating or in a powder matrix.

(8) The products with which this decision is concerned are those bulk synthetic substances which belong to the following groups of vitamins and closely related products: A, E, B1, B2, B5, B6, C, D3, biotin (H), folic acid (M), beta-carotene and carotinoids.

(9) Each group of vitamins includes those interrelated substances which have the same properties in their own biological field. Each has specific metabolic functions and is therefore not interchangeable with the other groups. In addition, the various group of vitamins when combined have a complementary synergistic effect.

1.2.2. THE VITAMIN MARKETS AND PRODUCTS - OVERVIEW

(10) The three largest producers of vitamins in the world are Roche, BASF and Aventis, formerly Rhône-Poulenc(4) with overall market shares of approximately [40 to 50] %, [20 to 30] % and [5 to 15] % respectively.

(11) Roche and BASF each produce a wide range of vitamins for both animal nutrition and for human usage, pharmaceutical and food.

(12) The vitamin activity of Aventis is confined to the animal feed sector for which it produces vitamins A and E and buys in for resale certain other vitamins from other producers.

(13) The total world bulk vitamins market (1999) is estimated at some EUR 3,25 billion.

(14) In volume terms, worldwide production of vitamins for animal feed, excluding choline chloride - vitamin B4, not the subject of the present procedure, is around 60000 tonnes per year; pharmaceutical/food tonnage totals around 65000 tonnes.

(15) The EEA market for the products which are the subject of the present Decision was worth around ECU 800 million, at ex-producer prices, in 1998.

(16) Vitamins A and E together comprise half the total market for vitamins. In 1998, the last full year of the cartel for these products, the vitamin E market in the Community was worth ECU 250 million; vitamin A sales aggregated some ECU 150 million.

(17) Sales of bulk vitamin C, which in 1995 had accounted for ECU 250 million in the Community, came to ECU 120 million, the price having more than halved since the ending of cartel arrangements at the end of 1995.

(18) The value of the vitamins market(5) in the Community/EEA from 1994 to 1998 was as follows:

>TABLE>

Source:

Roche market share statistics.

Table I in the Annex gives the breakdown for each vitamin product by Member State over the same period.

(19) Some 70 % of production of vitamins A and E is animal feed grade and 30 % for food pharmaceutical grade; in vitamin C, 80 % is intended for human consumption.

(20) Besides selling individual feed grade vitamins in bulk, much of this to "pre-mixers" which combine vitamins with other nutrients to form a package in powder or liquid form for use in the production of animal feed, the two major producers Roche and BASF are both forward-integrated and have their own operations producing pre-mixes, as does Rhône-Poulenc. A substantial proportion of their "feed grade" vitamin production is not sold on the "free" market but is employed internally in the manufacture of their "pre-mixes". These are blends containing other nutrients and medication besides vitamin concentrates which are added in small amounts to the main feed mixture. The remainder is sold to wholesalers, pre-mixers or directly to animal feed compounders.

(21) The vitamin producers sell the food/pharmaceutical grade product in "straight" form to intermediate customers, such as other vitamin producers, vitamin formulators who buy in concentrated form and to distributors and resellers. Vitamin producers which do not themselves produce particular vitamins may buy in their requirements from other vitamin producers.

1.2.2.1. The individual vitamin product markets

Vitamins A and E

(22) Vitamin A is a fat-soluble chemical substance with a variety of applications primarily in the feed industry. Smaller quantities of vitamin A are also sold to the food and pharmaceutical industries. Sales to the cosmetics industry are minimal. Vitamin A is necessary to ensure normal growth as well as healthy skin, eyes, teeth, gums and hair.

(23) Vitamin E is also a fat-soluble chemical substance with a variety of applications in animal and human nutrition as well as in the pharmaceutical and cosmetics industry. Vitamin E is necessary for the formation and functioning of red blood corpuscles, muscles and other tissue. Vitamin E can either be derived from natural sources or be generated as a synthetic product. There is only a very limited competitive overlap between synthetic and natural vitamin E which only occurs in human applications.

(24) The majority of synthetic vitamin E supplies is purchased by the feed industry, the remainder being consumed by the pharmaceutical and food industry as well as the cosmetics industry which has, however, only emerged as a sizeable purchaser of the product since 1996.

(25) Vitamins A and E together account for some 60 % of the worldwide demand for animal feed vitamins. Both vitamins are largely bought by the same customers, especially in the animal feed industry. The world demand for vitamin E is around 22000 tonnes annually, for vitamin A, around 15000 tonnes.

(26) Roche was the first producer to synthesise vitamins A and E, holding a monopoly on both vitamins until the late 1960s, at which time Rhône-Poulenc began marketing vitamin A for animal feed. BASF entered the market for both products in 1970, and shortly afterwards Rhône-Poulenc extended its activities to vitamin E, for animal feed only. The Japanese producer Eisai also began marketing vitamin E in Europe for human and animal usage in 1967; it does not produce vitamin A.

(27) Roche and BASF thus supply vitamin A and E for use in animal feed and human food, Rhône-Poulenc supplies both vitamins, for animal feed only and Eisai supplies vitamin E for both animal and human use. The only significant other producer of vitamin A is the Russian company Bel Vitamini with about 7 to 9 % of the total market volume. As for vitamin E, small Chinese producers have slowly increased their aggregate share from less than 1 % in 1989 to 7 % by the end of the 1990s.

(28) The bulk vitamin A market in the EEA in 1998 was worth around ECU 150 million; the vitamin E market, ECU 250 million. The average price of vitamin A in the EEA rose from around ECU 38,80/kg in 1990 to ECU 54,50 in 1998 (see Table II in the Annex). Vitamin E prices in the EEA increased from ECU 18,60/kg in 1990 to ECU 31,10 by 1998 (see Table III).

Vitamin B1

(29) Vitamin B1 (thiamin) is essential for the metabolism of carbohydrates through its coenzyme functions. Deficiency causes reduction of growth and nervous disorders. It is a water-soluble vitamin used for animal and human nutrition and in the pharmaceutical industry. Chemical synthesis is a complex process involving some 15 to 17 different steps.

(30) The main producers are Roche, Takeda and several Chinese manufacturers. BASF ceased its own production of vitamin B1 in 1989 and concluded a five-year supply agreement to obtain its requirements from Roche.

(31) Vitamin B1 prices (feed grade) in Europe were in the region of ECU 32,50/kg, rising by 1993 to ECU 38,00/kg before falling sharply in 1994 and reaching a low in 1996 of ECU 16/kg (see Table IV). The European market in vitamin B1 in 1994 was worth some ECU 18 million (1998: ECU 15 million).

Vitamin B2

(32) Vitamin B2 is found in all living cells and is involved in numerous reactions operating energy in cellular metabolism. Riboflavin coenzymes are essential for the conversion of vitamins B6 and folic acid into valid active form.

(33) Vitamin B2 is mainly used in the animal feed industry. Only 30 % of production is employed in food manufacturing and pharmaceuticals.

(34) The principal manufacturers of vitamin B2 are Roche and BASF, with world market shares of 55 % and 30 % respectively in 1990. The third largest supplier is Takeda with 11 % in 1990. There are other producers in Russia, China and the United States of America. So far, only Roche and Takeda produce synthetic vitamin B2; the others employ a fermentation process.

(35) The European price of riboflavin in 1991 was about ECU 43/kg, rising to about ECU 56 in 1994, after which it fell to the present level of EUR 40 (see Table V in the Annex). The European market for vitamin B2 in 1995 was worth some ECU 44 million (1998: ECU 34 million).

Vitamin B5

(36) Vitamin B5 (pantothenic acid, also referred to as calpan) plays a key role in the metabolism of carbohydrates, proteins and fats, and is therefore important for the maintenance and repair of all cells and tissues. Dietary deficiency of calpan in human beings results in a wide variety of clinical symptoms. In animals, a deficiency of vitamin B5 is manifested in retarded growth, impaired fertility, neuromuscular and dermatological disorders and sudden death.

(37) Calpan is produced in two main forms: a pure form known as d-calpan, used both for human consumption and as an ingredient in animal feed and a mixed form, dl-calpan, consisting as to 45 % of d-calpan and as to 55 % of an inert filler, which is used for animal feed only. Reflecting its chemical composition, the price of d-calpan is double that of dl-calpan.

(38) Vitamin B5 is another vitamin for which Roche and BASF were among the three leading producers worldwide; the other main manufacturer of this product is Daiichi of Japan. There are also minor producers in Japan, China, Poland and Romania.

(39) Roche and BASF between them have about two thirds of the market in Europe and worldwide.

(40) Roche, BASF and Daiichi produce only d-calpan, the majority of which is supplied to the animal feed industry. Alps (Japan) and companies in Romania and Poland produce dl-calpan.

(41) In the animal-feed sector, which accounts for the vast majority of production, d-calpan and dl-calpan are sold to pre-mixers who mix calpan with other vitamins and sell the pre-mix package to manufacturers of animal feed.

(42) Daiichi does not produce pre-mixes. Both Roche and BASF are however integrated downstream into pre-mixes; each owns and operates some seven pre-mix plants in Europe. They supply d-calpan both to their own pre-mixing operations (captive use) and to other pre-mixers.

(43) The price of d-calpan in Europe in 1990 was around ECU 12/kg. It currently sells at around EUR 20/kg (see Table VI in the Annex). The European market for calpan in 1998 was worth some ECU 35 million.

Vitamin B6

(44) Vitamin B6 (pyridoxine) serves as a coenzyme for many enzymes involved in the metabolism of amino acids. It plays a significant role in the metabolism of proteins, carbohydrates and fats. Adult ruminants are usually self-sufficient in vitamin B6, but young animals require supplements while growing. Vitamin B6 has a variety of uses in animal and human nutrition and in the pharmaceuticals industry.

(45) The main producers of vitamin B6 are Roche, Takeda, Daiichi and several Chinese producers. BASF and Merck ceased production in 1991/92 and now obtain their requirements from Roche.

(46) In 1989, Roche had a world market share in Vitamin B6 of about 40 %; Daiichi had 12 % and Takeda 11 %. The Chinese producers had only 3 % of the world market in 1989, rising to 16 % in 1997 with, according to Roche, an exceptional interim "high" of about 48 % in 1993.

(47) The price for vitamin B6 in Europe in 1990 was around ECU 25/kg, rising by early 1993 to ECU 46,50/kg. It is now in the region of EUR 20/kg (see Table VII in the Annex). In 1994 the Community market for vitamin B6 was valued at some ECU 15 million. It is currently worth about EUR 11 million.

Folic acid

(48) Folic acid forms part of the B complex of vitamins. The name is applied to a whole group of compounds also known as folates or folacin. It plays an important role in the metabolism of DNA and RNA, the carriers of genetic information in all living organisms. Folic acid reduces the risk of neural tube birth deformities in humans if consumed in adequate quantities by the expectant mother during pregnancy. In humans folic acid deficiency can also result in anaemia. Folic acid deficiency in animals causes anaemia and, in poultry, reduced laying performance and poor feathering.

(49) The producers of folic acid are Roche in Europe and Takeda, Sumika, a subsidiary of Sumitomo, and Kongo in Japan. Roche produces folic acid mainly for incorporation in its pre-mixes. The Japanese folic acid producers do not produce pre-mix, with the exception of a Takeda subsidiary which supplies the product locally in Japan.

(50) Until 1989, the three Japanese producers manufactured nearly all the world supply of folic acid. Until then Roche did not produce folic acid, but obtained its requirements from Takeda. In 1988/89 Roche terminated the supply agreement and started its own production.

(51) In 1991 folic acid demand worldwide was around 300 tonnes, worth some USD 30 million (ECU 25 million). The European market was worth around ECU 9 million to ECU 10 million. The price of folic acid (per kg) in Europe in 1991 was DEM 160 (approximately ECU 80). It is now about DEM 100 (approximately EUR 51,13).

Vitamin C

(52) Vitamin C (ascorbic acid) is a water-soluble vitamin which is used mainly in the human nutrition and pharmaceutical industries. It is required for the production in the living organism of collagen, the intercellular substance which gives structure to muscles, bone, vascular tissue and cartilage. Deficiency causes scurvy weakening of the tissues and intercapillary bleeding.

(53) Vitamin C, together with vitamin E and beta-carotene, is believed to act as an antioxidant with a preventive effect on degenerative cardiovascular diseases and cancer, it prevents the conversion of nitrates into carcinogenic substances. Humans are dependent upon vitamin C supply in the diet. Most food producing animals but not fish can synthesise vitamin C themselves, but may require a supplement to natural production. Vitamin C is also used as an antioxidant to protect the colour or aroma of foodstuffs.

(54) Roche had a monopoly in the production of vitamin C until the 1970s, when Takeda (Japan), Merck (Germany) and BASF entered the market. In 1990 Roche had 40 % of the world market, Takeda 23 % and Merck and BASF some 14 % between them. In Europe, the shares were Roche 36 %, Takeda 11,5 % and BASF/Merck 24 %.

(55) The price of vitamin C in Europe in 1990 was ECU 11,50/kg. After reaching an interim high in 1993/94 of around ECU 15/kg, prices currently stand at EUR 7,50/kg (see Table VIII). The value of the vitamin C market worldwide in 1990 was ECU 650 million, the European market was around ECU 210 million. In the last year of the cartel (1995) the European market was worth some ECU 250 million (current annual value: EUR 120 million).

Vitamin D3

(56) Vitamin D3, a fat-soluble vitamin like vitamins A and E, is sold either in straight form or more often in a blend with vitamin A known as "AD3". Only about 10 % of the vitamin D3 market (by value) is accounted for by human food applications: the vast bulk of production is used in animal feed.

(57) Vitamin D3 is required for healthy bone growth: it is necessary for the absorption of calcium and phosphorus from the small intestine, their reabsorption in the kidneys and the mineralisation of bones. It also plays a role in the proper functioning of muscles, nerves, blood clotting and cell growth. Deficiency leads to rickets in children and osteomalacia in adults; in animals, it leads to reduced growth and leg disorders and, in poultry, thin egg shells.

(58) The first company to produce vitamin D3 in industrial quantities was Duphar, formerly part of Philips and now owned by Solvay. Solvay Pharmaceuticals produced about half the world requirement of vitamin D3 in the early 1990s but its share of the "third party" market was much smaller. This was because some 40 % of Solvay's production of vitamin D3 was supplied in concentrated form to Rhône-Poulenc which incorporated it in an AD3 combination product or blend marketed under its own name.

(59) Roche, BASF and Rhône-Poulenc are all forward integrated in the market and have their own vitamin pre-mix operations which consume vitamin D3. Solvay does not produce blends or pre-mixes: it supplies the straight product to other vitamin producers like Rhône-Poulenc, vitamin formulators which buy in concentrated form, distributors and resellers and to pre-mixers and feed producers.

(60) Vitamin D3 is marketed at different prices in several different product forms. The producers use the D3500 (feed grade) form as the market grade. The price for feed grade vitamin D3 in Europe in 1993 was subject to considerable variations between the different countries. The European market for vitamin D3 in 1998 was worth some ECU 20 million.

Vitamin H

(61) Vitamin H (biotin), a water-soluble vitamin, assists in the utilisation of protein, folic acid and vitamin B12 (the latter is not the subject of the present procedure). Biotin is produced through chemical synthesis involving some 20 different processes Tanabe is developing a fermentation process but it is not yet in commercial use. It is sold in pure and diluted form.

(62) The animal feed sector accounts for some 90 % of Vitamin H production, the remainder being employed in the pharmaceutical industry. Feed grade biotin is sold in a 1 % diluted form in the United States of America; in Europe and elsewhere a 2 % solution is used for feed grade. Pharmaceutical grade is marketed in pure form.

(63) The main producers of Vitamin H are Roche, Sumitomo, Tanabe, Lonza and Merck. Lonza ceased production in 1996. The largest producer of biotin is Roche which currently has some [45 to 55] % of the world market, followed by Sumitomo and Tanabe, each with [15 to 25] %. Merck has some [5 to 15] % of the world market. Merck supplies the vast majority of its production (90 %) of biotin to BASF in the form of animal feed grade 1 % and 2 % concentrations.

(64) In Europe the biotin market is now worth some EUR 25 million (in 1995, ECU 36 million). Food/pharmaceutical grade (100 % pure) biotin is priced per gram. In 1990 the European price was around ECU 6,8/gm (DEM 14/gm), remaining stable until about 1995 since when it has declined steadily. The current price is around EUR 3,0/gm. The feed grade biotin price in 1990 was ECU 3,5/gm for the active ingredient. It begun to decline in 1995 and biotin feed grade currently sells at about EUR 1,0/gm.

Beta-carotene and carotinoids

(65) Strictly speaking these products are not vitamins. Beta-carotene is a pro-vitamin of vitamin A found naturally in plants; when ingested it is converted by the living organism into vitamin A. The vast majority of beta-carotene supplies are purchased by the food and also by the pharmaceutical industry.

(66) Carotinoids are mostly used as pigments for foods and cosmetics and to impart colour to animal flesh. Carotinoids are generally classified by the colour they produce when ingested by animals. Canthaxanthin and citranaxanthin are used to produce a red or golden colour and are referred to as the red carotinoids.

(67) The only producers of these products worldwide are Roche and BASF. Until the early 1990s Roche was the dominant producer with a 90 % market share. In 1991 BASF expanded its production facilities for beta-carotene and by late 1992 had doubled its share of the market in this product to 21 %.

(68) The European market for beta-carotene in 1993 was worth some ECU 45 million, increasing by 1998 to some ECU 76 million. Germany accounts for more than half of the consumption of beta-carotene in the Community/EEA. The beta-carotene price in 1993 was ECU 677/kg; it is now around EUR 748/kg. The Community market for canthaxanthin, the principal carotinoid product, is in the region of EUR 50 million annually. The price for canthaxanthin is currently around EUR 1250/kg.

1.2.3. THE RELEVANT GEOGRAPHIC MARKET FOR VITAMINS A, E, B1, B2, B5, B6, C, D3, H, FOLIC ACID, BETA-CAROTENE AND CAROTINOIDS

(69) The Commission considers that the markets for vitamins A, E, B1, B2, B5, B6, C, D3, H, folic acid, beta-carotene and carotinoids are at least EEA-wide. However, there are several indications that point to worldwide markets for each of the vitamin products.

(70) During the relevant period, the vitamin markets for all the products mentioned were essentially dominated by a global leader, Roche, and a very significant presence of two other producers, BASF and Takeda, the latter for vitamins B1, B6 and C. The combination of Roche with one of the other two producers resulted in market shares in the EEA and worldwide of over 50 % for any of the relevant vitamin products.

(71) Transportation costs and tariff barriers could lead to somewhat higher costs, but they did not prevent the producers of any of the relevant vitamin products from trading on a worldwide basis. This is demonstrated by the fact that a number of companies based in Japan traded in Europe. In addition, all the main companies sold the various products in the main regional markets America, Asia, Europe.

(72) Finally, the worldwide character of the markets for vitamins A, E, B1, B2, B5, B6, C, D3, H, folic acid, beta-carotene and carotinoids is also confirmed by the structure, organisation and operation of each of the cartels.

(73) The Commission therefore concludes that the markets for vitamins A, E, B1, B2, B5, B6, C, D3, H, folic acid, beta-carotene and carotinoids are worldwide.

1.2.4. INTER STATE TRADE

(74) European bulk vitamin production is concentrated at a small number of sites. Roche manufactures vitamins A and E at Sisseln, Switzerland, while BASF's facility is in Ludwigshafen (Germany) and Rhône-Poulenc's plant in Commentry (France). Vitamin C is now produced by Roche at Dalry, Scotland (the Grenzach plant in Germany for vitamin C closed in 1994) and by BASF in Grenaa, Denmark. The third European producer is Merck in Germany. Roche's B-complex production is at Grenzach in Germany. BASF has factories in Ludwigshafen and Grenaa.

(75) Most Community/EEA Member States import the totality of their bulk vitamin requirements, the vast majority of this from production originating in another Member State (Denmark, France, Germany, the United Kingdom).

1.2.5. THE PRODUCERS

1.2.5.1. Roche

(76) Hoffmann-La Roche AG is one of the world's largest research-based pharmaceutical and healthcare groups. The company's headquarters are in Basel, Switzerland. It has manufacturing facilities in a number of Member States.

(77) Total group sales worldwide in 1998 were CHF 24,66 billion (ECU 15,3 billion) producing a net income of CHF 4,4 billion equivalent to 18 % of sales. The vitamins and fine chemicals division accounted for 15 % of group turnover (CHF 3,63 billion). Vitamin sales worldwide totalled CHF 1,96 billion and carotinoids also the subject of this procedure, although not strictly speaking vitamins CHF 650 million. The Division's earnings before interest, tax and depreciation in 1998 were CHF 869 million (24 % of sales) or ECU 539 million. Operating profits were CHF 673 million (ECU 417 million). Roche is the largest manufacturer of vitamins both worldwide and in Europe. The company started producing vitamin C by chemical synthesis in 1935 and expanded its activities to produce the whole range of vitamins. In the vitamins industry as a whole, Roche has a market share of around 50 % worldwide. Its range of production is the widest of all the vitamin producers. Roche also supplies other vitamin products bought in from other manufacturers so that it markets the full range of vitamins for all possible uses: animal feed, food, pharmaceutical and cosmetics(6).

(78) The Vitamins and Fine Chemicals Division of Roche is now located at Kaiseraugst, near Basel. Vitamins and carotinoids account for 72 % of the Division's turnover. Other products of the Division include feed enzymes, emulsifiers, citric acid and fatty acids.

(79) The head office of the division is responsible for "strategic issues", while operational matters fall under five area centres which cover respectively Europe, North America, Latin America, Asia-Pacific and China.

(80) Roche Vitamins Europe SA, the marketing and distribution organisation for Europe, the Middle East, Africa and India is located in Müttenz. [...](7). Distribution centres for Europe are located in Venlo (the Netherlands) and Village-Neuf (France).

(81) During the relevant period, the most senior corporate officers responsible for the vitamins business were the head of the vitamins and fine chemicals division, who is also ex officio a member of the executive committee of Hoffmann-La Roche AG and the head of vitamins marketing.

1.2.5.2. BASF

(82) BASF AG is a multinational chemical company organised under the laws of Germany and has its principal place of business in Ludwigshafen, Germany. Its operations cover oil and gas, bulk chemicals, plastics, high performance chemical products, plant-protection products and pharmaceuticals. The consolidated turnover of the BASF group including subsidiary companies in which BASF has at least a 50 % shareholding in 1997 was some DEM 54 billion (ECU 27,45 billion).

(83) BASF's core business is divided into five segments: chemicals; plastics and fibres; colourants and finishing products; health and nutrition; oil and gas. The health and nutrition segment of BASF includes the fine chemicals division which in turn includes vitamins for human and animal nutrition. BASF produces vitamins as bulk chemicals and in pre-mixes in Europe, North and South America and in China.

(84) In Europe it has vitamin manufacturing facilities at its Ludwigshafen headquarters in Germany as well as at three sites in Denmark: Grenaa, Ballerup and Dianalund. The vitamin products common to the production programme of Roche and BASF are vitamins A, E, B2, B5, C, D3, beta-carotene and carotinoids. In two other vitamins (B1 and H) BASF is a major bulk supplier although it does not itself manufacture the product. BASF ceased its own production of vitamin B1 in 1989 but continued to act as a major supplier selling product bought in from other producers. It also purchases for resale the major part of the biotin (vitamin H) output of another German producer, Merck.

(85) During the relevant period, the senior executives responsible for BASF's vitamin business were the president of the fine chemicals division and the head of marketing for vitamins.

(86) The president of the fine chemicals division was the most senior corporate officer with operational responsibility for vitamins and reported directly to a designated member of BASF's board of executive directors (Vorstand).

(87) The head of vitamins marketing reported to the head of the fine chemicals division and was the most senior executive with sole responsibility for vitamins.

1.2.5.3. Rhône-Poulenc (now Aventis)

(88) Rhône-Poulenc SA, whose corporate headquarters were in Courbevoie, France, was an international company involved in the research, development, production and marketing of organic and inorganic intermediate chemicals, speciality chemicals, fibres, plastics, pharmaceuticals and agricultural chemicals.

(89) Its three core businesses were pharmaceuticals, plant and animal health and speciality chemicals. Total group sales in 1998 were FRF 86800 million (ECU 13,15 billion).

(90) On 1 December 1998 Rhône-Poulenc and Hoechst AG, the German chemical producer, announced their agreement on a plan to merge their life sciences activities in a new entity "Aventis" to be owned 50:50 by the two parent companies and to divest their chemical operations over a three-year period. The next step was to be the complete merger of the two parent companies.

(91) An accelerated programme for the merger project was announced in May 1999, subject to regulatory and other approvals. On 9 August 1999 the Commission decided under Article 6(1)(b) of Council Regulation EEC No 4064/89 of 21 December 1989 on the control of concentrations between undertakings(8), as last amended by Regulation (EC) No 1310/97(9) not to oppose the concentration and to declare it compatible with the common market(10).

(92) On 15 December 1999 the completion of the merger was announced. Aventis is led by a board of management of four members and an executive committee which consists of the four board members and five other senior executives. The new group is divided into two business areas, Aventis Pharma and Aventis Agriculture. Aventis Agriculture comprises the crop science, plant biotechnology, animal nutrition and animal health businesses. The chief executive officer of Aventis Agriculture, who was formerly the president of Rhône-Poulenc's plant and animal health division, is also a member of the executive committee of Aventis. The new company is headquartered in Strasbourg.

(93) Rhône-Poulenc Animal Nutrition (RPAN) was a wholly owned subsidiary of Rhône-Poulenc which produced and marketed nutritional additives including vitamins and amino acids for use in animal foodstuffs (poultry, pigs and ruminants). Its name has been changed to "Aventis Animal Nutrition". RPAN was directly attached to the plant and animal health division of Rhône-Poulenc SA and reported to it accordingly.

(94) RPAN's worldwide corporate headquarters is in Antony, near Paris. It also has regional sales headquarters for Europe, the Middle East and Africa (based in France); North America; South America and Asia-Pacific. RPAN's main feed additive products are vitamins A and E used in poultry and pig feed and methionine, an essential amino-acid used mainly for poultry feed and not the subject of the present procedure. Vitamins A and E are produced in Commentry, France. Some 90 % of Rhône-Poulenc's vitamin production is sold in "straight" form, the rest in pre-mixes.

(95) RPAN produced vitamins only for the animal feed market, its predecessor company AEC having left the human vitamins' market in or about 1988.

(96) The most senior corporate officer in Rhône-Poulenc with operational responsibility for the vitamins business was the president and chief executive officer of Rhône-Poulenc Animal Nutrition.

(97) Prior to the merger with Hoechst, RPAN was subject to the direct supervision of the president of the AGRO division of Rhône-Poulenc, renamed plant and animal health division in 1997. Following the merger with Hoechst, the equivalent post is currently CEO of Aventis Agriculture.

1.2.5.4. Lonza

(98) Lonza AG is a Swiss chemical producer founded in 1897. In 1994 it was acquired by what was then Alusuisse AG, as an independently managed subsidiary and became part of the Alusuisse Lonza Group (Algroup).

(99) The group, one of Switzerland's largest industrial companies, was active for 25 years in aluminium, packaging for pharmaceuticals and cosmetics, chemicals and energy. In 1998 Algroup demerged its chemicals and energy activities from the rest of the group in anticipation of the proposed merger of its aluminium and specialty packaging activities with those of Pechiney and Alcan(11).

(100) The demerged entity is responsible for fine chemicals, food additives and biotechnology products worldwide and energy generation in Switzerland and is named Lonza Group AG.

(101) Despite the multiple restructuring of Lonza AG's parent groups, the company has never been merged into another operation and has remained a separately managed undertaking.

(102) Net sales for 1998 of the entity now constituted as Lonza Group AG were CHF 2153 million (ECU 1340 million) and operating profit CHF 292 million (ECU 182 million).The group headquarters of Lonza Group AG are in Zurich. The fine chemicals and specialties division of Lonza Group is incorporated as Lonza AG (a 100 % subsidiary) and is located in Basel. Net sales of Lonza AG in 1998 were CHF 1012 million (ECU 627 million).

1.2.5.5. Solvay

(103) Solvay Pharmaceuticals NV whose headquarters are in Weesp, the Netherlands, is part of the pharmaceuticals group of Solvay SA, the Belgian chemical producer. Up to 1980 it was part of the Philips industrial group. It produces pharmaceutical drugs for human use. The only vitamin it produces and sells is vitamin D3. Its total turnover in 1998 was NLG 788 million (ECU 355 million).

1.2.5.6. Merck

(104) Merck KgaA of Darmstadt, Germany is a pharmaceutical and health product manufacturer. It is established as the operating subsidiary of E. Merck oHG, a general partnership dating from 1827, which owns 75 % of the capital.

(105) Up to mid-1995 the business was owned by E. Merck oHG. In July of that year, Merck KgaA was set up and the commercial operations were transferred to it; E. Merck oHG now acts purely as a holding company.

(106) Total sales (all products) in 1998 were DEM 8,1 billion (ECU 4,12 billion). Merck's relevant products for the purposes of this procedure are vitamins C and H (biotin). The vast majority of Merck's output of biotin is supplied to BASF which resells in bulk.

1.2.5.7. Daiichi

(107) Daiichi Pharmaceutical Co. Ltd of Tokyo, Japan, was founded in 1915 and produces a wide range of ethical pharmaceuticals, over-the-counter health products and veterinary products.

(108) Sales in 1998 came to JPY 280805 million (ECU 1,92 billion). Daiichi's relevant vitamin production is in vitamins B5 (calpan) and B6.

1.2.5.8. Eisai

(109) Eisai Co. Ltd of Tokyo is a leading Japanese pharmaceutical and drug manufacturer specializing in ethical drugs.

(110) Total sales in 1998 (year ending 31 March 1999) were JPY 284860 million (ECU 1,95 billion), of which 3 % was in Europe. Eisai's only vitamin product is vitamin E, which accounts for some [5 to 15 ] % of total sales.

1.2.5.9. Kongo

(111) Kongo Chemical Company Ltd of Toyama, Japan, is a privately owned producer of pharmaceutical preparations.

(112) Its total sales in 1998 were JPY 4097 million (ECU 28 million). The only relevant product for present purposes is folic acid.

1.2.5.10. Sumitomo

(113) Sumitomo Chemical Company Ltd of Osaka and Tokyo is one of Japan's largest chemical manufacturers, with a product range including basic chemicals, petrochemicals, fine chemicals, agricultural chemicals and pharmaceuticals.

(114) Total group sales in the financial year ending 31 March 1999 were JPY 927700 million (ECU 6,3 billion). biotin (vitamin H) and folic acid are the relevant products for present purposes.

1.2.5.11. Sumika

(115) Sumika Fine Chemicals Company of Osaka, Japan, is a wholly owned subsidiary of Sumitomo Chemical company.

(116) It was formed in April 1992 from the merger of Yodogawa Pharmaceutical with Daiei Chemical Industries and Okayama Chemicals on which occasion the new name was adopted.

(117) Total sales in the financial year 1998 were JPY 19345 million (ECU 132,5 million). The relevant product for present purposes is folic acid.

1.2.5.12. Takeda

(118) Takeda Chemical Industries Ltd, also of Osaka, and incorporated in 1925, is engaged in industrial chemicals, drugs, cosmetics and healthcare products and is a leading manufacturer of pharmaceuticals operating on a global basis; it is the principal vitamin producer in Japan and also one of the main producers of bulk vitamins worldwide. The Takeda products relevant for the present case are vitamins B1, B2, B6, C and folic acid.

(119) Takeda's total sales in 1998 amounted to JPY 841816 million (ECU 5,7 billion). Overseas sales accounted for 16,1 % of total revenue. Food and vitamin products constituted 10 % of sales.

1.2.5.13. Tanabe

(120) Tanabe Seiyaku Co. Ltd of Osaka is one of the leading pharmaceutical producers in Japan. Pharmaceutical products accounted for 81 % of revenue in 1998, the remainder of its business including food additives and cosmetics. In 1998 total sales were JPY 216 billion (ECU 1,6 billion). Overseas sales comprised 13,8 % of 1998 revenues.

(121) The relevant product of Tanabe for present purposes is biotin. Tanabe buys in other bulk vitamins from other producers, including Roche (vitamins B1 and C) and either uses them in its downstream production or resells them as a trader.

(122) Tanabe's main customer for biotin in Europe is [...](12).

1.2.6. TURNOVER AND MARKET SIZE

(123) The following tables give an overview of the relative importance of each undertaking on the worldwide and EEA market and of their respective size(13):

>TABLE>

For the following series of tables, the first column shows the name of the company concerned. The second column shows data for the worldwide turnover in the vitamin product concerned in the last complete calendar year of the infringement and, in brackets, the range of the company's market share in the worldwide market concerned during the time period of the infringement. The third column shows the same information as that of column two but in relation to the EEA-wide vitamin product market instead of the worldwide market. All of these figures are necessarily approximate.

Vitamin A

Turnover (1998, ECU million) and market share (1990 to 1998)

>TABLE>

Vitamin E

Turnover (1998, ECU million) and market share (1990 to 1998)

>TABLE>

Vitamin B1

Turnover (1993, ECU million) and market share (1991 to 1993)

>TABLE>

Vitamin B2

Turnover (1994, ECU million) and market share (1991 to 1994)

>TABLE>

Vitamin B5

Turnover (1998, ECU million) and market share (1991 to 1998)

>TABLE>

Vitamin B6

Turnover (1993, ECU million) and market share (1991 to 1993)

>TABLE>

Vitamin C

Turnover (1994, ECU million) and market share (1991 to 1994)

>TABLE>

Vitamin D3

Turnover (1997, ECU million) and market share (1994 to 1997)

>TABLE>

Vitamin H

Turnover (1993, ECU million) and market share (1991 to 1993)

>TABLE>

Folic acid

Turnover (1993, ECU million) and market share (1991 to 1993)

>TABLE>

Beta-carotene

Turnover (1998, ECU million) and market share (1992 to 1998)

>TABLE>

Carotinoids

Turnover (1998, ECU million) and market share (1993 to 1998)

>TABLE>

1.3. PROCEDURE

(124) On 12 May 1999 Rhône-Poulenc announced to the Commission that, pursuant to the Commission notice on the non-imposition or reduction of fines in cartel cases ("the Leniency Notice")(14), it wished to inform the Commission of its involvement and that of other producers in the European aspect of a [...](15) vitamins cartel, and intended to cooperate with its investigations.

(125) On 19 May 1999 Rhône-Poulenc provided a written summary to the Commission of activities in the market for vitamins A and E which on its own admission constituted a violation of Article 81 of the Treaty.

(126) Rhône-Poulenc provided a supplementary submission to the Commission on 25 May 1999 containing further particulars of the cartel.

(127) Roche and BASF wrote to the Commission on 4 and 6 May 1999 respectively followed by a joint approach on 17 May 1999. They informed the Commission of their intention to cooperate with any investigations, but without at the time providing any statement or documentary evidence.

(128) On 26 May 1999 the Commission addressed to Roche and BASF requests for information under Article 11 of Regulation No 17 concerning their involvement in suspected collusive arrangements in vitamins A, B2, B5, C, E, beta-carotene and pre-mixes, the products identified in the United States of America's proceedings, (see recitals 149 to 154).

(129) Each company provided the Commission with a memorandum admitting infringements of Article 81: Roche on 4 June 1999, BASF on 15 June 1999. These statements only covered the vitamin products which were the subject of the prosecutions in the United States of America. As regards pre-mixes, the producers claimed that while there had been sporadic discussions on pre-mix in Europe, there had never been any effective agreements for this format, since most sales were made as "straights"(16).

(130) By letter of 23 June 1999, BASF provided the Commission with an extensive bundle of documentation relating principally to the volume control and monitoring systems operated under the cartel for the above vitamin products from 1989 onward.

(131) Roche also provided the Commission with extensive documentation on the volume control system in vitamins A, E, B5, beta-carotene and carotinoids by letter of 22 June 1999.

(132) By letters dated 9 and 16 July 1999 in response to the Commission's request for information of 26 May 1999, Roche provided detailed information and documentation regarding the arrangements in vitamins A, E, B5, C and beta-carotene; on 30 July 1999 it provided information regarding the agreements in vitamins B1, B6, D3, H and carotinoids. Also pursuant to the information request, BASF provided information on the meetings for vitamins A, E, B5 and C on 16 July 1999.

(133) Solvay Pharmaceuticals supplied a memorandum concerning restrictive arrangements for vitamin D3 by letter of 29 June 1999, supplemented by further information and documentary evidence on 14 September 1999.

(134) On 19 and 20 August 1999 the Commission addressed requests for information to Takeda, Daiichi, Tanabe, Sumitomo, Lonza and Merck concerning their suspected involvement in price fixing arrangements for certain vitamins. The requests did not relate to all the products in respect of which collusion on their part was suspected(17).

(135) On 9 September 1999 the Commission received from Takeda a file of documents relating to vitamins B1, B2, B6, C and folic acid. Takeda claimed it had already prepared the file before receipt of the Article 11 request. It provided a reply to the request for information on 18 and 20 October 1999 concerning vitamins B1 and B6. It also provided further documents on folic acid, and on 10 January 2000 provided a response to a request for information in relation to folic acid, sent on 15 November 1999.

(136) Daiichi had already supplied on 2 July 1999 a substantial quantity of documents to the Commission concerning vitamin B5 before it was sent the Article 11 request, which related to vitamin B6.

(137) In relation to vitamin B6, Daiichi, in reply to the request for information of 19 August 1999, did not deny its involvement in collusion, at least up to mid-1994.

(138) Tanabe, in its reply dated 11 October 1999, admitted its participation in collusion with the other producers of biotin from October 1991 up to 1994.

(139) On 12 October 1999 the Commission received from Eisai a file of documents and a memorandum concerning restrictive arrangements for vitamin E.

(140) In its reply dated 5 November 1999, Sumitomo admitted frequent contacts with other biotin producers, but claimed that these did not involve any anti-competitive behaviour on its part.

(141) Lonza, by letter of 24 September 1999 in response to the request of the Commission, admitted participation in a number of multilateral meetings with other producers of biotin and the anti-competitive nature of these.

(142) Merck admitted in its reply of 26 October 1999 that it had participated in discussions on pricing with competitors regarding biotin. On 22 November 1999 it provided certain relevant documents regarding the arrangements in that product.

1.3.1. THE ADMINISTRATIVE PROCEDURE

(143) On 6 July 2000 the Commission initiated proceedings in the present case and adopted a statement of objections against the addressees of the present decision.

(144) The companies had access to the Commission's investigation file by means of a CD-ROM which contained all accessible material in the file. This CD-ROM was sent to them shortly after the statement of objections had been issued.

(145) Sumitomo and Sumika argue that they did not have complete access to the file as the Commission did not provide non-confidential versions in all cases nor a detailed description of the content of these documents and therefore might have violated the rights of defence of both companies.

(146) This argument must be rejected. The Commission provided a full copy of all accessible and partially accessible documents in its file of the case, including non-confidential versions of partially accessible documents, in the CD-ROM which was provided to all addressees of the statement of objections. A descriptive list of the content of the non-accessible documents was established and provided to the same addressees.

(147) Having replied in writing to the statement of objections, all the addressees of this Decision except Solvay Pharmaceuticals BV, Kongo Chemical Co. Ltd and Sumika Fine Chemicals Ltd attended the Oral Hearing on the case, which was held on 12 December 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 earlier.

(148) In their written replies to the statement of objections none of the producers, except Sumitomo and Sumika, substantially contested the facts on which the Commission based its statement of objections.

1.3.2. PROCEEDINGS IN OTHER JURISDICTIONS

(149) On 8 May 1998 the District Court of Northern Texas issued a Grand Jury subpoena on Roche's US subsidiary company in connection with investigations by the Justice Department into the vitamins market.

(150) By information filed in the District Court of Northern Texas, on 20 May 1999, Roche and BASF were charged with participation in a combination and conspiracy contrary to Section 1 Sherman Act 1890 (15 USC § 1) to suppress and eliminate competition by fixing the price and allocating the sales volumes of certain vitamins in the United States of America and elsewhere. Certain individuals were also charged with criminal violations of the Sherman Act. The vitamins and time periods concerned were as follows:

- vitamins A and E: from January 1990 to February 1999,

- vitamin B2: from January 1991 to at least Fall 1995,

- vitamin B5: January 1991 to at least December 1998,

- vitamin C: from January 1991 to at least Fall 1995,

- beta-carotene: from January 1991 to at least December 1998, and

- vitamin pre-mixes: from January 1991 to at least December 1997.

(151) By virtue of a plea agreement with the United States of America, BASF and Roche pleaded guilty to the charge of conspiracy and were fined USD 225 million and USD 500 million respectively. Two of the most senior executives of Roche, Messrs[...](18) and [...](19), who were both members of its executive board, pleaded guilty to criminal charges and were sentenced to agreed terms in prison of four and five months respectively, as well as paying personal fines.

(152) On 9 September 1999 Takeda, Eisai and Daiichi agreed to plead guilty and pay fines totalling USD 137 million for their participation in the vitamins conspiracy.

(153) Rhône-Poulenc was granted conditional immunity from prosecution under the Department of Justice's corporate immunity programme after cooperating with the US authorities.

(154) The main corporate fines imposed for the vitamins conspiracy in the US are thus as follows:

>TABLE>

(155) The Canadian Commissioner for Competition has also conducted extensive enquiries into the price-fixing cartel as it affected competition in the sale and supply of bulk vitamins in Canada.

(156) On 22 September 1999 Roche, BASF, Rhône-Poulenc, Daiichi and Eisai pleaded guilty in the Federal Court of Canada (Trial Division) to indictments charging conspiracy to prevent or unduly lesser competition in violation of Section 45 of the Competition Act 1985.

(157) The following criminal law fines were imposed:

>TABLE>

1.3.3. THE DOCUMENTARY EVIDENCE

(158) The principal documentary evidence obtained by the Commission consists of:

- statement of Rhône-Poulenc of 19 May 1999 plus annexes ("Rhône-Poulenc statement"),

- supplemental statement of Rhône-Poulenc of 25 May 1999 plus annexes ("Rhône-Poulenc supplemental statement"),

- statement of Roche of 2 June 1999 ("Hoffmann-La Roche statement"),

- statement of BASF of 15 June 1999 ("BASF statement"),

- statement of Solvay Pharmaceuticals BV (concerning vitamin D3) of 29 June 1999 ("first Solvay statement"),

- documentation provided by Roche by letter of 22 June 1999 (bundle A),

- documentation provided by BASF by letter of 23 June 1999 (bundle B),

- reply of Roche concerning vitamin E under Article 11 dated 9 July 1999, plus annexes 1 to 14 (bundle C),

- statement of Daiichi of 9 July 1999 (Daiichi Statement) concerning vitamin B5 plus documentary evidence (bundle D),

- reply of Roche (vitamins A, E, B2, B5, C, etc) under Article 11 of 16 July 1999, plus annexes,

- reply of BASF (vitamins A, E, B5, C) under Article 11 of 16 July 1999 plus tables,

- letter of Roche of 30 July 1999 concerning vitamins B1, B6, D3, ciotin and carotinoids plus annexes,

- statement of Solvay Pharmaceuticals BV of 14 September 1999 plus appendices ("second Solvay Statement"),

- documentation supplied by Takeda on 7 September 1999 concerning arrangements in B1, B2, B6, C and folic acid (bundle E),

- documentation supplied by Takeda on 18 October 1999 concerning arrangements in folic acid (bundle F),

- reply of Takeda of 18 and 20 October 1999 to request for information concerning vitamins B1 and B6,

- statement of Eisai of 12 October 1999 plus annexed documents (Eisai statement),

- reply of Tanabe dated 11 October 1999 to request for information concerning biotin plus appendices,

- reply of Merck dated 26 October 1999 to request for information concerning biotin,

- letter of Merck dated 22 November 1999 to request for information concerning vitamins B1 and B6,

- reply of Takeda dated 10 January 2000 to request for information concerning folic acid.

1.4. THE CARTELS

(159) This section provides a description of the facts in relation to each of the cartels in the different vitamin product markets concerned, namely the markets for vitamins A, E, B1, B2, B5, B6, C, D3, H, folic acid, beta-carotene and carotinoids.

1.4.1. VITAMINS A AND E

1.4.1.1. The origin and basic scheme of the cartels

(160) The European producers state that prices for both vitamin A and E actually fell significantly during the late 1980s as a result of competition. The "dramatic" fall in price in vitamin E is attributed by Roche to the "price offensive" of Eisai in 1989 (for vitamin A, Roche blames the aggressive pricing policy of Rhône-Poulenc). During the summer of 1989 at least two top level meetings were held, the first on 7 June between Roche and BASF in Basel, and the second in Zurich attended by Rhône-Poulenc as well. Senior executives of Roche, BASF and Rhône-Poulenc met again in Zurich in or about September 1989. The meeting lasted two days. Eisai did not attend; Roche says the idea was to bring Eisai in at a second stage.

(161) According to Rhône-Poulenc, Roche was satisfied with its 50 % market share, BASF wanted an increase from its then 30 % of the market, and Rhône-Poulenc would have liked more than the 15 % it had but realised that it would not be possible.

(162) BASF has described in some detail the September 1989 meeting in Zurich which involved the setting up of the cartel in vitamins A and E.

(163) On the first day senior executives responsible for vitamin marketing in each company, together with some product managers, identified the size of the market for vitamins A and E and then agreed the allocation between the four producers of the world and regional markets on the basis of their respective achieved sales in 1988.

(164) In summary, the underlying objective was to stabilise the world market share of each producer. Market shares were frozen at 1988 levels; as the market expanded, each company could increase its sales only in accordance with its agreed quota and in line with market growth and not at the expense of a competitor.

(165) On the second day, the chairmen of the fine chemicals division or the equivalent and the heads of vitamins marketing of each company joined the meeting to approve the agreed quotas and to establish "confidence" between the participants that the arrangements would be respected. The maxim "price before volume" was accepted as the underlying principle of the cartel. Specific pricing levels were also discussed.

(166) According to information provided by BASF, the market shares of each of the vitamin A producers in 1988, which served as the "base year" for fixing the quotas, were:

>TABLE>

(167) For vitamin E, BASF also provided information on the achieved sales for 1988 which were equivalent to the following percentages:

>TABLE>

(168) These figures may have been slightly adjusted to give the allocated quotas. According to BASF, the global market share agreed at the Zurich meeting were as follows:

>TABLE>

Roche confirms the vitamin A quotas as per the above.

(169) During the autumn of 1989, the European producers held a second meeting in Basel in order to develop in greater detail the framework and procedures of the cartel. For each region, including Europe, the market share quotas were further broken down country by country, so that the total of the allocations corresponded with the regional share assigned and the regional shares added up to the world quotas.

(170) The market for 1990 was estimated and the forecast agreed; the percentage quotas for each company were then converted into sales allocations on a tonnage basis for the world, the region and each national market.

(171) For the duration of the cartel, this exercise was repeated in the late summer/autumn of each year, and came to be known as "the budget".

Structure and participants

Structure of regular meetings

(172) As the implementation of the cartel developed, a complex structure of regular meetings evolved. There were four levels.

Top level

(173) This level was constituted by the most senior corporate officers with responsibility for the vitamins business, and included the divisional heads and sometimes the heads of vitamins marketing. Their role was to back the agreement with high-level support, to define overall strategy and ensure each party continued to adhere to the agreement.

Heads of marketing

(174) The heads of vitamins marketing, who might also attend the top level meetings, took decisions on the practical operation of the agreements and finalised the budgets. Some of their meetings might also be attended by the divisional chairmen. They met two or three times per year.

Global product marketing level

(175) This level consisted of managers with product marketing responsibility for vitamins A and E at global level. Their meetings, held at quarterly intervals, were intended to monitor the implementation of the quota systems.

Regional product marketing level

(176) These meetings, which were organised by the regional management and involved the heads of marketing for each region, including Europe, were held about four times a year. Discussions included pricing to individual customers. The group was also responsible for:

- monitoring sales against budget on a regional level and making adjustments if necessary;

- identifying relevant market developments inside their region;

- implementing the price increases agreed at the more senior levels.

(177) Often the regional meetings for Europe were combined with global operational meetings at a higher level.

(178) BASF named the usual participants in the meetings over the relevant period.

The interaction between the different groups

(179) The cartel's operations centred on the preparation and implementation of the annual "budget". Indeed in this and other respects its mechanisms were closely modelled on the internal financial management and controls of a single undertaking.

(180) The heads of marketing identified by BASF referred to by Rhône-Poulenc as the "top vitamins operations managers" met, usually in August, to exchange global sales figures and estimates of market size and growth for the following year and to prepare the budget for the next year.

(181) These meetings, referred to as "budget meetings", were invariably organised by Roche and were held in hotels in or around Basel. According to Rhône-Poulenc, Roche first made a presentation on the current state of the market with tables prepared from the information which the others had provided in advance by telephone.

(182) It was in this forum that price increases would normally be decided: usually the price was raised in steps of five per cent. Final decisions on pricing were usually taken in the second half of the year, a typical effective date for an increase being 1 April of the following year.

(183) If a price increase was decided, Roche usually took the lead and announced first. Apparently however, it occasionally asked BASF to lead the increase publicly.

(184) After the August budget meeting the three division chairmen (in the case of Rhône-Poulenc, the president of RPAN), met so that the operations managers and heads of marketing who had attended the budget meetings could present the previous year's results.

(185) The meetings were also held in hotels in or near Basel. At the meetings, which were organised and led by Roche, Roche presented market developments and the Division Chairmen would discuss the size of the market, increases in market shares, price movements and resolve potential problems.

(186) The most senior corporate executives from Roche, BASF and Rhône-Poulenc who supervised the vitamins business held further meetings once or twice a year in Basel, Paris and Frankfurt, the meetings apparently being organised in turn by each of the companies involved. According to Rhône-Poulenc, there was no specific agenda. These are however presumably the meetings described by Roche. Their purpose was to demonstrate top-level support for the cartel and to determine overall strategy.

(187) The regional meetings for Europe were also usually organised by Roche and held in Basel. These meetings were scheduled in the month following the end of each quarter. The regional marketing managers reported on market developments to the more senior level of meetings which took the necessary decisions.

(188) The managers who attended the European regional meetings had weekly telephone contact in order to monitor the agreements on pricing and sales volumes and to discuss individual customers. Every month they exchanged the volumes of vitamins A and E sold in each national market. Roche provided the others with the monthly sales of Eisai in the European market as a whole rather than for each country.

Volume control mechanism: "budgets"

General

(189) The fundamental idea underlying the cartel was to freeze market shares in both products at the 1988 level.

(190) All three major European producers have supplied to the Commission tables and spreadsheets created and used for the purposes of calculating, reviewing and agreeing the sales quotas of vitamins A and E for each regional and national market.

(191) Those provided by BASF are probably the most complete set of documents relating to the "budget" and may be used to demonstrate the operation of the volume control mechanism. For the most part, the BASF documents consist of (a) worksheets or support documents used to fix the annual "budget" for each producer on a country-by-country basis and (b) charts comparing the actual sales of each producer with their respective "budgeted volumes", i.e. their quota for each regional and national market both on an annual basis and for interim periods (sales figures in volumes were exchanged on a monthly basis).

(192) The documentation provided by Roche consists of (a) spreadsheet documents established from data supplied by the other producers and reflecting the volume allocation agreements and monthly and yearly results exchanged by the participants; (b) charts prepared by Roche for budget discussions and meetings.

(193) The "budget" documentation for the year 1998 is representative of the whole and may be taken as an example(20).

Vitamin A

(194) For the whole "region" which also includes Eastern Europe, Africa and the Middle East, the quotas proposed are 45,3 % for Roche, 31,6 % for BASF and 23,3 % for Rhône-Poulenc.

(195) For West Europe as a whole, the quotas are given as 44,3 % for Roche, 32,1 % for BASF and 23,6 % for Rhône-Poulenc.

(196) The information for the whole year was maintained on a cumulative monthly basis to ensure that each party kept to its agreed market share; if one was seen to be selling more than its allocated quota, it would have to "slow down" sales to enable the others to catch up. If at the end of the year a producer was substantially ahead of its quota, it had to purchase vitamins from the others in order to compensate them for the corresponding shortfall in their allocation.

Vitamin E

(197) A similar computerised database was kept for vitamin E, although (1) there are separate charts for "feed", "pharmaceutical" and "total" and (2) the volumes are given in metric tonnes.

(198) Documentation provided by BASF for the year 1998 may again be taken as illustrative of the functioning of the system which operated along these lines also for the years 1989 to 1997.

(199) In the vitamin E spreadsheets the three main producers are again designated as "1", "2" and "3"; "4" refers to Eisai and "5" to other producers.

Minimum and target prices

(200) In their "top-level" meeting in Zurich in September 1989, the divisional chairmen of Roche, BASF and Rhône-Poulenc had agreed to a policy of "price before volume".

(201) The decisions on whether, when and by how much to increase prices were taken by the heads of vitamin marketing in their periodic meetings. Final decisions were generally taken in the second half of each year with a typical effective date for the "increase" being the following 1 April.

(202) At the beginning of the cartel the parties had agreed on a price increase of about 10 % for both vitamins A and E.

(203) The parties normally agreed that one producer should first "announce" the increase, either in a trade journal or in direct communication with major customers. Once the price increase was announced by one cartel member, the others would generally follow suit.

(204) In this way the concerted price increases could be passed off, if challenged, as the result of price leadership in an oligopolistic market.

(205) The Commission has obtained internal pricing and management documentation from both Roche and BASF showing that both producers habitually worked on the basis of "list" (or "target/Ziel" and "lowest" prices).

(206) An illustration of the utilisation of the price targets is provided by Roche's "pricing sheet" for vitamins A and E issued to the business units in March 1991.

(207) The objective for vitamin A was to increase prices in CHF by 5 % to 10 % for 1991 while balancing out the USD/DEM price differential to discourage brokers. While Managers are instructed to hold the worldwide market at 48 %, they are ordered to put "price target before quantity/market share target: do not overshoot quantity by not achieving price target" c.f. the "price before tonnage" maxim. in recital 200 above.

(208) The pricing sheet shows the "list" and "lowest" prices to be applied for each product form in DEM and USD for the second and third quarters of 1991.

(209) To implement the increase the business unit is warned that in Europe "Present DEM prices in Feed to be strictly applied in second quarter 1991. Price increase of + 10 % to be prepared and announced in May with immediate effect for spot business and all third quarter contracts. Food/Pharma prices to be strictly applied." Similar instructions are given for vitamin E.

(210) During the 1991 concerted initiative, new prices were initiated each quarter; from the beginning of 1993, prices were increased as a rule once a year, usually on 1 April, with 1 October being kept as a fallback date in addition.

Operation of the cartels (1989 to 1997)

(211) During the first year of the cartel, executives from Roche, BASF and Rhône-Poulenc met frequently to concretise their arrangements: Rhône-Poulenc has identified some nine meetings in Basel between January 1990 and January 1991.

(212) There were also separate meetings between Roche and Eisai on vitamin E which are documented in a Roche internal memorandum headed "Eisai history" beginning with a top-level meeting in Japan in September 1990.

(213) A follow-up meeting took place in Basel on 25 October 1990 in which Eisai executives confirmed the readiness of their company to enter the "club", on condition that the members exchanged their sales data.

(214) The three European producers agreed in a trilateral meeting held in Basel on 30 October 1990 to include Eisai in the scheme for an initial five years with an allocation of 1600 tonnes subject to increase in line with market growth. For Eisai the advantage would be a guaranteed volume of sales and higher prices.

(215) Since during most of 1990 Eisai was not definitively inside the scheme for vitamin E and had supplied more volume than anticipated, the arrangements apparently had not resulted in any great increase in price during that year.

(216) In December 1990 Rhône-Poulenc's vitamin E factory was severely damaged by fire. The major producers concluded that customers would be prepared to pay higher prices in the face of a product shortage, they also concluded that vitamin A prices could be increased at the same time on the back of the shortfall in vitamin E.

(217) Although Rhône-Poulenc presents this fortuitous incident as the catalyst for the consolidation of the cartel, it is clear from BASF's and Roche's accounts of events that the framework of the cartel and the machinery for its implementation had already been agreed by the end of 1989.

(218) Following a "summit" meeting in Japan on 8 and 9 January 1991 between senior officials of the three European producers and Eisai (recital 234), the latter confirmed its willingness to join the worldwide volume allocation scheme for vitamin E and its quota was raised from 10 % to 11 %. Eisai appears to have rationalised the discussions with competitors in terms of antitrust law by meeting each of the three separately for 20 minutes each; it disingenuously calls these meetings "courtesy calls". Whatever ambiguity Eisai may have hoped to engender by this colourable device, the effect was negated by its inviting all three competitors to a " joint meeting" immediately afterwards in a restaurant in which on its own admission an "orderly marketing" system was proposed and discussed.

(219) The agreement was confirmed a few weeks later when senior executives of Roche visited Japan and met Eisai (recital 236).

(220) The definitive inclusion of Eisai in the volume and pricing scheme for vitamin E, together with the shortage of product, enabled the four producers to raise prices for that product significantly during 1991. Rhône-Poulenc was supplied by Roche and BASF with "coproducer" deliveries until its plant was back on stream. At the same time and in parallel with the increase in prices for vitamin E, the three European producers agreed and implemented significant price rises in vitamin A.

(221) Prices for both vitamins increased substantially between 1991 and 1994. The initial price increase implemented in 1991 was in the order of 10 % (see recital 202). According to Roche, the goal after 1994 was to maintain the achieved price levels.

(222) The simultaneity and uniformity of the price increases for vitamins A and E led to complaints to the authorities in France from local pre-mixing companies. An inspection was carried out by the French authorities on 28 January 1993. Roche informed Takeda of the outcome in a vitamin C meeting on 8 February 1993. Takeda duly took note of their dismissive attitude towards the investigations:"Nothing was found in the investigation. In addition an inspection was made of RPAN but nothing was found. This type of inspection was also held in 1991, but there was no evidence. R does not consider these inspections problematic: however they are being careful as to how they handle documentation."

(223) By the beginning of 1994, a substantial price gap (around 10 %) had developed between Europe and the United States of America for vitamins A and E. Brokers were using the opportunity to conduct "arbitrage" operations. Roche instructed its area managers on 1 to 4 February 1994 that the "key focus regarding 1994 pricing is therefore on Europe (...). Our objective is to bring A prices up by DEM 2 and E prices by DEM 1. Volumes need to be strictly controlled." BASF had already drawn the attention of its European sales subsidiaries to the phenomenon in September 1993.

(224) On 14 February 1994 BASF announced via the trade press increases of 5 % for vitamins A and E. Instructions were given to the sales offices to apply with immediate effect new "limit" prices: the minimum amount of the increase was to be DEM 2 for vitamin A and DEM 1 for vitamin E.

(225) In 1994 the rapid increase in demand for vitamin E for human consumption necessitated a revision of the quota allocated to Rhône-Poulenc. To maintain its agreed 16 % share of the overall market, Rhône-Poulenc had to increase its sales in the animal feed sector. The producers agreed in August 1994 that the Rhône-Poulenc share of the feed segment be capped at 21 %; if the agreed increase in quota in that area did not however give Rhône-Poulenc its full 16 % overall, the other two European producers would purchase product from it to compensate for the shortfall. Compensating purchases were made by Roche in 1996 and by Roche and BASF in 1997.

(226) BASF has stated that throughout the period of the cartel the participants contemplated and explored measures to eliminate or deter marginal competitors in China and Russia from entering the European market.

The continuation of the cartels after the US investigations

(227) In late 1997, it was publicly reported in the United States of America that the US Department of Justice had convened a Federal Grand Jury to investigate possible criminal violations of Section 1 of the Sherman Act in the vitamins sector.

(228) The participants in the meetings had already become aware of the interest of the antitrust authorities in their secret arrangements and sought to minimize the number and frequency of their contacts. The last trilateral meeting was held in Basel in November 1997, when it was decided that in future meetings would only occur on a bilateral basis.

(229) Rhône-Poulenc says that in December 1997 the then president of its animal and plant Health sector telephoned his counterparts at Roche and BASF and arranged meetings with them supposedly to announce his company's "withdrawal" from the agreements; on 22 December 1997 he is said to have visited first BASF in Ludwigshafen and then Roche at its Headquarters in Basel to terminate the agreements in vitamins A and E.

(230) This action was "announced" to the line management of Rhône-Poulenc Animal Nutrition in early January 1998.

(231) However, whatever formal or official instructions may have been given, the reality was otherwise: senior executives from all three companies decided to continue the cooperation in a modified form and on a "more discreet basis", as BASF put it. This apparently took place at the initiative of Roche. A meeting took place on 15 January 1998 between Roche and Rhône-Poulenc and a few days later with BASF. Both encounters are described by Roche as a "top-level and operational meeting". It was decided that there would be no further group meetings but only one-on-one contacts as necessary. Roche has provided a list of these meetings. For a period of over a year, these senior executives also exchanged monthly sales data from their private residences, the purpose being to monitor any departure from the agreed quota allocations.

(232) BASF's attribution of responsibility for these continuing contacts to "a few individuals" in each company has to be seen in the light of the positions they occupied: the heads of vitamins marketing in Roche and the commercial director of RPAN.

(233) The last known occasion when these contacts took place was in February 1999; sales data was exchanged for the month of January.

Involvement of Eisai

(234) Eisai was a producer of vitamin E only and did not take part in any meetings for vitamin A. As regards vitamin E, contacts initiated by Roche with a view to setting up a cartel had already begun in Tokyo on 22 and 23 November 1989 and were followed by the meeting in Basel on 8 December 1989 with the three European producers described by Eisai. However, Eisai claims not to have given any commitment on reducing its production. Following further meetings with Roche in Europe and Japan and continuous pressure from Roche, Eisai invited the senior executives of the three European producers to a "summit meeting" on 8 and 9 January 1991. Eisai's claim to have been on this occasion a reluctant host "surprised" by a crude abuse of business protocol is belied by the terms of the invitation to Roche.

(235) As the invitation expressly states, the meeting was intended to confirm the intentions of top management, to establish a relationship of trust between the parties and to agree the nature of the next "summit".

(236) A few weeks later, on 30 and 31 January 1991, Roche senior executives went to Japan to meet separately a number of Japanese vitamin producers, among them Eisai. A price increase of approximately 10 % was agreed (see recital 207). It was also agreed that all their future contacts would be bilateral only: Roche would inform BASF and Rhône-Poulenc of the outcome. In turn, Roche would agree its position with the other two European producers and act on their behalf in its dealings with Eisai.

(237) Thereafter there were no multilateral meetings involving Eisai and the channel of communication with the cartel was always via Roche.

(238) The usual procedure was for the three European producers to meet first, whether for top-level, budget, quarterly operational or regional meetings, and then for Roche to meet one or two weeks later with Eisai at the appropriate level.

(239) Eisai provided Roche with its sales volumes in each of the regions; in return Roche gave Eisai the aggregate sales figures for the three European producers combined on a worldwide and regional basis. It did not supply individual data.

(240) Eisai's attempts to present itself in these proceedings as a reluctant participant in arrangements simply to "exchange information" are contradicted by the documentation supplied to the Commission by Roche originating from Eisai and demonstrating the latter's active involvement in the establishment of a quota system. Eisai has itself provided to the Commission documents prepared in connection with these meetings which disprove its claim.

(241) A chart prepared by an Eisai employee for a meeting in February or March 1995 shows Eisai's results in North America, Europe, Asia and South America for 1990, 1993 and 1994 and its plan for 1995. A "speaking note" for the same meeting shows Eisai's declared policy towards its competitors was to convince them of its good intentions regarding the cartel arrangement:

"The meeting held in January 1991 has been recognized as 'base' and the result in 1990 was basic quantity.

As the lowest market share holder, we have started at 11,2 % share (1990) and have been accepted by you at 11,9 % share's plan (1991).

Maintaining our 11 % level share, we have followed the basic plan proposed by you in every year to collaborate CLUB.

We have respected position and status of each other.

Starting from the first meeting, we have mentioned our intention to obtain [5 to 15] % market share in mid-term (five years) and also [10 to 20] % share in the long term (10 years).

As the result till 1994 per the total table, we have never deviated from the fundamental agreement and understanding."

(242) The active involvement of Eisai in the cartel for vitamin E, whatever artificial devices were adopted to "justify" the meetings, enabled the European producers to raise the price levels in Europe without fear of undercutting by this Japanese producer. Eisai itself admits that "it had a policy of increasing prices and would follow the price increases put in place by others." In this context any suggestion that normal market forces applied must be assessed in the light of the cartel's peculiar view of what constituted "price leadership": see recitals 200 to 203).

1.4.2. VITAMIN B1 (THIAMIN)

1.4.2.1. The origin and basic scheme of the cartel

(243) In 1989 Roche had a world market share of 44 %, BASF had 13 % and Takeda some 31 %, with the Chinese manufacturers taking 9 %.

(244) According to Roche, the cartel agreement in vitamin B1 was initiated on 30 and 31 January 1991 during the visit to Tokyo of the head of vitamins marketing, when he met representatives from Takeda, as well as the other Japanese vitamin manufacturers. The participants exchanged data on tonnages and market shares in 1990.

(245) The purpose of the agreement in vitamin B1 was to increase prices by stabilising market shares and allocating sales volumes on the basis of the previous year's achieved sales.

(246) Roche did not provide to the Commission details of the quota allocations for each region, but these can be seen from the documentation supplied to the Commission by BASF.

(247) In the "reference year" of 1990, the achieved sales and market shares in Europe are shown as Roche 280 tonnes (38 %), BASF 142 tonnes (20 %) and Takeda 300 tonnes (42 %). Forecasts for each region for 1991 and the "targets" for 1992 are also given.

(248) BASF did not attend this meeting, and Roche in its statement does not refer to its involvement, but it is clear that BASF was party to the volume control scheme: see recitals 260 to 269.

1.4.2.2. Volume control and monitoring system

(249) Although, in contrast with its disclosure for vitamins A and E, the main protagonist Roche provided no "budget" documentation to the Commission relating to vitamin B1, Takeda has supplied a considerable volume of its contemporaneous documents, including tables and meeting reports which demonstrate the operation of the volume control and monitoring system:

- a document dated 5 June 1991 is headed "Vitamin B1 monitoring 1990" and shows for each region (Northern America, Latin America, Japan, Europe, etc.) the sales in tonnes of Roche, BASF, Takeda and the Chinese producers, the latter presumably estimated for the year 1990,

- a document bearing the same date is headed "Market forecast 1991" and on the basis of an assumption as to market growth for each region (Europe is 1,5 %) shows the allocation of volumes to each producer for 1991,

- a further document, bearing the same date, is headed "Market Monitoring first quarter 1991" and shows for Roche, BASF and Takeda a comparison of actual sales against forecast in each region,

- a document headed "Market and Competition Monitor - Vitamin B1" (dated 20 May 1993) shows the achieved sales of Roche, BASF and Takeda by region for 1992 compared with their allocations,

- a document dated 5 November 1993 compares Takeda's achieved sales for 1992 with its quota allocation in each region and contains a template to be completed for a comparison of each producer's "performance" against "plan" for the period January to December 1993,

- a set of templates with details filled in for the comparison on a running quarterly basis of the "allocation" and the "result" for Roche, Takeda and BASF for 1993,

- similar documentation is available for other years.

1.4.2.3. Cartel meetings

(250) After the first meeting in January 1991, Roche and Takeda executives met at regular intervals in Tokyo and Basel at both "top" and "operational" level in order to monitor the application of the quota system and fix prices.

(251) BASF did not take part in the meetings, but it was given a quota in vitamin B1 which was discussed during the meetings.

(252) Given that there were cartel arrangements across the whole range of vitamins which Roche and Takeda produced in common (vitamins B1, B2, B6, C and folic acid), their regular meetings often covered these five products. From the Roche side, the participants at technical level would change as the discussions moved on to the next product, see for example Takeda's note of the two-day operational meeting in Tokyo in November 1992; the first day was dedicated to vitamin C, while the morning session on the second day covered vitamins B1, B2 and B6.

(253) Takeda's note of one meeting in November 1992 typifies the proceedings in the operational meetings:

"VB1

(1) Exchange of results for January through September

>TABLE>

All below expectation. B's marketing strength is weak.

Taken over by Chinese products

Interested more in keeping the price than quantity

(2) Quota for 1993

Growth rates increased by around 2 %

1992

>TABLE>

(3) Price

Unchanged: USD 43,00; DEM 74,00

(4) Chinese Products

Takeda would like to protect its traditional customers by using off-spec products of feed grade. It is hard to recover customers after they start using Chinese products."

(254) There were also bilateral meetings between Roche and Takeda in Basel which covered their common range of products: vitamins B1, B2, B6, C and folic acid. On occasion, Takeda also had bilateral meetings with BASF, which included discussion on vitamin B1.

1.4.2.4. The operation of the cartel (1991 to 1994)

(255) From 1991 until about 1993, the price of vitamin B1 was gradually increased by the cartel. In 1991, the producers raised the market price from below DEM 65 to DEM 68/kg. A table dated 29 March 1994 supplied by Takeda shows the "list" and "lowest" prices for the product in each geographical zone, including Europe.

(256) From 1 January 1992 the "list" price was DEM 76/kg delivered and the "lowest" price DEM 74/kg, BASF's pricing instructions of 11 December 1991 confirm the minimum price level of DEM 74/kg.

(257) By late 1992 the effect of competition from Chinese products was being felt, and the producers were debating whether to "ignore" this competition as they had done in the past, or to absorb the Chinese production. By June 1993 the producers had decided to compete on price at specific customers who used Chinese products.

(258) The policy was confirmed at the end of 1993. The basic plan would be maintained for 1994. In order to maintain their customer base, the producers agreed they had to align on the Chinese prices for feed grade to important customers but the low price ought not to be made universal; higher pricing should continue for food and pharmaceutical grades.

(259) According to Roche, the two producers decided by 1994 that the agreement was no longer viable and it was ended in the first half of 1994; the last meeting for vitamin B1 was on 10 June of that year. By about the second half of 1994 the market price for feed grade had fallen to around ECU 28/kg, from a high of ECU 38/kg. The development of the price level of vitamin B1 over the period of the cartel and following its abandonment is shown in Table IV in the Annex.

1.4.2.5. Involvement of BASF

(260) BASF ceased production of vitamin B1 in 1989 and subsequently obtained its requirements from Roche, initially under a five year supply contract. It was still among the most important suppliers of bulk vitamins in the Community and worldwide during the duration of the cartel.

(261) Tables provided to the Commission by Takeda for vitamin B1 headed "market and competition monitor - vitamin B1" and "market monitoring" and prepared for the purposes of monitoring collusive arrangements show for Roche, Takeda and BASF the "forecast" and "assessment" of quantities supplied on a quarterly basis in each of the major geographic regions, including Europe.

(262) BASF data is also included in the tables headed "Vitamin B1: market forecast" and in the cumulative tables showing "result" against "allocation" of each producer for 1993.

(263) In Takeda's memorandum recording its meeting with Roche in November 1992 for the five vitamin products they both produced (including vitamin B1) the section headed "Exchange of results for January through September" compares "plan" and "sales result" for Takeda, Roche and BASF (BASF is also allocated a quota for 1993). The information must have been supplied to Roche by BASF.

(264) Takeda's more complete minute of this meeting confirms the involvement of BASF in the quota scheme. Roche reports that:

"Because of the influence of Chinese products, neither R, T nor B were able to reach their project results. B is especially behind (- 50 tons) and would desperately like adjustments to be made."

(265) Roche had clearly been delegated by BASF to speak on its behalf. The minute continues:

"By R: We would like to ask if there is any way that you could help B, since they are so much behind. (T replied that B's products are sold by R, so that if B needed help, R should provide it)."

(266) BASF, while denying direct involvement in the vitamin B1 cartel, has itself provided to the Commission hand-written tables which (it says) "reflect information conveyed to BASF by a representative of Roche concerning the arrangements between Roche and Takeda with respect to vitamin B1." It also points out it does not produce B1. BASF however omits to explain the incorporation in the tables of a quota allocation to it (BASF) as well as to "Roche" and "Tak". For Europe, there are similar calculations for each geographical region, the table reads:

>TABLE>

The figures for the 1990 "Reference year" match those provided by Takeda.

(267) On its own admission BASF was informed of the arrangements with Takeda by Roche, which did not want BASF to disrupt the vitamin B1 market with its resales: "Pursuant to this arrangement with Takeda, Hoffmann La Roche instructed BASF as to the prices and volumes of vitamin B1 that BASF could resell on a region by region basis."

(268) During Takeda's occasional bilateral contacts with BASF, the subject of vitamin B1 pricing was visited: when BASF's head of vitamins marketing was in Tokyo on 13 July 1993 he indicated that on vitamins C, B1 and B6 BASF "will follow the price policies of R(oche) and T(akeda) ... if the price increases, we will follow your lead."

(269) Despite the fact it did not attend the meetings between Roche and Takeda, BASF's involvement in the collusive scheme to fix the market in vitamin B1 is thus amply established.

1.4.3. VITAMIN B2 (RIBOFLAVIN)

1.4.3.1. The origin and basic scheme of the cartel

(270) In the period 1988 to 1990, the price of vitamin B2 fell by about 12 %. In order to reverse the trend, the two major producers decided that concerted action was required.

(271) On 14 and 15 July 1991, representatives of Roche and BASF met at Bottmingen in Switzerland to agree the framework of a cartel in vitamin B2. Takeda was not present at this initial meeting but the intention of BASF and Roche was to include it in a second step. Takeda was by then already involved in the cartel arrangements for vitamins B1 and C.

(272) Working from their achieved 1990 sales, and estimating the market share of other producers for each year, they agreed on global quotas to be effective for the period 1992 to 1994 inclusive. The volume quotas were worked out as follows:

>TABLE>

(273) As between Roche and BASF, their respective sales in vitamin B2 were to move from a proportion of 65:35 in 1990 to 62:38 in 1994. 1992 was to be the first year for the operation of the quota system. For 1994, Roche and BASF calculated that they would together have 80 % of the available world market; Takeda was to have 13,5 %, against the figures for Takeda BASF has noted "If they go higher war ?". A document provided by BASF shows the agreement reached in this meeting.

(274) Later in 1991, Roche and BASF senior executives went (separately) to Japan in order to persuade Takeda to agree to the proposed market allocation in vitamin B2, which it ultimately did by late 1991/early 1992. The discussions during the visit to Basel on 13 April 1992 of Takeda representatives on "the new price policy to increase the price continuously" included vitamin B2.

1.4.3.2. Cartel meetings

(275) The cartel was implemented by quarterly meetings. The usual procedure was apparently for Roche to meet Takeda first and to then hold a separate bilateral meeting with BASF.

(276) The purpose of the quarterly meetings was to monitor achieved market shares against quota and to adjust sales levels to comply with the agreed allocations. A control system along the lines of the vitamin A and E mechanism was developed (see recital 283).

(277) Takeda's minute of a meeting with Roche in Zurich on 25 May 1993, headed "Destroy after reading", may be taken as typical of these meetings for vitamin B2:

"1) VB2

- Prices are rising smoothly, (R) (T).

e.g. R results in Europe for April, DEM 91,4 (R),

T results in Europe for March, DEM 88.

- No likelihood of increase in demand, meaning that a quantitative increase would be difficult. (R)

T expects 400 t for 1993, i.e. about the same level as 1992 (T).

(...)

- Lohmann(21)

Since R and BASF are in competition, Lohmann would prefer not to purchase the whole quantity from competitors, i.e. they would prefer to purchase from T. T. should take care with pricing when making an offer. The price should under no circumstances be too low. (R)

Understood, will contact Mr [Takeda employee] (T)"

(278) Takeda also had occasional bilateral meetings with BASF covering vitamin B2, as well as other products, a memorandum of 13 July 1993 also headed "Destroy after reading" reads:

"VB2 Feed

(B) B's price in Europe is DEM 90-92. However T is offering a lower price of DEM 85/86. Please correct this as soon as possible.

(T) T is selling at DEM 88/90. On the other hand, B's offer of the lower price of DEM 86 to DK's Loevense is causing problems.

(B) We will check tomorrow and get back to you. We would like to ask that general prices are kept no lower than DEM 90.

(T) We agree."

1.4.3.3. The quotas

(279) Following Takeda's entry into the cartel arrangements for vitamin B2, the annual quotas were the subject of intense negotiation, with Takeda demanding a higher allocation. A Takeda note of a meeting in or about November 1992 covering the range of vitamins, including B2, reads:

"VB2 January - September

(1) Deciding quota

>TABLE>

Makeup of 384

>TABLE>

Division Manager wished to bring it up to 500 tonnes within 5 years (in 1991)

R made an error in calculation at the time of the 1991 estimation (...)

Over-achievement should be acceptable if there is no damage to the pricing."

(280) Takeda's volume aspirations were clearly a cause of irritation for Roche. Takeda's minute of its meeting with Roche in Tokyo on 17 November 1992 notes as follows in relation to vitamin B2:"As with VB6, R was cautious of T's increase in sales quantity, and kept coming back to T's words that they wished to sell 500 tonnes within 5 years."

(281) Roche suggested that Takeda's quota for 1993 should be 385/390 tonnes, rising to 420 for 1994. Takeda sets out its reaction as follows:

"By T: Since our production capacity is still unclear, we do not yet know our quantity. Although we are not serious, Mr [...] wishes to obtain 500 tonnes in 1993. The middle ground between this and your suggestion of 390 would be around 440/445 tonnes. (R did not ask any further)."

(See also a Takeda note of a meeting on 21 April 1993, for a reference to Takeda's reining in its volume ambitions).

(282) In fact, for 1994 Takeda agreed to keep its sales volume to about 410 tonnes. In a meeting in the Basel Hilton Hotel with Roche on 9 February 1994, the participants exchanged their sales results in vitamin B2 for 1993 and sales plans for the year 1994:

"By T: Our 1993 results are 421 t and very close to the agreed quantity, and we will plan to keep the same level of around 420-440 t in 1994. With regard to price, we will support R's policy fully and work toward obtaining the lowest price of USD 69,00 cif/DEM 115,00 for USD products and USD 61,00 CIF/DEM 92,00 for feed (US delivered price) ... In Europe, B will announce a price raise for feed (4 %) in mid-February. T would like to raise the lowest price from DEM 92,00 to DEM 97,00 on April 1. T's sales quantity continues to be low, so concentrated effort will be made toward a raise in price.

(b) With regard to T's 1993 results and 1994 plans, these are going according to the basic agreement.

We cannot expect much increase in demand in 1994. An effort will be made to increase the price in Europe and maintain the lowest price of USD 61,00 in US. R would also like T to go along with this pricing policy. (T agreed)."

1.4.3.4. Volume control and monitoring

(283) As with most other vitamin products, the quota scheme for vitamin B2 was the subject of a continuously updating reporting and monitoring system. Documentation was provided to the Commission by BASF relating to the operation of the control and monitoring system for vitamin B2, of which the following is representative:

- sales data for each region (Europe, North America, Latin America, the Far East and Japan) for the year 1995 and the first three months of 1996. Estimates are included for producers outside the agreements (ADM (Archer Daniels Midland); GUS (the Russian producers)),

- a BASF internal worksheet giving its own sales in each country(22).

1.4.3.5. Target and minimum prices

(284) During the course of the cartel, regular price increases were agreed and bottom price limits fixed. Takeda has also provided to the Commission tables giving the "list" and "lowest" prices by region for the different vitamins, including B2 which were in effect during the period 1 June 1991 to 1 April 1993. For vitamin B2, the prices were given as follows:

>TABLE>

(285) The development of the average price level for vitamin B2 over the duration of the cartel and after the arrangements ended is shown in Table V in the Annex.

1.4.3.6. The operation of the cartel (1991 to 1996)

(286) The pricing and volume decisions reached in the meetings were implemented by each company issuing directives to the Regional managers. From 1991 to 1993, prices for B2 were regularly increased (see recital 284).

(287) In 1993, the parties realised that a US producer, Coors, had a larger production capacity for vitamin B2 than they had estimated in 1991. In order to prevent Coors from disrupting their arrangements by the export of its production surplus, Roche and BASF agreed that the former would contract to purchase 115 tonnes of vitamin B2 (representing half of Coors's capacity) in 1993. BASF in turn would purchase 43 tonnes from Roche; the burden was thus to be shared in the same 62:38 proportion as their quotas.

(288) Later Coors sold its vitamin B2 plant to Archer Daniels Midland (ADM). In 1995, Rhône-Poulenc and ADM contracted for Rhône-Poulenc to market in Europe the riboflavin produced by ADM in the United States of America. BASF noted Roche's "ambivalent" attitude at times giving priority to price, at others to volume. BASF saw no point in raising price levels which would simply facilitate ADM's entry to the market. The market share of ADM in Europe rose from only 2 % to 9 %, mainly at the expense of Roche. The price level began to decline. Roche claims it had already become aware that