2003/382/EC: Commission Decision of 8 December 1999 relating to a proceeding under Article 81 of the EC Treaty (Case IV/E-1/35.860-B seamless steel tubes) (notified under document number C(1999) 4154) (Text with EEA relevance)
Date: 1999-12-08
Institutions: European Commission
Subjects: application of EU law, competition law, import restriction, infringement of EU law, iron and steel industry, processing industry, trade agreement, tube

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 8 December 1999

relating to a proceeding under Article 81 of the EC Treaty

(Case IV/E-1/35.860-B seamless steel tubes)

(notified under document number C(1999) 4154)

(Only the English, French, German and Italian versions are authentic)

(Text with EEA relevance)

(2003/382/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation No 17, first Regulation
implementing Articles 85 and 86 of the Treaty of 6 February
1962 (1), as last amended by Regulation (EC) No 1/2003 (2),
and in particular Articles 3 and 15 thereof,

Having regard to the Commission Decision of 20 January
1999 to initiate proceedings in this case,

Having given the firms concerned the opportunity to make
known their
the
views on the objections
Commission,

raised by

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

Whereas:

I. THE FACTS

A. Procedure

(1)

On 1 and 2 December 1994,
decision
Commission

of

25 November

acting under

a
1994,

of

and

officials

representatives

the
Commission
competition authorities of the Member States concerned
carried out
investigations under Article 14(3) of
Regulation No 17 at a number of undertakings,
including British Steel plc, Mannesmannröhren-Werke
to which this decision is
AG and Vallourec SA,
addressed. It was the Commission's intention to examine
the existence of a possible infringement of Article 85 of
the EC Treaty (now Article 81 EC).

(2)

(3)

(4)

simultaneously,
The investigations were carried out
together with officials
from the EFTA Surveillance
Authority (‘ESA'), following a request pursuant to Article
8(3) of Protocol 23 to the Agreement on the European
Economic Area (‘EEA Agreement')
to investigate a
possible infringement of Article 53 of that Agreement.

By decision of 6 December 1995, the ESA, pursuant to
Article 10(3) of Protocol 23 to the EEA Agreement,
forwarded its dossier
since it
considered that
the documents collected during the
investigations showed that intra-Community trade was
being affected.

to the Commission,

Further investigations in accordance with Article 14(2)
of Regulation No 17 were
carried out between
September 1996 and December 1997 at Vallourec SA,
Dalmine
SpA and Mannesmannröhren-Werke AG.
Subsequently, requests for information under Article 11
of Regulation No 17 were sent to all the undertakings
to which this Decision is addressed.

(1) OJ 13, 21.2.1962, p. 204/62.
(2) OJ L 11, 4.1.2003, p. 1.

(5) When Dalmine SpA, Siderca SAIC and Groupe Techint
refused to supply some of the information requested, a

(6)

(7)

(8)

(9)

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decision pursuant to Article 11(5) of Regulation No 17,
dated 6 October 1997, was sent to them. Siderca SAIC
and Dalmine SpA appealed against the decision to the
Court of First Instance of the European Communities.
Dalmine's appeal was rejected as clearly inadmissible by
order dated 24 June 1998.

Mannesmannröhren-Werke also refused to supply some
of the information requested. A decision in accordance
with Article 11(5) of Regulation No 17 was sent to it,
dated 15 May 1998.

On 20 January 1999 the Commission sent a statement
of objections to the addressees of this decision and to
Siderca and Tubos de Acero de México.

Präzisrohr GmbH (50 %),
Mannesmann Hoesch
Röhrenwerk Gebr. Fuchs GmbH (50 %),
International
Drill Pipe Assembly SA (49 %), and DMV Stainless BV
(33,33 %). In addition, MRW holds 100 % of the capital
of Mannesmann Handel GmbH, which is responsible for
pipe and tube distribution and marketing in the
Mannesmann group.

(12)

From 1 October 1997, MRW's activities in the seamless
pipe and tube sector have been transferred to Vallourec
& Mannesmann Tubes, 45 % of whose capital is owned
by MRW.

(13) MRW controls Vallourec SA following its purchase of
Usinor's holding in the company. MRW's turnover in
1998 was DEM 4 570 million (approximately EUR
2 321 million).

The firms had access between 11 February and 22 April
1999 to the file which the Commission had compiled
on the case. In addition, by letters dated 11 May 1999,
the Commission sent
investigation
decisions of November 1994 to the undertakings which
were not addressees of
those decisions and which,
consequently, had not had access to them.

copies of

the

Having replied in writing to the statement of objections,
all
in the
hearing on the case, which was held on 10 June 1999.

this decision took part

the addressees of

B. Parties

1. Mannesmannröhren-Werke

(10) Mannesmannröhren-Werke AG (‘MRW')

industry

processing

is a company
constituted under German law, 79 % owned by
Mannesmann AG. The latter is a diversified German
group whose business covers the fields of mechanical
engineering,
engineering,
information technology, electronics, the manufacture of
vehicle parts, the production, processing and marketing
of steel products and the provision of related services.
The remaining 21 % of MRW is held by Thyssen Stahl
AG, a German steel producer. MRW is the portfolio
holding company for all Mannesmann's pipe and tube
production activities. It operates in the production of
pipes and tubes and the production of steel and input
products for pipes and tubes, and in the steel processing
sector.

(11)

in the

In the pipe and tube production sectors, MRW has
following firms: Mannesmannrohr
holdings
Sachsen
GmbH (100 %), Mannesmannröhren-Werke
GmbH (100 %), Mannesmann SA — Brazil
(76 %),
Mannesmann Sümerbank Boru Endüstrisi TAS —
Europipe GmbH (50 %), MHP
Turkey

(60 %),

2. Vallourec SA

(14)

through its subsidiary, Sopretac,

Vallourec SA (‘Vallourec', sometimes referred to as ‘VLR'
is a company constituted under
in the documents)
French law. Through it subsidiary, Valtubes, it operates
in the production and processing of pipes and tubes and
related products;
it
manufactures and processes other ferrous materials. The
main subsidiaries of Valtubes are Vallourec Industries,
Valti, Vallourec Précision Étirage, Vallourec Précision
Soudage, Valinox Welded, DMV Stainless BV (33,33 %),
Vallourec Oil & Gas, International Drill Pipe Assembly
SA (51 %), Tubular
and
Industries
Valmont. Vallourec's turnover in 1998 was FRF 14 867
million (approximately EUR 2 252 million).

Scotland Ltd,

(15) On 3 June 1997,

the Commission authorised the
takeover of Vallourec by MRW and the amalgamation of
their
seamless pipe and tube production. From 1
October, those activities were allocated to Vallourec &
Mannesmann Tubes,
in which Vallourec has a 55 %
stake.

3. British Steel Limited

(16)

Following the merger on 6 October 1999 between
the
British Steel plc and Koninklijke Hoogovens NV,
former became a subsidiary wholly owned by Corus
Group plc. This entailed changing both its name and
legal form. On 8 October 1999, British Steel plc became
British Steel Limited (hereinafter ‘BS'). BS is one of the
main European steel producers. Its principal activities
are the production and distribution of ECSC products. It
also produces welded pipes and tubes. Up to 1995, BS
produced hot-rolled, finished seamless pipes and tubes.
Today, it restricts itself to marketing seamless pipes and
tubes via its subsidiary Tubular Supply Services Limited

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(TSSL) and to cold-finishing pipes and tubes through its
subsidiary Cold Drawn Tubes Limited. BS's turnover in
1998 was GBP 6 228 million (approximately EUR 9 207
million).

4. Dalmine SpA

(17) Dalmine SpA (‘Dalmine') used to be the subsidiary of
Ilva (the main Italian steel producer) responsible for the
production of seamless pipes and tubes. On 27 February
1996, Techint, a subsidiary of Siderca, acquired control
the firms in the
from Dalmine,
of Dalmine. Apart
Techint group which operate in the seamless pipe and
tube sector are Siderca SAIC (Argentina) and Tubos de
Acero de México SA (Mexico)
(‘Tamsa'). These three
firms present themselves jointly under the name of DST
Pipes. Together
they produce more than 2 million
tonnes of steel pipes and tubes. OCTG (oil country
tubular goods, see recital 29) are Tamsa's speciality, and
account
for the greater part of Siderca's production,
while Dalmine specialises in line pipe and engineering
pipes and tubes. Dalmine manufactures and sells mainly
seamless pipes and tubes, but, through its subsidiary
Tubificio di Piombino srl, also produces small-diameter
welded
for
seamless pipes and tubes is 930 000 t/yr. Its turnover in
1998 was ITL 1 300 082 million (approximately EUR
669 million).

tubes. Dalmine's production capacity

5. Sumitomo Metal Industries Limited

8. NKK Corporation

(21)

The Japanese firm NKK Corporation (‘NKK') is one of
the world's 10 leading steel producers. It manufactures
welded and seamless steel pipes and tubes. Its turnover
in 1998 was JPY 1 013 636 million (approximately EUR
6 923 million).

C. Market

1. Steel pipes and tubes in general

(22)

The steel pipe and tube sector comprises a great variety
of pipes and tubes, which are manufactured by different
processes for a whole series of uses.

(23) A distinction is drawn, according to the manufacturing

process, between:

— seamless steel pipes and tubes, which are made from
pierced and hot reduced solid products without
removing any metal, and

— (longitudinally or spirally) welded steel pipes and
tubes; these are made from flat products which are
shaped and welded. They may be subdivided into
large-diameter pipes (with an external diameter of
406,4 mm or over) and small- or medium-diameter
pipes and tubes (with an external diameter of less
than 406,4 mm).

(18)

The Japanese firm Sumitomo Metal Industries Limited
(‘SMI') is one of the 20 leading steel producers in the
world. It manufactures welded and seamless steel pipes
and tubes. SMI is the largest producer of seamless pipes
and tubes in Japan. SMI's turnover in 1998 was JPY
1 469 418 million (approximately EUR 10 505 million).

(24)

6. Nippon Steel Corporation

world's

The Japanese firm Nippon Steel Corporation (‘NSC') is
It
the
manufactures welded and seamless steel pipes and tubes.
Its
JPY 1 975 062 million
(approximately EUR 13 489 million).

in 1998 was

second-largest

producer.

turnover

steel

In the last 25 years seamless pipes and tubes have
gradually declined as a proportion of all pipes and tubes
produced and consumed, in favour of welded pipes and
tubes. In 1960, welded pipes and tubes accounted for
52 % of steel pipes and tubes produced worldwide,
whereas today they account for 68,5 %. A process of
substitution has been going on, therefore, which can be
explained, inter alia, by the technological progress in the
manufacture of welded pipes and tubes, which, with
lower production costs, has made it possible to achieve
the requirements hitherto met only by seamless pipes
and tubes.
the process of
substitution is reaching its limits: for some applications
(very high pressures,
a high degree of hardness,
resistance to high temperatures) only seamless pipes and
tubes can be used.

is clear, however,

that

It

7. Kawasaki Steel Corporation

(25)

The Japanese firm Kawasaki Steel Corporation (‘KSC') is
one of the 15 leading steel producers in the world. It
manufactures welded and seamless steel pipes and tubes.
JPY 836 240 million
Its
(approximately EUR 5 711 million).

in 1998 was

turnover

2. The crisis in the steel industry

Since the 1970s, the Community steel market has been
affected by a long, serious crisis,
the most notable
in
features of which have been the continuous fall
demand and the collapse of prices. These market
conditions have brought with them serious problems of
overcapacity,
and prices
low plant-utilisation rates
failing to cover total production costs and ensure the
profitability of firms. The crisis in the steel market has

(19)

(20)

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just hit ECSC steel but has also affected the
not
non-ECSC sectors, which include the pipes and tubes
covered by this decision. To combat
the
Commission adopted between 1977 and 1988, pursuant
to the ECSC Treaty, production and delivery quota
arrangements which were binding to various degrees,
backed by price and external trade measures.

the crisis,

(26) With regard in particular to the pipe and tube industry
in the Community, since 1980 Community production
has been severely restructured in order to adapt capacity
to changing market conditions. By the end of 1990,
seamless pipe and tube production capacity had been
reduced by about 20 %. Between 1988 and 1991, more
than 20 000 jobs were lost. Since early 1991,
the
production,
worsening
Community
of
imports, has
combined with the growing influx of
resulted in draconian decisions having to be taken
concerning the continued reduction of capacity to core
levels and in the closure of several production mills in
Germany, Italy and the United Kingdom.

situation

(27)

In 1972, as part of the anti-crisis trade measures it had
adopted, the Commission concluded with the Japanese
Government an agreement on the voluntary restraint of
exports. In response to the request from the Japanese
Ministry of International Trade and Industry (MITI), the
six Japanese integrated manufacturers (including the
four to which this decision is addressed) concluded a
quota agreement in 1975 for exports of steel products
to the Community. In 1978, as a back-up measure to
the 1977 anti-crisis plan, the Commission adopted an
agreement with MITI with a view to establishing price
discipline
the
Community market and thus ensure the preservation of
traditional trade patterns (3). Although focused on ECSC
products,
the agreement provided that both parties
should endeavour to avoid disturbance in the markets
for
first-stage processing
(including pipes and tubes). The 1978 agreement was
extended until 1987. As part of an arrangement between
the Commission and MITI, the authorisation granted by
MITI to the quota agreement concluded by the Japanese
firms was renewed until 1990.

iron and steel products of

that would prevent

disruption of

3. Product markets

(28)

The products concerned in this case are seamless,
carbon-steel pipes and tubes (that is, not stainless steel
pipes and tubes), in particular those used by the oil and
gas industry, which account for 40 % to 50 % of the

consumption of seamless pipes and tubes (4). An oil
well serves to bring up petroleum or gas from the
formation or deposit some two to five thousand metres
below the earth's surface up to ground level (onshore)
or
then
transported to the refinery. The seamless pipes and
tubes used by this sector of industry include two major
categories.

the seabed (offshore);

the oil or gas

is

( a ) B o r e h o l e p i p e s a n d t u b e s ( O C T G )

(29)

Borehole pipes and tubes are commonly called OCTG
(oil country tubular goods). OCTG are either plain end
pipes or pipes
joined by (standard or premium)
threading. They have special characteristics as a result of
various finishing, conditioning and control operations
treatment, ultrasound investigation, hydrostatic
(heat
internal and external coating). In the
pressure testing,
Mannesmann/Vallourec decision (5),
the Commission
concluded that OCTG comprised two different product
markets:

— casings and tubings. Casings ensure that the walls of
the borehole hold (they have to be able to resist the
great pressures resulting from movements in the
rock), while tubings bring the oil or gas to the
surface. There is a single worldwide standard for
casings and tubings (API 5 CT). The vast majority of
such pipes are seamless, although for certain casings
welded pipes can be used as well,

— drill pipes. These carry the bit and perform a dual
function: they transmit a rotary motion to the bit
and ensure that the drilling fluid circulates. They are
connected by special, very advanced threads, which
must
tensile and torsional
stresses and be watertight. There is only one
worldwide standard for such pipes (API 5 D). Only
seamless pipes are used.

the mechanical

resist

(30)

The Commission considers that, given the information
at its disposal, this definition of the market is also valid
in the present case.

(31) OCTG may be sold unthreaded (‘plain ends', which are
also defined in the API standard) or
threaded. The
threads are often cut in the same plant or at least in the
same tube company, in which case the term used is a
‘mill
joint'. Threads may be cut in a threading shop
completely separate from the manufacture of the pipes,
in which case the term used is a ‘shop joint'. This is
what happens most frequently in the United States, but
there are threading shops in the United Kingdom too.

(4) Source: reply from BS, dated 26 August 1997, to the Commission's

request for information.

(3) Twelfth general

report on the

activities of

the European

(5) Commission decision of 3 June 1997 in Case IV/M.906 (OJ C 238,

Communities, point 453.

5.8.1997, p. 15).

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(32)

the grease

The threaded joint on OCTG pipes may be either
standard (commonly called ‘API') or special (commonly
called ‘premium' — normally protected by patent).
Unlike standard threads, which are not completely tight
— despite
is
assembled, the thread forms a natural leakage channel
after
time — premium threads are
‘metal-to-metal' tight, which prevents any risk of a leak.
There are several premium joints: VAM (used by
Vallourec, SMI and BS), NS-CC (used by NS), Fox (used
by KSC), NK 3SB (used by NKK), Antares (used by
Dalmine) and BDS (used by MRW).

applied when the pipe

a period of

transport

(36) As regards line pipe, the Commission took the view, in
the Mannesmann/Vallourec decision, that the geographic
market is at least the European market, given that the
cost of
there is
substantial interpenetration of markets and that prices
from one country to another. The
do not differ
Commission considers that, given the information at its
disposal, this definition of the market is valid in this
case as well.

significant,

is not

that

(33)

Standard threaded pipes account for about 55 % of the
total OCTG sales of the firms to which this decision is
addressed. The proportion is 17 % for their sales in the
Community (see Annex 2), where since the mid-1980s
premium threaded pipes have predominated.

( b ) L i n e p i p e

(34)

Pipes for carrying oil and gas over medium and short
distances are commonly called ‘line pipe'. They need to
be very firm and hard, highly resistant to high or low
temperatures and corrosion, and very weldable. In the
abovementioned Mannesmann/Vallourec decision,
the
Commission considered that
such pipes and tubes
constituted a separate product market. The Commission
considers that, given the information at its disposal, this
definition of the market is also valid in this case. On
this market, a distinction is drawn between ‘project' line
pipe, which is subject to individual specifications and
intended for particular projects, and ‘trade'
line pipe,
which is standardised and sold from stock. Project line
pipe accounts for about 45 % of
the total sales of
seamless line pipe of the firms to which this decision is
addressed. The proportion is 31 % for their sales in the
Community (see Annex 2).

4. Geographic markets

(35)

In the Mannesmann/Vallourec decision, the Commission
took the view that the OCTG market is almost certainly
worldwide, given that the cost of transport is negligible
compared with the price,
there is only one
worldwide standard for each type of tube (API 5 CT for
casings and tubings, and API 5 D for drill pipes), and
that trade between Europe and the rest of the world is
substantial. The Commission considers that, given the
information at its disposal, this definition of the market
is valid in this case as well.

that

5. Supply

( a ) P r o d u c t i o n a n d e x t e r n a l t r a d e

(37) As the table in Annex 1 shows, the Community is the
main production area for seamless pipes and tubes in
the world. It exports about 45 % of its production and
is thus the leading world exporter, closely followed by
Japan and Latin America.

(38) Within the Community, six countries produce seamless
Italy and France together

pipes and tubes. Germany,
account for 85 % of Community production.

(39) OCTG and line pipe account for about 50 % of world

production of seamless pipes and tubes.

(40)

(41)

(42)

The geographic distribution of
the seamless OCTG
deliveries of the addressees of this decision is given in
Annex 3. The principal destination is China (27 %),
followed by Europe (20 %), and the Middle and Far East
(10 % each).

The geographic distribution of the seamless line pipe
deliveries of the addressees of this decision is given in
Annex 4. The principal destination is Europe (26 %),
followed by the Far East (24 %), North America (13 %)
and the Middle East (12 %).

( b ) P r i n c i p a l p r o d u c e r s

Standard pipes and tubes and more sophisticated, high
quality pipes and tubes are manufactured on the same
rolling mills and machines and, depending on their final
subsequently undergo specific finishing:
application,
threading,
shaping,
joints, heat
special
elongation. The largest manufacturers (MRW-Vallourec,
the Techint group, SMI, NSC, NKK, KSC and US Steel)
are present on all product markets. Other manufacturers
have specialised in some of the markets.

treatment,

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( c ) T r e n d o f p r o d u c t i o n c a p a c i t y

(48)

The main consumers of OCTG and line pipe are oil
prospecting and extraction firms, which as a rule buy
their pipes and tubes through international tenders.

(43)

Between 1975 and 1994 the global production capacity
for seamless pipes and tubes increased by 20 %. The
trend differed, however, according to geographic area. In
western Europe and the United States, after an increase
in capacity between 1975 and 1980, there was a gradual
reduction, which is currently still continuing. In Japan,
capacity increased until 1985, but from that date started
to decline.
In central and eastern Europe, production
capacity has been more or less stable since 1975. Lastly,
in Asia and Latin America, production capacity has not
stopped growing. As
there has been a
a
geographic shift in supply.

result

(44)

The trend in the supply of seamless pipes and tubes is
closely linked to that in the oil market. At the end of
the 1970s world demand for oil pipes and tubes
increased sharply. This gave rise to the construction of
new pipe mills in Japan, China and the USSR, which
came on-stream in the mid-1980s. With the collapse in
demand from 1982 on, the industry was hit by a crisis
and capacity reductions became necessary.

(45)

Currently there is an excess of global capacity, which
some sources put at 40 %. This is confirmed by the
replies from the addressees of
this decision to the
Commission's requests for information under Article 11
of Regulation No 17.

6. Demand

(46)

Between 1960 and 1980, world consumption of
seamless pipes and tubes increased steadily (with the
exception of 1975) at a rate of 5 % a year. After 1980 it
began to decline, currently reaching a level slightly
above that of 1960 and should, according to some
sources, stabilise in future.

in the oil market. For

(47) Demand is characterised by large cyclical variations,
instance,
linked to those
according to the forward programme for steel for the
first half of 1999 and for 1999 as a whole (6), after
expanding very favourably in 1997 and into the first
half of 1998, the steel pipe and tube market declined
sharply towards the end of 1998,
in particular on
account of the collapse in oil-industry demand and the
lack of new pipeline construction projects.

(6) OJ C 24, 29.1.1999, p. 2.

(49) World consumption of seamless OCTG is about 5,1
million tonnes a year; world consumption of seamless
line pipe is also 5,1 million tonnes a year (7).

(50)

consumption of

The
Community and in Germany, France,
United Kingdom is illustrated by the following table:

seamless OCTG within the
Italy and the

Seamless OCTG

Average consumption
1990 to 1995

(in thousand tonnes)

Germany

France

Italy

United Kingdom

Community

14

8

84

136

289

Source: Data supplied by the firms and foreign trade data.

(51)

The consumption of seamless line pipe within the
Community and in Germany, France,
Italy and the
United Kingdom is illustrated by the following table:

Seamless line pipe

Average consumption
1990 to 1995

(in thousand tonnes)

Germany

France

Italy

United Kingdom

Community

10

29

119

70

289

Source: Data supplied by the firms and foreign trade data.

(7) Source:

Provvedimento n. 3630 dell'Autorità Garante della
Concorrenza
Finanziaria-
(C2311)
Siderca/Dalmine. Bolletino N. 7-1996 dell'Autorità Garante della
Concorrenza e del Mercato, p. 55.

del Mercato

Techint

e

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(52)

Consumption in the United Kingdom thus accounts for
about 35 % of Community consumption of seamless
OCTG and line pipe.

( b ) P a r t i c i p a n t s

(53)

(54)

D. Europe-Japan club

The documents copied by the Commission during the
investigation of 1 December 1994 reported on meetings
between European and Japanese producers of seamless
steel pipes and tubes known as the ‘Europe-Japan club'.
They also referred to ‘fundamentals', which appeared to
govern relations between these producers. On 17
September 1996, during an investigation pursuant to
Article 14(2) of Regulation No 17, Vallourec made a
written statement
for
explanations from Commission officials concerning the
Europe-Japan club and the ‘fundamentals'. The statement
contained a description of
the
agreement (‘fundamentals'), the products concerned, the
duration of the agreement and the practical details of its
operation.

in response to oral

the basic rules of

requests

‘[…]

The main information in the statement is confirmed by
BS's reply of 31 October 1997 to the request
for
In practice,
information from the Commission:
domestic markets were reserved to the local producers
(page 11932) (9). These
in the
assertions are corroborated by the statements made in
June 1995 to the public prosecutor in Bergamo by
in particular a […], who
several Dalmine managers,
maintained he had attended the meetings (page 8220 ter
1-29).

instance' (8)

first

1. Beginnings of the ‘agreement'

(55)

The Europe-Japan club began operating in 1977. In its
statement, Vallourec writes:

‘Ces échanges ont commencé aprés
la chute du
marché de 1977 (postérieure au premier boom
pétrolier)' (page 6258) (10).

(57) According to the replies from Vallourec (page 6355), BS
(page 11932), NSC (pages 13547 to 13549), NKK (pages
14456 and 14457, 14491 to 14498), SMI (pages 14176
and 14177) and KSC (page 14605) to the Commission's
requests for information, the European members of the
club were BS, Dalmine, Mannesmann and Vallourec,
while the Japanese ones were Kawasaki, NKK, Nippon
Steel and Sumitomo Metals.

( c ) O r g a n i s a t i o n

(58) According to Vallourec's statement, meetings of club

members were held at three levels:

— experts,

— managers, and

— presidents.

(59)

(60)

The links between these meetings are clear from the
‘Timetable for OCTG/Line pipe'
the
the Europeans
meeting on 23 September 1993:
coordinate their positions during preparatory meetings
and then discuss them with the Japanese and the Latin
Americans at the three levels mentioned at recital 58
(page 4912) (11).

tabled by BS at

The meetings of the Europe-Japan club took place twice
a year at
irregular intervals. During an investigation
carried out on 17 September 1996 pursuant to Article
14(2) of Regulation No 17, Vallourec gave the dates of
some of these meetings from 1992 to 1994 (14 April
1992 in Florence, 23 October 1992 in Tokyo, 19 May
1993 in Paris, 5 November 1993 in Tokyo and 16
(page 6358). Documents
March 1994 in Cannes)
photocopied at Vallourec (pages 15586 and 4350)
allude to meetings of the Europe-Japan club in 1989
and 1991.

2. Products, participants and organisation of the club

( a ) P r o d u c t s

3. Principles

(56) According to Vallourec's statement, the products which
are the subject of the agreements described above are
API OCTG and seamless project line pipe.

(8) Original English.
(9) The page numbers cited in brackets are those in the file.
(10) ‘This trade began after the 1977 fall in the market (following the

first oil boom).'

(61)

There are three pillars to the agreement on OCTG and
line pipe, as described by Vallourec:

(11) Thus in 1993,

the meeting of 5 November was prepared by
meetings of the Europeans during the summer, meetings of the
European-Japanese-Latin American working parties in the autumn,
a meeting of the European presidents on 23 September (at which
line pipe' was
for president on octg and project
the ‘paper
discussed) and a meeting of European and Japanese managers.

L 140/8

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(a) observance of domestic markets (the ‘fundamentals');

la regola è
p. 12) (13).

rigidamente osservata.'

(page 8220 ter,

(b) […];

(c)

[…].

( a )

‘ F u n d a m e n t a l s '

(65)

In its written answer of 4 April 1997 to the question
put during the investigation of 13 February 1997
concerning the substance of
the ‘fundamental rules',
Dalmine maintains that:

in

the

consists

(referred

documents

(62) According to Vallourec's statement, the basic rule of the
as
to
agreement
‘fundamentals')
in observing the domestic
markets of the different producers. The United Kingdom
(off-shore) was regarded as semi-protected: a competitor
had to contact the local producer of oilfield pipes and
tubes before making a bid (page 6257). The document
‘entretien BSC'
(pages 15596 to 15599) confirms this
rule.

(63)

reply to the questions

In its
raised during the
investigation under Article 14(2) of Regulation No 17,
on 22 April 1997, MRW describes the ‘fundamentals' as
follows:

ist

der

nur

Begriff

“Fundamentals”

‘Mir
im
Zusammenhang mit Verhaltensweisen europäischer und
japanischer Hersteller aus der Vergangenheit
(dh vor
1.4.1995) bekannt. Nach meiner Kenntnis, handelt es sich
bei den “Fundamentals” um eine Übereinkunft betreffend
OCTG-Rohre und Project linepipe, die im wesentlichen den
jeweiligen Heimatsmärkte bezweckte. Dies
Schutz der
bedeutete, daß japanische Hersteller
in diesen Bereichen
nicht in europäischen Märkte vordrängen sollten, während
europäische Hersteller nicht nach Japan liefern sollten.'
(page 10990A) (12).

(64)

In his
statement of 1 June 1995 to the public
prosecutor in Bergamo, Mr […], […] between 1991 and
the end of 1992, and then the marketing manager for
that division until the end of 1994, said:

si

il quale

‘le gare d'appalto […] venivano costantemente vinte dalla
Dalmine, in quanto nelle riunioni dei club dei produttori
tenevano due volte l'anno, una volta in
(cartelli) che si
stabiliva un
Europa ed una volta in Giappone,
gentlement agreement per
ciascun produttore
avrebbe avuto diritto di vincere in patria le gare d'appalto,
sulla base di une regola internazionalmente accettata per
cui, fatta pari a 100 l'offerta dell'operatore nazionale, gli
altri operatori si impegnano ad offrire un prezzo superiore
di un tasso variabile tra l'8 e il 10 %… Se taluno degli
operatori, in violazione del patto, sottoquota un concorrente
sul mercato domestico, subisce come sanzione minacce di
ritorsione tali da ritirare l'offerta, ma ciò non capita perché

(12) ‘I am only aware of the concept of “fundamentals” in connection
with past practices (i.e. prior to 1 April 1995) between European
and Japanese producers. So far as I know, “fundamentals” relates to
an agreement concerning OCTG and project line pipe which was
aimed primarily at protecting domestic markets. This meant that
the Japanese producers were not supposed to penetrate the
European market in these sectors, while European producers were
not to deliver to Japan.'

possano

riflettere

posizione

‘esse
dell'industria
la
comunitaria dei tubi in acciaio senza saldatura … Questa
posizione si è sviluppata su due linee: attuazione di un
processo di razionalizzazione …; contatti con l'industria
giapponese la cui capacità produttiva superava la domanda.
I contatti si riferivano all'esportazione di tubi (specialmente
quelli per l'industria petrolifera) in aree diverse dalla CE
(quali Russia e Cina)
volgevano anche a limitare
l'esportazione di tubi alla CE in seguito alla chiusura degli
impianti di British Steel e quindi a proteggere l'industria
comunitaria dei tubi senza saldatura.' (14) (pages 15099
to 15101).

e

(66)

(67)

In its reply of 31 October 1997 to the Commission's
request for information, BS states with regard to the
Europe-Japan club:
‘In practice, domestic markets were
reserved to the local producers in the first instance.' (15)
(page 11933).

The ‘fundamentals' are also mentioned in the Vallourec
internal memo (pages 15591 to 15594) concerning a
meeting held on 1 June 1990 (according to the
Vallourec internal memo of 24 July 1990) between BS
and Vallourec:

‘L'analyse de VLR est qu'il ne faut pas ouvrir la porte aux
Japs en les favorisant d'un british content. Il faut jouer les
la première démarche étant d'écrire
fondamentals à fond,
les
via le pt du Club aux pt

Jap pour

signaler

(13) ‘Contracts put out to tender by AGIP-Italia were constantly won by
Dalmine, since the meetings of the producers' clubs (cartels), held
twice a year, once in Europe and once in Japan, established a
gentlemen's agreement under which each producer was to be
entitled to win tenders in its home country, on the basis of an
internationally accepted rule according to which if the domestic
operator's bid was equal to 100, the other operators undertook to
bid a price higher by a proportion varying between 8 and
10 % …. An operator that breaks the agreement by underquoting
a competitor on the domestic market will be threatened with
reprisals so as to make it withdraw the bid, but
that never
happens because the rule is rigidly observed'.

(14) ‘they may reflect the position of the Community seamless pipes
and tubes sector …. This position has developed on two lines:
implementation of a rationalisation process …; contacts with the
Japanese industry, whose production capacity was exceeding
demand. These contacts related to exports of pipes (particularly
those intended for the oil industry) to zones other than the EC
(Russia and China) and they were also intended to limit pipe
exports to the EC after the closure, of British Steel's mills and,
consequently, to protect the Community seamless pipe and tube
industry.'

(15) Original English.

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shojas

Il paraît ambitieux
implantations des
d'imaginer que BSC puisse organiser un sharing key en PJ
japonais alors que SMI se casse les dents sur ce point
depuis de longs mois.' (16) (page 15598).

en UK.

(68)

Examination of the deliveries of the members of the
Europe-Japan club shows
this principle was
observed.

that

SEAMLESS OCTG AND LINE PIPE

Share of domestic producer in the deliveries of BS, Dalmine,
MRW, Vallourec, SMI, KSC, NSC and NKK

Destination

1990

1991

1992

1993

1994

1995

( c ) S h a r i n g o f o t h e r m a r k e t s

(72)

[…].

(73)

[…].

(74)

[…].

(75)

[…].

Italy

> 90 % > 90 % > 90 % > 90 % > 90 % > 90 %

(76)

[…].

Germany

97 %

91 %

99 %

87 %

92 %

87 %

France

92 %

82 %

86 %

86 %

84 %

85 %

United
Kingdom (a)

81 %

84 %

78 %

79 %

84 %

78 %

Japan

100 % 100 % 100 % 100 % 100 % 100 %

Total, club

90 %

88 %

88 %

87 %

91 %

87 %

Source: Replies from the firms to requests for information under Article 11.
(a) From 1991, Vallourec's, Dalmine's and MRW's deliveries of OCTG to the
United Kingdom are regarded as domestic deliveries following the closure of
the British Steel plant.

(78)

(69)

It is in the light of this protection of domestic markets
that
the following sentence contained in Vallourec's
internal memo of 20 June 1994 […] must be
interpreted:
‘STDM devrait tout de même respecter à
peu près le UK en échange de notre protection du
Mexique et de l'Argentine, mais dans le reste du monde
il essaiera de développer ses ventes au maximum' (17)
(page 15813).

( b )

‘ S p e c i a l m a r k e t s '

(70)

[…].

(71)

[…].

(16) ‘VLR's view is that we should not open the door to the Japs by
allowing them a British content. We must play the fundamentals
for all their worth, the first step being to write via the pt of the
Club to the Jap presidents drawing attention to the presence of the
shoshas in the UK. It seems ambitious to imagine that BSC can
organise a sharing key in Japanese PJ when SMI has got nowhere
on this point for many months.'

(17) ‘All the same, STDM should more or less leave the UK alone in
exchange for our protection of Mexico and Argentina, but in the
try to expand its sales as much as
rest of
possible.'

the world it will

(77)

Such cooperation also applied to particular projects
(page 4283).

4. Plain-end supply contracts concluded between BS,

Vallourec, Dalmine and MRW

In the context of the protection of domestic markets
(‘fundamentals'),
the cessation of hot-rolled seamless
pipe and tube production proposed by BS in 1990
raised the question of the ‘non-domestic' nature of the
British market. Vallourec and BS therefore introduced
the concept of ‘fundamentals improved'. The record of a
meeting between Vallourec and BS on 24 July 1990
establishes under the heading ‘Respect du UK par les
Japonais':

‘MRW est le seul producteur européen qui fasse peur
aux japonais et qui puisse donc imposer un respect
des “fundamentals improved”. MRW aurait un intérêt
à la défense des “fundamentals” sur le UK puisqu'il
fournirait une partie des plain end pipes après l'arrêt
de Clydesdale … VLR insiste sur le fait que toute
alliance en Europe doit être faite avec une part
suffisamment forte pour MRW' (18) (pages 15586 et
seq.).

At the end of the meeting, the record reads:

‘BS et VLR s'accordent pour dire que ce renforcement
à des
de
aux
“fundamentals

aboutir
interdiraient

jouable
improved”

et doit
qui

la CEE est

(18) ‘MRW is the only European producer who frightens the Japanese
and who can therefore enforce the “fundamentals improved”. It
would be in MRW's interest for the “fundamentals” to be defended
in the UK, since it would supply some of the plain end pipes after
the closure of Clydesdale …. VLR stressed the fact that any alliance
in Europe must be made with a sufficiently strong share for MRW.'

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japonais l'accès du UK même après que Clydesdale
aurait été fermé. PhV (19) ajoute qu'un respect à
100 % des “fundamentals” en UK est impossible mais
que si les exceptions ne dépassent pas 15 000 tonnes
par an,
la situation sera supportable. BS évoque
toutefois la possibilité d'acheter des plain ends à UTM,
SIDERCA et TAMSA pour éviter leur concurrence
sauvage' (20) (page 15587).

Européens que se répartissent cette fourniture selon une règle
stricte' (22)
(page 15611). Two months later (24 July
1990) the fact that MRW would supply plainends to BS
was regarded as settled:
‘MRW aurait un intérêt à la
défense des “fundamentals” sur le UK puisqu'il fournirait
l'arrêt de
une partie des plain end pipes
Clydesdale' (23) (page 15586).

après

(81)

Through these contracts, BS undertook:

(79)

Following the closure of Clydesdale, BS concluded
agreements for the supply of plain-ends for TSSL (its
heat-processing and threading subsidiary) with:

— to meet all its plain-end requirements, which it had
from
and Dalmine

from its Clydesdale plant,

([…] %), MRW ([…] %)

previously met
Vallourec
([…] %),

— Vallourec

for
requirements (page 12867 et seq.),

(24 July 1991)

[…] % of BS's

quarter of the prices it charged, and

— to inform Vallourec, MRW and Dalmine every

— Dalmine (4 December 1991)

for

[…] % of BS's

requirements (page 12910 et seq.), and

(82)

— MRW (9 August 1993)

for
requirements (page 12948 et seq.).

[…] % of BS's

— to inform Vallourec, MRW and Dalmine every year
of the quantities of plain-ends that it consumed.

In turn, Vallourec, MRW and Dalmine undertook to
supply BS with quantities of plain ends (unknown in
advance) and not to impose discriminatory prices and
conditions of sale as compared with other customers
shelf. These
operating on the British continental
agreements were concluded for a period of five years.
After such time, they remain in force if none of the
parties has given 12 months' notice of termination.

(80)

sur

The possibility of sharing supplies of plain ends among
the Europeans, and the link between the prices and
quantities sold by BS and the sales of plainends by the
Europeans, had already been considered by Vallourec in
March and May 1990 in connection with the closure of
Clydesdale: ‘… si … on peut obtenir des Japonais qu'ils
n'interviennent pas
le marché UK, et que le
problème se règle entre Européens. Dans ce cas on
les tubes lisses entre MRW,
partagerait effectivement
VLR et Dalmine. Dans ce
scénario II, on aurait
probablement intérêt à lier les ventes de VLR à la fois au
prix et au volume du VAM vendu par BSC' (21) (pages
15624 and 15625); (in the contracts, the prices of the
plain end pipes which MRW, Vallourec and Dalmine
undertook to supply to BS depended on the prices of
the threaded tubes sold by BS);
‘MRW/DALMINE/VLR
obtiennent que BSC achète ses tubes lisses en priorité aux

(19) Ph. Varley, representative of BS.
(20) ‘BS and VLR agree that this strengthening of the EEC is viable and
must result in “fundamentals improved” which would stop the
Japanese from having access to the UK even after Clydesdale had
been closed. PhV added that 100 % respect for the “fundamentals”
in the UK was impossible but that if the exceptions did not exceed
15 000 tonnes a year,
the situation would be tolerable. BS
mentioned, however, the possibility of buying plain ends from
UTM, SIDERCA and TAMSA to avoid cut-throat competition on
their part.'

(21) ‘… if … we can persuade the Japanese not to intervene on the UK
market and that the problem should be settled among Europeans.
In that case, plain ends would effectively be shared between MRW,
VLR and Dalmine. In this second scenario, it would probably be in
our interest to link VLR's sales to both the price and the volume
of VAM sold by BSC'.

5. Reorganisation of the club

( a ) C r i s i s o f 19 9 3

(i) Disruptive factors

(83)

Several
agreement:

factors disrupted the

equilibrium of

the

— the restructuring of

the European industry,

in
particular the cessation of seamless pipe and tube
activity by BS and the possible closure of New
Tubemeuse (‘NTM'),

— the rise of

the Latin American producers, which
made it difficult to apply the sharing keys worked
out in the Europe-Japan club,

de VLR avec SMI

(22) Vallourec document entitled ‘Réflexions stratégiques concernant

les
et BSC' dated 2 May 1990.
relations
‘MRW/DALMINE/VLR are getting BSC to buy its plain ends as a
matter of priority from the Europeans, who share out this supply
in accordance with strict rules'.

(23) ‘The defence of the “fundamentals” in the UK would be in MRW's
interest, since it would supply some of the plain-end pipes after
the closure of Clydesdale'.

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— the growing importance of welded OCTG, whose
share of the world market can be estimated at 20 %,
despite regional disparities (in Europe, the share of
welded OCTG is very low — about 5 % — whereas
it may be as much as 50 % in, say,
the United
States).

(ii) Position of the Europeans

— the consequences of enlarging the club to include

the Latin Americans,

— the consequences of

restructuring the European

industry,

— […].

(84)

(85)

Japanese' document

The document entitled ‘Paper for presidents on OCTG
and project linepipe' (24) (pages 4902 to 4908) (‘paper
(25)
for presidents') and the ‘(g)
(pages 4909 to 4914) note these disruptive factors and
the Tokyo
clarify the position of
the
meeting on 5 November 1993.
Europeans want
the
European
European
producers by reserving the European market (including
the offshore regions). The proposed action plan consists
in:

the
industry mainly

In substance,
restructuring of

the Europeans at

current

benefit

to

— determining the tonnage which the Japanese and the

Latin Americans can deliver in Europe,

— threatening the Japanese,

if

they do not comply,

with:

(a) […];

(b) […];

(c) not

restructuring the European industry and

ensuring the withdrawal of NTM;

(d)

lodging a dumping complaint.

( b ) M e e t i n g o f 5 N o v e m b e r 19 9 3

the content of which is
(the ‘sharing-key document')

The Tokyo meeting gave rise to a new tripartite
reflected in a
agreement,
document
(page 7320)
handed to the Commission on 12 November 1997 by a
party not involved in the proceedings (which asked for
its
to be revealed). According to the
informant, the source for this document is a commercial
agent of one of the participants at the said meeting.

identity not

Three main topics were discussed:

for

(24) This was a preparatory document

the meeting of

to their meeting with their

the
presidents of the European firms held on 29 September 1993 in
Paris, prior
Japanese and Latin
American counterparts on 5 November. According to the
handwritten note on the document, the latter was transmitted to
Vallourec on 23 September 1993 by AS (A. Stewart of British
Steel).

(25) This document was one of the preparatory documents for the
meeting of the presidents of the European firms, prior to their
meeting with their Japanese and Latin American counterparts on 5
November 1993. According to the handwritten note on the
transmitted to Vallourec on 23
latter was
document,
September by AS (A. Stewart of British Steel).

the

(i) The consequences of enlarging the club to include

Latin America

(86)

the

The sharing-key document confirms that the approaches
made to the Latin Americans were partly successful.
[…]. Nevertheless,
Latin American producers
expressed a specific reservation concerning observance
of the European market (26) (page 7320) and delivered
significant
sharing-key
document expressly contradicts Vallourec's reply to the
investigation on 18
oral questions
December 1997 and Siderca SAIC's and Tamsa's replies
to the statement of objections, according to which the
exploratory approaches made by the Europeans to the
Latin Americans in late 1993 were unsuccessful.

to Europe. The

quantities

asked at

the

(ii) Effect of restructuring the European industry on the

agreements

(87)

Both in the preparatory document and in the agreement
itself, a distinction should be made between the closure
of the Belgian producer NTM and the withdrawal of
British Steel.

Closure of NTM

(88)

Following the closure of the market in the former USSR
and the reduction of world demand for oil pipes and
tubes in 1992 to 1993, the financial situation of NTM
deteriorated sharply. This
led its parent company,
Soconord, to seek a partner which would be interested
in particular in the threading plants. These were more
competitive than the heat-processing plants (electric
furnace and rolling mill). Negotiations took place […],
but were not successful. NTM's production was closed
down altogether on 31 December 1993; the threading
installations and rolling mill were transferred to Iran
from August 1996.

(89) As

the

japanese'
documents show, the possible closure of NTM was used

for presidents'

and ‘(g)

‘paper

(26) ‘LA agreed the above share except

for European market. For
liaison shall be discussed case by case in a

European tenders,
cooperative sense'.

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as a negotiating, weapon to try and obtain reciprocal
concessions from the Japanese. Since NTM's deliveries
were concentrated in the Middle and Far East and were
not
closure was very
its possible
advantageous, given the sharing keys, for the Japanese
and the South Americans.

inconsiderable,

Purchase by Vallourec of British Steel's OCTG finishing
activities

(90)

The continued operation of pipe and tube production
in the United Kingdom — the result of a
units
rationalisation
show
programme — would
non-European competitors that the United Kingdom was
still a primary producer within a strong European
industry (pages 4626 to 4640). As the ‘paper
for
presidents' document shows, the Europeans wanted to
ensure that the cessation of the ‘seamless pipe and tube'
activity of BS would not alter either the sharing keys or
the status of the UK market:

in our agreements

‘Although the Japanese have agreed not to request
changes
the EC seamless
industry were to restructure, there is no guarantee
that they would follow this precept if British Steel
were to exit
finishing in the
UK' (27) (page 4902).

the tubemaking or

if

the contracts for the supply of plain ends between BS
and Vallourec, MRW and Dalmine, without changing the
proportions. The same day, a meeting took place
between MRW and BS,
in the course of which MRW
‘agreed that Vallourec should take the lead in the future
ownership of the OCTG Business' (29) (page 4626). The
Dalmine document entitled ‘Seamless steel tube system
in Europe and market evolution'
(page 2053), dated
May/August 1993, stated that a solution to the BS
problem which was appropriate to everybody could
that
only be found in a European context;
Vallourec was acquiring the BS plant was also accepted
by Dalmine.

the fact

(92) On 22 February 1994, Valtubes
of BS's
took

control

(a

Scottish

subsidiary of
Vallourec)
plants
specialising in heat processing and VAM threading and
set up the company Tubular Industries Scotland Limited
(TISL), the leader on the North Sea market for threaded
pipes with premium or standard joints (30). On 31
March 1994, Vallourec, which would have been able to
cancel the contracts signed by BS (clause 9(i)) and hence
would have had an extra outlet for its production of
plain ends, renewed the plain ends supply contracts
concluded by BS with Dalmine and MRW referred to in
recital 79. The contract with MRW was still in force on
24 April 1997 (the date of the investigation at MRW).
The contract concluded between TISL and Dalmine is
still in force, but, following the statement of objections,
the parties agreed, as a precautionary measure, that if
the Commission maintained its objections in the final
decision the contract would be rescinded retroactively to
30 March 1999.

(91) On 21 January 1993 BS sent Vallourec (and probably
MRW and Dalmine as well) outline proposals for a
seamless pipe and tube restructuring agreement
for
discussion at a meeting at Heathrow on 29 January
1993 between Mannesmann, Vallourec, Dalmine and
British Steel (page 4628). The document states:
‘British
Steel has indicated its intention to withdraw eventually
from seamless tube manufacture. It seeks to do this in
an orderly and controlled manner in order to avoid
disruption in the supply of tubes to its customers and to
assist these producers who acquire the business to retain
the order load … Discussions have been held over the
last
and other
producers interested in acquiring assets from British
Steel and British Steel believes that there is a consensus
to proceed along the lines described in this paper' (28).
One of
the proposals consisted in transferring the
OCTG activities to Vallourec while maintaining in force

six months between British Steel

(93) On 31 March 1994 BS signed with Vallourec (TISL) a
contract for the supply by BS […] of certain types of
small-diameter OCTG plain ends. The contract expired
with the closure of Wednesfield in December 1995. It
course be viewed separately from the
cannot of
purchase by Vallourec, one month earlier, of British
Steel's Scottish plants specialising in heat processing and
VAM threading.

(94)

The sharing-key document shows that the restructuring
of the European industry influenced the negotiations
and that these ended, as far as the Japanese producers
were concerned at least, in the way the Europeans had
wanted: Europe was reserved for them. However, the
Latin Americans expressed their disagreement on this
score.

(27) Original version.
(28) Original version.

(29) Original version.
(30) Vallourec Annual Report 1994 (page 14617).

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(iii) Chinese market

(95)

[…].

6. End of the agreement

(96) Although the last meeting of which any trace exists in
the file took place in March 1994,
is clear from
Vallourec's statement that the Europe-Japan club stopped
operating only in 1995.

it

(97) MRW maintains that the fundamentals belong to the
past (namely to the period before Mr […] took up his
post on 1 April 1995).

(100) From 1977,

attested by several documents apart

the firms BS, Dalmine, MRW, Vallourec,
KSC, NKK, NSC and SMI reached a consensus as to their
marketing policies for seamless API OCTG pipes and
tubes and project line pipe in different geographic areas.
What is involved, therefore, is an agreement within the
meaning of Article 81(1) of the Treaty whose existence
is
from the
statements of Vallourec and Dalmine (see recitals 62 to
69): the ‘paper for presidents', dated 23 September 1993
mentioned
current
agreements' and ‘our agreements'. In the ‘record of the
discussion with JF in Brussels',
the ‘agreements' are
mentioned as a synonym for the ‘club' or the ‘système
system'). The sharing-key document
actuel'
clearly states: ‘The following sharing key was agreed' …
‘50 % increase of price was agreed' … ‘above agreement
is valid through end of March 94' (32) (page 7320).

in recital 84,

talks of

(‘current

‘the

II. LEGAL ASSESSMENT

2. Object and effect of the agreement

A. General

(101)

In the statements of the different producers, the content
of the agreement is presented as follows:

(98) Article 81(1) of the Treaty prohibits as incompatible
with the common market all agreements between
undertakings and concerted practices which may affect
trade between Member States and which have as their
object or effect the prevention, restriction or distortion
of competition within the common market, and in
particular those which directly or indirectly fix purchase
or selling prices or any other trading conditions, limit
or control production, markets, technical development,
or investment, and share markets.

B. The Europe-Japan club

1. Nature of the infringement

(99)

The Commission considers that
for a restriction to
constitute an agreement within the meaning of Article
81(1) of the Treaty it is not necessary for the agreement
to be legally binding on the parties. There is an
agreement if the parties reach a meeting of minds on a
plan which limits, or is likely to limit, their commercial
freedom by determining their mutual course of action
on, or their non-participation in, a market. Neither
contractual penalties nor implementing procedures are
required. Nor does
the agreement have to be in
writing (31).

(31) Commission Decision 86/398/EEC of 23 April 1986 in Case
IV/31.149 — Polypropylene (OJ L 230, 18.8.1986, p. 1, recital 81).
See also T-1/89 Rhône-Poulenc [1991] ECR II-867, paragraph 120
and Joined Cases T-305/94 etc. Limburgse Vinyl Maatschappij (not
yet published), paragraph 715.

— the relations between producers are governed by
fundamental rules (‘fundamentals') which prohibit
everyone from selling in the national markets of
competitors party to the agreement,

— […],

— […],

— […],

(102) Thus

the object of

the agreement was

to restrict
competition in the common market by providing that
the domestic markets of the different producers (namely
the German, French,
Italian, British and Japanese
markets) should be respected inasmuch as the supply of
seamless pipes and tubes in Member States where a
national producer was established was limited by the
other producers party to the agreement refraining from
supplying those markets.

(103) The two parts of the ‘Europe-Japan' agreement, […],
would also be caught by Article 81 of the Treaty if it
were established that those practices enabled producers
to limit supply within the common market or, directly
In the case in
or indirectly, to fix the price thereof.

(32) Original English.

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point, the Commission is not able to provide evidence
of such a restrictive effect on the common market. Nor
can it provide evidence of
the agreement having
restrictive effect in the territory covered by the EEA
Agreement outside the Community. The Europe-Japan
agreement, therefore, is covered by this decision only in
so far as it provided for the observance of domestic
markets (‘fundamentals') and concerned Member States.

(104) As the Court of Justice of the European Communities
held in ACF Chemiefarma,
‘the sharing out of domestic
markets has as its object the restriction of competition
and trade within the common market' (33). It has been
consistently held that ‘for the purposes of Article 85(1)
it is unnecessary to take account of the actual effects of
an agreement where its object is to restrict, prevent or
distort competition' (34). The table in recital 68 shows,
however, that the domestic markets were respected.

3. Impact on trade between Member States

(105) An agreement on the observance of domestic markets
affects trade between Member States in so far as it
concerns sales from a producer in the common market
intended for another Member State and even where it
relates to sales in the common market from a third
country (35).

(106) The producers, by concerting their action, were able to
alter the tonnages of pipes and tubes which each of
them, in the absence of concerted action, would have
the Member States (36). The
sold on the markets of
impact on intra-Community trade is appreciable, since
deliveries of the products covered by the agreement by
the firms to which this Decision is addressed on the
four ‘domestic' markets concerned account
for about
15 % of Community consumption of seamless OCTG
and line pipe.

(33) Case 41/69 [1970] ECR 661, paragraph 128..
(34) Case 123/83 BNIC v Guy Clair [1985] ECR 391, paragraph 22.
(35) Case 51/75 EMI Records v CBS United Kingdom [1976] ECR 811,
paragraph
28. Commission Decisions 74/634/EEC of 29
November 1974 (IV/27.095 — Franco-Japanese ball-bearings
agreement (OJ L 343, 21.12.1974, p. 19)), 75/77/EEC of 8 January
1975 (IV/27.039 — Preserved mushrooms (OJ L 29, 3.2.1975, p.
26)) and 75/497/EEC of 15 July 1975 (IV/27.000 — IFTRA rules
for producers of virgin aluminium (OJ L 228, 29.8.1975, p. 3)).
(36) See the Commission Decision 73/109/EEC of 2 January 1973
the EEC
(OJ L 140,

relating to proceedings under Articles 85 and 86 of
Treaty (IV/26.918 — European sugar
26.5.1973, p. 17).

industry)

4. Participation by the firms

(107) The European and Japanese producers acknowledged
that
there had been meetings between them and
admitted having taken part in them. In their replies to
the various requests for information sent to them, the
firms gave the Commission the dates of some of these
meetings held between 1992 and 1994, but
they
acknowledge that the club was set up in the late 1970s
(Vallourec's statement gives the start of the concerted
action as 1977).
In their replies to the statement of
objections, the Latin American producers supplied the
Commission with figures showing their deliveries to
Europe, which,
together with the express reservation
led
concerning their respect for the European market,
the Commission to withdraw the objections relating to
them.

5. Duration of the infringement

(108) According to Vallourec's statements, the meetings of the
Europe-Japan club started in 1977 (page 6257). They
continued until 1995 (page 6257). However, in view of
the agreements on the voluntary restraint of exports
concluded between the Commission and the Japanese
Government (see recital 27) the Commission will take
into account the existence of an infringement only from
1990 onwards.

6. Conclusion as to the applicability of Article 81(1) of the

Treaty

(109)

In view of the above, the Commission takes the view
that all the firms to which this decision is addressed
infringed Article 81(1) of
the Treaty by agreeing to
respect the others' domestic markets.

C. Contracts concluded between British Steel,
Vallourec, Dalmine and MRW

1. Nature of the infringement

(110) Even though three separate contracts were concluded on
different dates,
they were the fruit of an agreement
made originally between Vallourec and BS (see recital
78). Vallourec renewed them in agreement with BS,
Dalmine and MRW as part of the restructuring of the
European industry (see recital 91).

2. Object and effect of the contracts

(111) The object of these contracts was the supply of plain
ends to the leader of the North Sea OCTG market, and

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their purpose was to maintain a domestic producer in
the United Kingdom with a view to securing respect for
the fundamentals in the Europe-Japan club. The main
object and effect of the contracts was to share between
MRW, Vallourec and Dalmine (Vallourec from 1994) all
the requirements of their competitor, BS. The contracts
made the purchase prices of the plain ends dependent
on the prices of the pipes and tubes threaded by BS.
They also contained a restriction on BS's freedom of
supply (on Vallourec's from 1994) and forced it
to
selling prices
the
to its competitors
communicate
applied and the quantities sold.
In addition, MRW,
Vallourec (until February 1994) and Dalmine undertook
to supply a competitor (BS, then Vallourec from March
1994) with quantities not known in advance.

(112) Article 81(1) of the Treaty expressly mentions as being
incompatible with the common market all agreements
which have as their object or effect
the sharing of
markets. Contracts whose object and effect is to share
supplies to the principal producer of threaded pipes and
tubes
the
recital 50)
Community's OCTG consumption (see
involve an appreciable restriction of competition within
the common market.

representing nearly half of

in a market

6. Conclusion as to the applicability of Article 81(1) of the

Treaty

(116)

In view of the above, the Commission takes the view
that MRW, BS, Dalmine and Vallourec infringed Article
81(1) of the Treaty by concluding contracts for sharing
supplies of plain ends to BS (to Vallourec from 1994).

D. Inapplicability of Article 81(3) of the Treaty

(117) Since the agreements referred to in this decision were
not notified and do not satisfy the conditions laid down
in Article 4(2) of Regulation No 17, Article 81(3) of the
Treaty does not apply.

E. Arguments of the parties

1. On the procedure

3. Impact on trade between Member States

( a )

I n v e s t i g a t i o n d e c i s i o n s o f N o v e m b e r
19 9 4

(113)

Intra-Community trade is affected, since the contracts
concern deliveries to the United Kingdom from France,
is appreciable, since
Germany and Italy. The impact
deliveries
the products
covered by the agreement account for about 20 % of
Community consumption of seamless OCTG.

to the United Kingdom of

4. Participants

(114) The participants

in this agreement were Vallourec,
MRW, Dalmine and BS (the last named until February
1994 only).

5. Duration of the infringement

(115)

the purchase by Vallourec of

For BS, the infringement lasted from July 1991 (date of
the signing of the contract with Vallourec) to February
1994 (date of
the BS
plants). For MRW, it lasted from August 1993 (date of
the signing of the contract with BS) to at least 24 April
1997 (see recital 92). For Vallourec the infringement
lasted from July 1991 to March 1999. For Dalmine, it
lasted from December 1991 (date of the signing of the
contract with BS) to March 1999 (see recital 92).

obtained

(118) The Japanese firms and Dalmine and MRW contest the
the decisions on the basis of which the
legality of
in December
investigations
Commission carried out
to use the
1994, and hence the Commission's right
investigations.
documents
the system established by
According to these firms,
Article 56 of
the
the EEA Agreement
possibility of the ESA and the Commission combining
their powers
the Commission
suspected an infringement of Article 81 of the Treaty, it
alone would have been competent and would not have
acted at the ESA's request.

(‘one-stop shop').

rules out

during

those

If

(119)

this argument must be
In the Commission's view,
rejected, since the purpose of the decisions which the
institution, on the basis of
the information it held,
adopted in November 1994 concerning the existence of
agreements and/or concerted practices was
twofold,
namely to check whether the practices might:

— affect trade between Member States (infringement of

Article 81 of the Treaty), and/or

— affect trade between the contracting parties to the
EEA Agreement (infringement of Article 53 of the
Agreement).

In addition, the ESA's request concerned only part of
the EEA (Norway), whereas the investigations carried
out by the Commission were on a much wider scale, as
is clear from the wording of the investigation decisions.

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Contrary to what the firms maintain, the Commission
was therefore competent to carry out the investigation
at
its own
investigations in order to establish the possible existence
of other infringements.

and to carry out

the ESA's

request

(120) The dual

and the EEA Agreement

legal basis — the EC Treaty (in particular
former Article 85)
(in
particular Article 53) — was consequently lawful, since
at that stage of the inquiry the Commission could not
determine whether the facts indicated infringements of
Article 81 of the Treaty only or infringements of Article
53 of the EEA Agreement as well. After investigation of
the facts and after the transfer of the case by the ESA,
the Commission was also the only body responsible for
continuing the proceeding in the context of the EEA
Agreement.

( b ) U s e b y t h e C o m m i s s i o n o f t h e

s h a r i n g - k e y d o c u m e n t

(121) All the firms, except MRW and BS (who have not made
their views known in this respect) challenge the fact that
the Commission can use the sharing-key document,
since its source, author, date and the occasion on which
the
it was
Commission is entitled not to identify its sources of
information when it has been requested not to. It may
use a document of this type where several factors make
it likely that it is authentic:

specified. However,

created are not

( c ) A c c e s s t o t h e f i l e

(123) MRW maintains that

internal documents of
the ESA which the
forwarded to the Commission in December 1995.

it did not have access to the
latter

(124) The Commission considers that

these were working
documents of a public authority, forwarded pursuant to
Article 10(3) of Protocol 23 to the EEA Agreement.
They must therefore be treated as internal documents
and,
in accordance with the Commission notice on
access to the file (37), may not be made accessible.

(125) Dalmine

that

emphasises

in the
several passages
(and hence accessible) versions of
non-confidential
file had simply been
certain documents
concealed, without a summary of their content being
supplied. This practice is alleged to be inconsistent with
the abovementioned Commission notice on access to
the file.

in the

(126) The Commission is obliged to protect undertakings'
legitimate interest in ensuring that third parties do not
confidential
know their business
the
information. The Commission considers
practice of
concealing confidential passages whilst
leaving the documents generally comprehensible is
acceptable.

secrets or other

that

( d ) T i m e l i m i t f o r r e p l y i n g t o t h e

s t a t e m e n t o f o b j e c t i o n s

— the document drawn up by Vallourec on 27 January
1994 (pages 4822 and 4823) notes the existence ‘des
accords' (‘of the agreements') or of a ‘système actuel'
(‘current system') or a ‘club', and the figures quoted
in it […] coincide with those which, according to
the sharing-key document, were agreed upon,

(127) MRW and Dalmine claim that the time limit allowed by
the Commission for
replying to the statement of
objections was not sufficient, given the large number of
documents and the different languages in which they
were written.

— certain points covered by the agreement
document

sharing-key
discussed in the proposals of
producers for the November meeting,

[…] were

the

in the
specifically
European

— the list of club meetings of which the Commission
the
has cognisance (see recital 60)
meeting following that of November 1993 in Tokyo
was held in March 1994 in Cannes. The sharing-key
document mentions that the next meeting of the
Presidents will be held in March 1994.

shows

that

(128) The Commission granted the firms a period of

two
months in which to reply,
in accordance with the
practice it has followed since 1993 (see 23rd report on
competition policy, point 207).

2. As to the facts

( a ) E x i s t e n c e o f t h e a g r e e m e n t

(122)

In any event,
the Commission did not adduce the
document in isolation, but as one item in the body of
evidence.

(129)

In their written replies to the statement of objections
and during the hearing, Vallourec and Dalmine explicitly

(37) OJ C 23, 23.1.1997, p. 3, points I(A)(3) and II(A)(2).

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the

the

Europe-Japan
existence of
acknowledged
agreement described by the Commission for standard
OCTG and project line pipe. BS, while declaring that it
did not contest the facts, questioned the existence of the
agreement (‘British Steel submits that if there was an
should be assessed in its
agreement as alleged,
economic
reasons why such an
agreement would not have restricted competition within
the Community to an appreciable extent, suggest that
there would not have been any commercial rationale for
such an agreement — which calls into question whether
in fact there was an agreement of the kind alleged in the
SO' (38). MRW did not express an opinion on the facts
described by the Commission.

context … The

it

(130) KSC maintains that it is not in a position to show that
the facts described by the Commission in the statement
of objections are incorrect. The company, along with
NSC, NKK and SMI, disputes that
the evidence is
sufficient to substantiate participation in an agreement
aimed at protecting domestic markets. NKK, while
the European
acknowledging that at
their domestic
producers had asked it
it maintained its commercial
markets, argues
strategy based on its own decisions without
feeling
bound by such requests. SMI contends that domestic
markets were discussed precisely in order to exclude
them from a ‘global sharing key'.

the meetings
to respect

that

consistent

(131) As far as the Commission is concerned, as it pointed
out during the hearing without receiving an answer
from the firms, the documents cited in recitals 62 to 67
and in recital 100 constitute a body of reliable, accurate
to
evidence which
and
the
existence
demonstrate
agreement. First, the statement made by […] Vallourec
is
[…]
and
clear
corroborated by the other documents. Secondly,
the
Japanese firms acknowledged that they were unable to
the
provide clarification regarding the meetings of
Europe-Japan club:

sufficient
and substance of

sufficiently

accurate

and

the

is

is

meetings between European and Japanese producers
and, if so, in what capacity they attended' (39) (page
14159).

it

felt

important

to stress that

‘SMI
it relied on
recollections of SMI employees since, without having
it could not be absolutely
documents and records,
employees'
the
certain as
accounts' (40) (page 14430).

accuracy of

to the

‘To the best of Mr […] (NKK) knowledge, there is no
information other than that… contained in our reply
dated 7 November 1997' (41) (page 14493).

that KSC only has hearsay information
‘The fact
concerning
the
these meetings means
information it can provide to the Commission is
necessarily vague' (42) (page 14616).

that

(132) The Japanese firms maintain that between 1977 and
1995 they delivered large quantities of OCTG and line
pipe to the British North Sea market. The fact that they
did not deliver to Germany, France and Italy was due to
imply the
objective economic reasons which do not
existence of an agreement to respect domestic markets.
According to these firms, the British market has special
features compared with the other three markets:

— the North Sea is an offshore area which is not part
of the customs territory of the Community. Thus,
imports into the area do not bear customs duties
and are not subject to anti-dumping proceedings,

— the North Sea market is very attractive in terms of
both quantity (it is the largest in the Community)
and price (the pipes used there are ‘premium'
threaded
expensive).
Consequently, the transport costs from Japan can be
absorbed in an economically viable manner.

hence more

ones

and

‘NSC cannot exclude the possibility that some of its
the
former employees who were responsible for
seamless tube business participated in such meetings
‘NSC cannot
prior
attended
confirm whether

to July 1995'
its

(page 13548).
former

employees

(38) Point 1.6 of its reply to the statement of objections.

(133) On the other hand, according to the Japanese firms (and
to sales by
in the other Community markets,

considerable barriers

there were

firms

BS),
Japanese
namely:

(39) Original English.
(40) Original English.
(41) Original English.
(42) Original English.

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— the Commission's commercial policy (see recital 27),

— customs duties were fixed at 9 % of the price of the

pipes and tubes,

— the quantities of pipes and tubes consumed were
tiny and the average contract size was assumed to
be very small,

— transport costs: according to some of the Japanese
estimates, these were more than 20 % of the fob.
price of standard threaded pipes,

— national approval standards and requirements,

— delivery times from Japan: from four to six weeks,

— the very strong position of the European producers

on their national markets,

— the threat of anti-dumping proceedings,

— national preference on the part of oil producers and
public

firms which were

distribution

gas
undertakings,

— public procurement rules, which granted no rights

to non-Community firms.

the Japanese
European firms considered the sales of
firms, whether of finished products or of plain ends to
be threaded locally (pages 15611 and 15623), as a
genuine threat. This clearly shows that the existence of
the agreement to respect domestic markets really did
from exporting to
prevent
European markets.

the Japanese producers

(137) The economic arguments put

forward by the firms

cannot be accepted for the following reasons:

— the trade measures adopted by the Commission to
combat the steel crisis, and more specifically the
agreement with the
authorities, were
designed to avoid market disruptions. While they
may have managed to persuade the Japanese firms
not to export to Europe until 1990, they do not
justify the continuation of this policy beyond that
date,

Japanese

— given the structural overcapacity in the sector (see
recital 45) and the high fixed costs, any sale at a
price above the variable cost helps to cover the
fixed costs and hence to reduce total production
costs. Consequently,
the
consumption of the products in question was not
very great are definitely of interest to all producers,

even markets where

(134) The Commission considers

it

is

that

that

sufficiently
established that there was an agreement which, inter alia,
provided for the observance of domestic markets. The
fact
to the
the Japanese firms did not export
common market has its natural explanation in that
agreement. Furthermore, after examining the economic
factors put
the Commission
concludes that they are not such as to preclude the
existence of the agreement as described in recitals 61 to
77, for the following reasons:

forward by the firms,

(135) Firstly,

the fundamentals were only part of a wider
agreement which governed all the commercial relations
(except for the American and Canadian markets) of the
European and Japanese producers. Like any agreement,
it was based on a balance of the specific interests of
each party, which may diverge. Thus, even if in the view
of the Japanese firms the continental European markets
were not interesting, it is likely that the substance of the
its very
agreement would have been different, or
existence called into question,
the
European domestic markets had not been included in it.

if observance of

(136) Secondly, the supposed barriers to entry were not such
as to make it impossible for the Japanese to sell on the
domestic markets of the European producers. On the
it is clear from several documents that the
contrary,

— the Japanese firms export, by sea and all over the
world, more than 95 % of their production of oil
pipes and tubes. In the submissions made by these
firms at the hearing, freight prices to Europe were
presented in isolation,
it was assumed that
i.e.
vessels carry only a small tonnage of pipes and that
their sole destination is Europe. However, this does
not take account of the fact that it is possible to
bulk cargoes, which would reduce
cost.
Furthermore,
in shipping, distance is not a factor
which determines price. Also, the prices referred to
since no
were not
comparison was made between the real transport
costs incurred by the firms and the real production
costs, which would have made it possible to
establish whether sales did not cover costs,

costs but

estimates,

real

the

— as regards the alleged difference in national approval
it should be pointed
standards and requirements,
out that the API standard is a worldwide one and
that any approval
requirements on the part of
consumers apply throughout the world,

— delivery times

from Japan,

for OCTG of API
standard and for ‘project' line pipe, are the same as
for premium threaded pipes, for which the firms did
not think that they represented an obstacle,

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— the very strong position of the European producers
on their national markets, rather
than being an
obstacle for the Japanese firms' exports to Europe,
demonstrates,
in the Commission's view, that the
fundamentals were respected,

— the argument

the

that

accepted by

threat of anti-dumping
proceedings prevented Japanese exports to Europe
the Commission. No
cannot be
anti-dumping proceedings were
initiated against
Japanese imports of steel products, and some of
those which were initiated against other countries
(which concerned seamless pipes and tubes as a
whole) did not succeed. Furthermore, the Japanese
(and
to
anti-dumping proceedings in the United States in
respect of several steel products, which did not
result in their withdrawal from the US market,

firms were

European)

subject

the

(140) The Commission bases its arguments on the Vallourec
statement in this respect and considers that no firm has
provided specific information which casts doubt on it.

(141) With regard to the end of the agreement, KSC, SMI,
NKK and Dalmine maintain that they did not attend any
meeting of the Europe-Japan club after 1994.

(142) The Commission considers that it is not necessary to
hold a meeting in order to participate in an agreement
which has existed for such a long time. The Vallourec
statement of 17 September 1996 mentions that talks
with the Japanese firms had finished a little more than a
year beforehand. It should also be taken into account
that the investigations took place in December 1994.
For these reasons, the Commission has concluded in
recital 108 that the agreement lasted from 1977 to 1995
(except in the case of BS).

— as to the ‘national preference' of oil producers and
gas distribution firms, the Japanese firms did not
give an example of a tender of theirs which had not
been accepted. Without tenders, it is impossible to
conclude contracts,

3. On the legal assessment

( a ) T h e E u r o p e - J a p a n c l u b

— the public procurement

the Japanese firms

rules did not make it
to conclude

impossible for
contracts.

(138) The Commission recognises that where sales to Europe
are concerned the Japanese producers had certain
disadvantages on account of distance and customs
these disadvantages do not explain
duties. However,
their absence from the European market for such a long
period.

( b ) D u r a t i o n o f t h e a g r e e m e n t

(139) The

that

Japanese

firms point out

the Vallourec
statement says that talks began after 1977 but does not
specify the exact date. Dalmine contends that, even if
the talks did start in 1977, there is nothing to indicate
that they resulted in an agreement as described by the
Commission, and that this could have materialised later.
the Commission cannot
According to these firms,
simply rely on Vallourec's statement
to establish the
agreement as starting in 1977. For its part, SMI did not
object to the Commission considering that the meetings
started in the mid-1980s.

(143) The Japanese firms and BS argue that if there had been
an agreement to respect domestic markets it would not
have affected competition within the common market,
since,
in order to sell, the Japanese firms would have
had to overcome the obstacles described above (see
recital 133). BS, for its part, contends that it did not sell
on the domestic markets of
the other producers
because, following the construction of its pipe mill, it
had chosen to concentrate on its domestic market and,
consequently,
view to its
an agreement with a
non-participation would have had no effect on
competition.

(144) However, where it is established that an agreement has
as its object the restriction of competition within the
meaning of Article 81(1) of the Treaty, it is superfluous
to take account of its specific effects on the market (see
recital 104), as this question is relevant only in so far as
determining the amount of any fines is concerned (43).

(145) The Japanese firms also use as an argument the fact that
firms) and that
they sell directly to final users (oil
therefore the products are not resold later. Accordingly,
the agreement does not affect intra-Community trade
within the meaning of Article 81(1) of the Treaty. The
Commission considers that this argument ignores the
fact
four
Japanese firms,
European firms took part
in the agreement, part of
which concerned the observance of domestic markets.

from the four

that, apart

(43) Case T-14/89 Montedipe [1992] ECR II-1155, paragraph 264.

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trade

In the Commission's view, such an agreement is likely to
influence
flows between the Member States
concerned in a way that conflicts with the achievement
of the objectives of a single market among Member
States. For the reasons set out above (see recital 106),
affected
is
intra-Community
appreciably by this agreement.

likely

trade

be

to

( b ) C o n t r a c t s c o n c l u d e d b e t w e e n B S ,
Va l l o u r e c , D a l m i n e a n d M R W

(146) Firstly the four parties deny that the three contracts are
they were

the result of an agreement among them:
negotiated and concluded separately and individually.

(147) The Commission considers, however, that, as is clear
from recitals 78 to 81, there was an agreement between
BS and Vallourec (on Vallourec's initiative, as part of the
renewal of the VAM licensing contract) that BS should
obtain its supplies of plain ends from MRW, Dalmine
and Vallourec so as to preserve the ‘domestic' character
of
firms.
vis-à-vis
the
Furthermore,
in 1993, the four firms had reached a
consensus to maintain these contracts (see recital 91) as
the European industry,
the restructuring of
part of
which they also championed vis-à-vis
the Japanese
producers. For these reasons, the Commission considers
that the contracts are contrary to Article 81(1) of the
Treaty.

the UK market

Japanese

(148) Secondly, the four parties maintain that these contracts
were justified from the commercial standpoint and that
their substance is not contrary to Article 81(1) of the
Treaty.

(149) BS asserts that

for specific economic reasons it had
decided as early as 1990 to stop production of
this
hot-rolled seamless pipes and tubes (Clydesdale);
took place in April 1991. Its finishing plant at Airdrie
(Imperial) continued to operate in the short term and
required reliable supplies of plain ends. The percentages
allocated to the three partners are explained by the fact
that, given the volatile nature of demand in the United
Kingdom,
it would have been very risky for BS to
commit itself to buying fixed quantities for five years or
to a single supplier. As the firm was
to tie itself
dependent on a Vallourec
its OCTG
licence
for
in a strong position to
production, Vallourec was
become its principal supplier ([…] %). With a view to
reducing its stocks and storage charges, Dalmine and
MRW would have been natural choices, since they could
Japanese
deliver
deliveries would have taken several weeks. In addition,

in a week, whereas

the product

BS maintains that the formula used for calculating the
price of plain ends gave each supplier a margin without
restricting competition. Lastly, to apply the formula, BS
revealed only the average prices
the previous
quarter.

for

(150) According to Dalmine, its contract with BS gave it an
outlet on the biggest market in Europe […]. Dalmine
considers that it did not undertake to supply quantities
of plain ends which were unknown in advance, since
the quantities were determined every month. Dalmine
maintains that, at the very most, it had merely played a
secondary role in the conclusion of the contract.

(151) MRW, for its part, contends that its contract with BS
to improve its utilisation of production
enabled it
capacity following the collapse of
the market in the
former Soviet Union and after it had lost a legal battle
with Vallourec over MRW's
to use its own
premium joint.

right

is

sector at

considered

break-even

and tubes

(EEC) No

time
the
3296/92 (44)

(152) The Commission takes the view that the purpose of
these contracts was to maintain BS as a producer in the
United Kingdom as part of the fundamentals (see recital
147). Given the structural overcapacity in the seamless
(Commission
pipes
Regulation
a
imposing
provisional anti-dumping duty on imports of certain
seamless pipes and tubes originating in Czechoslovakia,
Hungary, Poland and the Republic of Croatia referred to
a capacity utilisation rate considerably below 75 %,
‘which
for
the
profitability'), BS did not need to fear a shortage of plain
ends or deliveries at uneconomic prices. It is clear from
the file (pages 15611 and 15612) that, as a result of
these contracts, prices on the British market remained
high (‘Certains clients UK voudront profiter d'opportunité de
tubes lisses à prix plus bas que ceux offerts par les Européens
à BSC et chercheront à imposer à BSC des tubes lisses
ce que BSC aura du mal à
d'origine
refuser' (45). Moreover, to avoid ‘cut-throat competition',
BS had even mentioned the possibility of buying plain
ends from producers other than Vallourec, MRW and
Dalmine (pages 15586 to 15587). Lastly, producers
established outside Europe would have also been in a
position to deliver plain ends within the minimum
period of five or six weeks laid down in the relevant
contracts (46). The contracts provided for no other

sud-américaine,

point

(44) OJ L 328, 14.11.1992, p. 15, recital 38.
(45) ‘Some UK customers will want

the
opportunity to obtain plain ends at
lower prices than those
offered by the Europeans to BSC and will try and force BSC to use
plain ends of South American origin, which BSC will find hard to
refuse.'

to take advantage of

(46) According to clause 4, there are three cut-off dates: for instance,
for deliveries in March, BS specifies (a) quantities on 15 December,
(b) outside diameters on 15 January and (c) all the other order
attributes on 25 January (if the delivery is for the first half of
March) or 10 February (if it is for the second).

6.6.2003

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Official Journal of the European Union

L 140/21

penalty in the event of non-delivery than to include the
undelivered tonnage in the calculation of the annual
tonnage to which the supplier was entitled, which
would simply have reduced de facto the percentage of
supplies provided for in the contracts. Hence, the time
limit did not have the importance which BS said it gave
it.

(155) The Commission considers, however, that, as the file
shows (see recital 91), the renewal by Vallourec had
been agreed between the four parties as part of the
restructuring of
to
maintain ‘domestic' production in the United Kingdom.

the European industry,

in order

(153) At all events,

the contracts contained clauses which

restricted competition.

1. General

F. Penalties

of

fixed

terms

— By defining the quantities to be delivered to BS in
amounts,
instead
percentage
Vallourec, MRW and Dalmine undertook,
for the
benefit of a competitor, to deliver quantities which
were unknown in advance. Thus, for the benefit of a
competitor, they partly abandoned taking advantage
on the market for threaded tubes of any increase in
consumption, since BS's (later Vallourec's) right to
ask MRW, Dalmine and Vallourec for unlimited
quantities of plain ends enabled it to satisfy any
increase in demand. Vallourec, MRW and Dalmine
would not have undertaken to deliver quantities
which were not known in advance without being
certain that BS would not take advantage of this to
increase its share of the market in threaded pipes to
their detriment. To avoid this, pursuant to clause
9(c), the suppliers could rescind the contracts if they
could show that performance had effectively resulted
trading accounts.
in losses in their
In addition,
defining quantities
in percentage terms deterred
competition on quantities between MRW, Vallourec
and Dalmine in respect of their supplies to BS.

— As a consequence of

the formula adopted for
calculating the prices, which made the prices of
plain ends dependent on the prices of
threaded
pipes, Vallourec, MRW or Dalmine lost any interest
in initiating competition on the prices of threaded
pipes in the United Kingdom. A reduction in the
threaded pipes would have entailed a
prices of
reduction in the prices of
the plain ends which
these firms had undertaken to supply to BS (later
Vallourec); the four parties thus ensured that prices
in the United Kingdom remained high.

— The

information which BS (later Vallourec)
is
obliged by the contracts to supply to the other
prices
parties
is
information
secrecy.
by
Communication of
information preserved
this
control over the conditions on the British market.

and
business

(concerning

quantities)

covered

(156)

impose

decision,

In accordance with Article 15(2) of Regulation No 17,
the Commission may
on
by
undertakings or associations of undertakings fines of
between EUR 1 000 to EUR 1 000 000, or a sum in
excess thereof but not exceeding 10 % of the turnover
the
in the preceding business
undertakings participating in the infringement where,
either intentionally or negligently, they infringe Article
81(1) of the Treaty.

each of

year of

(157) To determine the amount of the fine, the Commission
has to take into consideration all the relevant facts and,
in particular,
the
infringement.

duration of

gravity

and

the

(158)

In the case in point, the Commission will also apply its
notice of 18 July 1996 on the non-imposition or
reduction of fines in cartel cases (47).

2. Gravity of the infringement

(159)

In assessing the gravity of
Commission takes into account
impact on the market and the size of
geographic market.

the

its nature,

infringement,

the
its actual
the relevant

the

subject of

and tubes which were

(160) The Commission observes that in the case in point the
the
pipes
agreement (seamless API OCTG and project line pipe)
represent only a proportion of the seamless pipes and
tubes intended for the oil and gas industry. The API
OCTG and project line pipe sold in the Community by
the firms to which this Decision is addressed account
for only about 19 % of Community consumption of
seamless OCTG and line pipe; the rest of the demand is
met from seamless OCTG and line pipe not covered by
the agreement
(more than 50 %) and imports from
non-member countries other than Japan (more than
21 %). Moreover, given the technological progress in the
manufacture of welded pipes and tubes that has been
made over the past 25 years, some of the demand for
could be met by
seamless OCTG and line pipe
medium-diameter welded pipes and tubes, which cost
less to produce (see recital 24). Thus the specific impact
of the infringement on the market has been limited.

(154) Vallourec maintains that it renewed the contracts for the
same reasons that had led BS to conclude them.

(47) OJ C 207, 18.7.1996, p. 4.

L 140/22

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Official Journal of the European Union

6.6.2003

(161) However, the agreement which is the subject of this
decision and whose purpose is
the observance of
domestic markets constitutes, in principle, a very serious
infringement of Community law, since it jeopardises the
proper functioning of
the single market. Aware that
their actions were unlawful, the producers agreed to
introduce a secret,
institutionalised system designed to
restrict competition in an important industrial sector.
Furthermore,
in question
account for most of the consumption of seamless OCTG
and line pipe in the Community and therefore constitute
an extended geographic market.

four Member States

the

(162)

the above,
very
a

the infringement must be
In view of
considered
the
one. However,
serious
Commission takes into account the fact that the sales of
the products concerned in the four Member States in
question by the firms to which this decision is addressed
amount only to about EUR 73 million a year.

(163) Consequently, the amount of the fine, which reflects the
gravity of the infringement, should be fixed at EUR 10
million.

(164) As

to the contracts concluded between BS, MRW,
Dalmine and Vallourec, the Commission considers that,
in fact, these represented only a means of ensuring the
respect of domestic
application of
markets in the framework of the Europe-Japan Club. For
this reason the Commission does not intend to impose
an additional fine.

the principle of

(165) All the firms covered by this decision are large firms.
There is therefore no need to differentiate between the
amounts adopted.

3. Duration of the infringement

(166) As indicated above (see recital 108), the Commission
takes into account the existence of an infringement only
from 1990 onwards. The infringement therefore lasted
in the case of Vallourec, MRW, Dalmine, KSC, NKK,
NSC and SMI from 1990 to 1995. For BS it lasted from
1990 to 1994. Consequently,
this is a medium-term
infringement, which warrants an increase of 10 % a year
in the amount of the fine established on the basis of
gravity.

(167) The basic amount of the fine is therefore fixed at EUR
15 million for Vallourec, MRW, Dalmine, KSC, NKK,
NSC and SMI and EUR 14 million for BS.

4. Attenuating circumstances

(168) The Commission is mindful that the steel pipe and tube
industry has been in crisis for a long time, as indicated
in recital 26. Since 1991 in particular, the situation in
the sector has deteriorated, which, combined with the
growing influx of
imports, has resulted in capacity
reductions and plant closures.

(169) These considerations warrant a reduction of 10 % in the
attenuating
the

amounts

grounds

on

of

basic
circumstances.

5. Applicability of the Commission notice on the

non-imposition or reduction of fines in cartel cases

(170) Vallourec was the only firm concerned by this decision
to supply substantial information on the existence and
content of the agreement. The information enabled the
Commission to establish the infringement of Article
In addition,
the Treaty with less difficulty.
81(1) of
Vallourec informed the Commission that
it was not
substantially
facts on which the
Commission had based its statement of objections.

contesting

the

(171) This cooperation justifies a reduction of 40 % in the
amount of the fine,
in accordance with the first and
second indents of point D(2) of the abovementioned
notice.

(172)

In its written reply to the statement of objections and at
the hearing, Dalmine informed the Commission that it
was not substantially contesting the facts on which the
Commission had based its accusations.

(173)

It should therefore be granted a reduction of 20 % in
accordance with the second indent of point D(2) of the
abovementioned notice.

the hearing,

(174) As far as MRW is concerned, the Commission regards
its behaviour as ambiguous: although MRW did not
in its written reply to the
the facts either
contest
statement of objections or at
it never
clearly expressed its position. MRW refused to supply
certain information which the Commission requested in
a decision pursuant to Article 11(5) of Regulation No
17. The Commission considers that application of the
notice is not warranted in this case. The same also
applies to BS which, while declaring that it did not
contest
the
agreement as described by the Commission in its
statement of objections.

the facts, questioned the existence of

6.6.2003

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Official Journal of the European Union

L 140/23

(175) With regard to KSC, NKK, NSC and SMI,

Commission found
that
cooperation which would justify application of
abovementioned notice. These
existence of the agreement throughout the proceeding,

the
there was no effective
the
contested the

firms

HAS ADOPTED THIS DECISION:

Article 1

1. Mannesmannröhren-Werke AG, Vallourec SA, British
Steel Limited, Dalmine SpA, Sumitomo Metal
Industries
Limited, Nippon Steel Corporation, Kawasaki Steel Corporation
and NKK Corporation have infringed the provisions of Article
81(1) of the EC Treaty by participating, in the manner and to
in an
the extent set out
agreement providing,
their
respective domestic markets for seamless standard threaded
OCTG pipes and tubes and project line pipe.

in the grounds to this decision,

for the observance of

inter alia,

The infringement lasted from 1990 to 1995 in the case
2.
of Mannesmannröhren-Werke AG, Vallourec SA, Dalmine SpA,
Sumitomo Metal Industries Limited, Nippon Steel Corporation,
Kawasaki Steel Corporation and NKK Corporation. In the case
of British Steel Limited, it lasted from 1990 to February 1994.

Article 2

Article 4

The following fines are imposed on the firms mentioned in
Article 1 on account of the infringement established therein:

1. Mannesmannröhren-Werke AG

EUR 13 500 000

2. Vallourec SA

3. British Steel Limited

4. Dalmine SpA

EUR 8 100 000

EUR 12 600 000

EUR 10 800 000

5. Sumitomo Metal Industries Limited

EUR 13 500 000

6. Nippon Steel Corporation

EUR 13 500 000

7. Kawasaki Steel Corporation

EUR 13 500 000

8. NKK Corporation

EUR 13 500 000

Article 5

The fines imposed shall be paid within three months of the
notification of this decision to the following bank account:

Account No 310-0933000-43
European Commission
Banque Bruxelles Lambert
Agence européenne
Rond-point Schuman 5
B-1040 Brussels.

1. Mannesmannröhren-Werke AG, Vallourec SA, British
Steel Limited, and Dalmine SpA infringed Article 81(1) of the
EC Treaty by concluding, in the context of the infringement
mentioned in Article 1, contracts which resulted in a sharing
of the supplies of plain end OCTG pipes and tubes to British
Steel Limited (to Vallourec SA from 1994).

After the time limit has expired,
interest will be charged
automatically at the rate applied by the European Central Bank
to its repo operations on the first working day of the month in
which this decision is adopted, plus 3,5 percentage points,
namely 6,5 %.

In the case of British Steel Limited,

2.
the infringement
lasted from 24 July 1991 to February 1994. In the case of
Vallourec SA, the infringement lasted from 24 July 1991 to 30
March 1999. In the case of Dalmine SpA, the infringement
lasted from 4 December 1991 to 30 March 1999. In the case
of Mannesmannröhren-Werke AG,
lasted
from 9 August 1993 to 24 April 1997.

the infringement

Article 6

This Decision is addressed to:

Article 3

The firms designated in Articles 1 and 2 shall
immediately
terminate the abovementioned infringements, if they have not
already done so, and shall refrain in future from repeating the
acts or behaviour specified in those Articles and from adopting
any measures having equivalent effect.

1. Mannesmannröhren-Werke AG, Wiesenstrasse 36, D-45473

Mülheim

2. Vallourec SA, 130,

rue de Silly, BP 415, F-92 103

Boulogne-Billancourt Cedex

3. British Steel Limited, 15 Marylebone Road, London NW1

5JD, United Kingdom

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Official Journal of the European Union

6.6.2003

4. Dalmine SpA, Piazza Caduti 6 luglio 1944, n.1, I-24044

8. NKK Corporation, 1-1-2 Marunouchi Chiyoda-ku, Tokyo

Dalmine (Bergamo)

100-8202, Japan.

5. Sumitomo Metal Industries Limited, Ote Centre Building,
1-3, Ohtemachi 1-Chome, Chiyoda-Ku, Tokyo, 100-8113
Japan

This decision shall be enforceable pursuant to Article 256 of
the EC Treaty.

6. Nippon Steel Corporation, 6-3 Otemachi 2-chome,

Done at Brussels, 8 December 1999.

Chiyoda-ku, Tokyo 100-8071, Japan

7. Kawasaki Steel Corporation, Hibiya Kokusai Building, 2-3,
Uchisaiwaicho 2-chome, Chiyoda-ku, Tokyo 100-0011,
Japan

For the Commission

Mario MONTI

Member of the Commission

6.6.2003

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Official Journal of the European Union

L 140/25

ANNEX 1

SEAMLESS PIPES AND TUBES 1996

Production

3 273

1 278

2 617

2 064

1 678

1 938

3 162

390

EEC

CEECs

CIS

USA

Latin America

Japan

China

Other

Source: European Steel Tubes Association.

Total

16 400

(in thousand tonnes)

Exports

1 472

687

695

467

1 183

1 267

234

376

6 381

L 140/26

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Official Journal of the European Union

6.6.2003

SALES OF SEAMLESS STEEL PIPES AND TUBES FOR THE OIL INDUSTRY (EXCEPT THOSE MADE OF
STAINLESS STEEL) BY VALLOUREC, DALMINE, MRW, BS (1), NSC, SMI (2), KSC AND NKK (3)

ANNEX 2

Plain end OCTG

Standard threaded
OCTG

Premium threaded
OCTG

Total OCTG

Project line pipe

Trade line pipe

Total line pipe

EUR
million

Tonnes

EUR
million

Tonnes

EUR
million

Tonnes

EUR
million

Tonnes

EUR
million

Tonnes

EUR
million

Tonnes

EUR
million

Tonnes

Average 1990 to 1995

FRG

France

Italy

UK

Total EU

Total world

0,3

301

3,9

0,4

190

3,1

0,6

31,2

33,3

99,6

719

1,4

57 822

59 549

169 143

15,8

31,5

463,5

3 266

3 140

1 514

19 622

38 277

688 601

13,9

2,7

29,2

63,5

133,7

329,9

8 452

2 616

31 734

58 152

125 143

361 374

18,0

6,2

31,1

110,5

198,4

892,9

12 717

5 982

33 966

131 940

223 280

1 241 446

5,1

3,5

9,9

30,0

57,2

192,0

4 585

4 277

13 355

37 983

71 209

319 028

1,2

14,4

47,5

19,3

101,1

224,6

1 831

22 696

77 725

27 659

160 951

396 806

6,4

17,9

57,3

49,4

158,3

416,1

6 417

26 973

91 580

65 642

232 159

715 834

(1) BS's figures do not include the line pipe products made at its Wednesfield mill.
(2) SMI was unable to provide the breakdown for project line pipe and trade line pipe. Consequently, its line pipe figures are not

included. Its sales of plain end OCTG are included in the figure for standard threaded OCTG.

(3) NKK's sales data are based on the figures published by the Japanese Ministry of Finance. No breakdown has been made between the
different categories of OCTG or line pipe at world level. At European level, the figures are NKK estimates. Accordingly, the NKK
world data are not included. Similarly, its sales of plain end OCTG are included in the figure for standard threaded OCTG.

6.6.2003

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Official Journal of the European Union

L 140/27

ANNEX 3

DELIVERIES OF SEAMLESS OCTG BY VALLOUREC, DALMINE, MRW, BS, NSC, SMI, KSC AND NKK

Average 1990 to 1996

Italy

Germany

France

United Kingdom

Spain

Austria

Rest of EU

Norway

EEA

CIS

USA/Canada

South America

Japan

Middle East

Far East

China

Rest of world

Tonnes

31 775

12 329

5 854

127 419

454

1 821

38 906

74 096

292 725

106 266

132 989

69 455

10 524

153 287

150 703

403 267

136 488

%

2

1

0

9

0

0

3

5

20

7

9

5

1

10

10

27

9

Total

1 484 977

100

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Official Journal of the European Union

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ANNEX 4

DELIVERIES OF SEAMLESS LINE PIPE BY VALLOUREC, DALMINE, MRW, BS, NSC, SMI, KSC AND NKK

Average 1990 to 1996

Italy

Germany

France

United Kingdom

Spain

Austria

Rest of EU

Norway

EEA

CIS

USA/Canada

South America

Japan

Middle East

Far East

China

Rest of world

Tonnes

89 020

9 988

26 969

62 430

6 655

2 677

24 411

16 078

238 566

61 507

121 818

26 106

35 498

111 670

220 500

10 846

70 505

909 657

Total

%

10

1

3

7

1

0

3

2

26

7

13

3

4

12

24

1

8

100

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L 140/29

ANNEX 5

IMPORTS FROM NON-MEMBER COUNTRIES (EXCLUDING JAPAN)

Average 1990 to 1995

Seamless OCTG

Seamless line pipe

(tonnes)

49 781

1 604

1 682

3 622

66 027

27 748

4 082

2 163

4 395

56 580

Italy

Germany

France

United Kingdom

EU

Source: Eurostat.