2002/271/EC: Commission Decision of 18 July 2001 relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement — Case COMP/E-1/36.490 — Graphite electrodes (Text with EEA relevance.)(notified under document number C(2001) 1986)
Date: 2001-07-18
Institutions: European Commission
Subjects: electrical equipment, fine, infringement of EU law, inter-company agreement, iron and steel industry, trade agreement, trade-mark law

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 18 July 2001

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

Case COMP/E-1/36.490 — Graphite electrodes

(notified under document number C(2001) 1986)

(Only the English and German texts are authentic)

(Text with EEA relevance)

(2002/271/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

and Commission Regulation (EC) No 2842/98 of 22 December
1998 on the hearing of parties in certain proceedings under
Articles 85 and 86 of the EC Treaty (3),

Having regard to the Treaty establishing the European Com-
munity,

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

Having regard to the Agreement on the European Economic
Area,

Whereas:

Having regard to Council Regulation No 17 of 6 February
1962, first Regulation implementing Articles 85 and 86 of the
Treaty (1),
(EC)
amended
No 1216/1999 (2), and in particular Articles 3 and 15 thereof,

Regulation

last

by

as

1. THE FACTS

1.1.

SUMMARY OF THE INFRINGEMENT

Having regard to the Commission’s decision of 24 January
2000 to initiate proceedings in this case,

(1)

This Decision imposing fines for an infringement of
Article 81 of the Treaty and Article 53 of the EEA
Agreement is addressed to the following undertakings:

Having given the undertakings concerned the opportunity to
make known their views on the objections raised by the
Commission pursuant to Article 19(1) of Regulation No 17

— SGL Carbon AG (‘SGL’)

— UCAR International Inc. (‘UCAR’)

— VAW Aluminium AG (‘VAW’)

— Showa Denko K.K. (‘Showa Denko’)

(1) OJ 13, 21.2.1962, p. 204/62.
(2) OJ L 148, 15.6.1999, p. 5.

(3) OJ L 354, 30.12.1998, p. 18.

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— Tokai Carbon Co., Ltd (‘Tokai’)

1.2. THE GRAPHITE ELECTRODES INDUSTRY

— Nippon Carbon Co., Ltd (‘Nippon’)

— SEC Corporation (‘SEC’)

— Carbide/Graphite Group, Inc. (‘C/G’).

(2)

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

— fixed the prices of the product,

— agreed on and implemented a mechanism for

implementing price increases,

— allocated markets and market share quotas,

— agreed not to increase production capacity,

— agreed not to transfer technology outside the circle

of cartel participants,

— set up machinery for monitoring and enforcing

their agreements.

(3)

The undertakings participated in the infringement during
the following periods:

— SGL: from May 1992 to March 1998

— UCAR: from May 1992 to March 1998

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

— Showa Denko:
April 1997

from May 1992 to at

least

1.2.1. THE PRODUCT MARKET

(4)

(5)

Graphite electrodes are ceramic-moulded columns of
graphite used primarily in the production of steel in
electric arc furnaces, also referred to as ‘mini-mills’. The
electric are process currently accounts for some 35 % of
steel production in the Community and its share is
increasing. Electric arc furnace steelmaking is essentially
a recycling process whereby scrap steel is converted into
new steel. Electrodes can be up to 700 mm (30 inches)
in diameter and 2 800 mm (9 feet) in length and weigh
up to 2 200 kg. The electrodes form part of the roof
structure of the furnace. After the furnace is filled with
selected scrap, the electrodes are lowered until the tips
almost touch the scrap. Electricity is passed into the
electrodes and jumps from the electrode tip to the scrap
steel. As conductors of electricity, graphite electrodes
generate sufficient heat (up to 3 000 °C) to melt scrap
steel and further refine molten steel
into a finished
product. Nine electrodes, joined in columns of three, are
used in the average three-phase AC electric arc furnace
to melt scrap steel. Because of the intensity of the melting
process, one electrode is consumed approximately every
eight hours.

Graphite electrodes are produced using special ‘needle’
coke, a by-product of the oil
industry, and coal tar
pitch. The manufacturing process has six steps, namely
forming, baking, impregnation, rebaking, graphitising
and machining. During graphitising the product
is
heated electrically to over 3 000 °C and is physically
transformed into graphite, the crystalline form of the
carbon and a unique material with low electrical but
high heat conductivity, high strength and performance
at high temperature that makes it suitable for use in
electric arc furnaces. The processing time for an electrode
is approximately two months. There are no product
substitutes for graphite electrodes.

— Tokai: from May 1992 to February 1998

1.2.2.

SUPPLY OF GRAPHITE ELECTRODES

— Nippon: from May 1992 to February 1998

— SEC: from May 1992 to February 1998

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

(6)

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

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

In the Community some 280 000 tonnes of graphite
electrodes were produced, a considerable proportion of
which was exported to third countries.

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

(7)

(8)

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

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

1.2.3. DEMAND FOR GRAPHITE ELECTRODES

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

that

(9)

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

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

(10) According to the cartel’s own figures

(see CMS
Report/Forecast 1995 & 1996, points 72-73, Appen-
dix 20 (4)), demand for electrodes in the Community in
1996 was estimated at 160 000 tonnes. Italy, the largest
single national market, was estimated at 44 000 tonnes;
Germany 31 000 tonnes, Spain 24 000 tonnes, France
18 500 tonnes and the United Kingdom 16 000 tonnes.
(For Norway demand was estimated at 1 200 tonnes.)

(11) Graphite electrodes are priced in the appropriate
national currency per tonne for the standard 24-inch dia-
meter electrode on a delivered basis. The price as at
1 January 1998 was DEM 5 600/tonne (or equivalent).
For larger-sized electrodes (and for DC electrodes) the
price is subject to a premium of 15 to 30 %.

1.2.4.

INDUSTRY RESTRUCTURING

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

The steel industry was also undergoing major restructur-
ing in this period.

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

(*) The square brackets marked with an asterisk denote confidential

(4) All references in this Decision to numbered appendices are to the

information which has been deleted from the text.

appendices to the Statement of Objections.

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

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

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

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

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

1.2.5. THE RELEVANT GEOGRAPHIC MARKET FOR

GRAPHITE ELECTRODES

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

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

(17)

the market

the worldwide character of

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

(18) The Commission therefore concludes that the market

for graphite electrodes is global.

1.2.6.

INTERSTATE TRADE

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

The following table shows the combined shipments
of SGL, VAW Carbon (5), Conradty and UCAR from
Community production sites to each of the Member
States for the year 1996 (6) (imports from the United
States, Japan and other countries not included).

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

(5) VAW Carbon’s figures for the Benelux countries are included
under ‘Belgium’, for Portugal under ‘Spain’ and for Ireland under
‘UK’.

(6) As declared to the Commission in response to requests for
information under Article 11. The figures for some producers
would appear to understate the actual position.

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Market

Austria

Belgium

Denmark

Finland

France

Germany

Greece

Ireland

Italy

Luxembourg

Netherlands

Portugal

Spain

Sweden

UK

Tonnage supplied
from Community
production sites by other Community
SGL, VAW, UCAR,
Conradty

Member States
in %

Imports from

816

3 564

1 843

2 022

13 684

19 416

2 099

353

36 300

2 234

360

1 079

19 633

5 404

8 403

38,48

72,05

100

100

38,62

46,16

100

100

21,83

100

100

100

9,72

100

100

Norway is a steel producer but has no domestic electrode
production. The Norwegian market for electrodes of
1 200 to 2 000 tonnes per year is supplied primarily
from the Community by UCAR, SGL and VAW.

producers supply the rest of demand in the Community
and the EEA.

(21)

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

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

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

turnover

total worldwide

SGL’s
in 2000 was
DEM 2 560 million (approximately EUR 1 262 million).
Its own estimates put its share of the European graphite
electrode market in 1998 at [...]*. SGL’s production
facilities in the EEA are located in Germany, Italy, France,
Spain, Austria and Belgium.

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

1.2.7. THE PRODUCERS

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

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

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

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

(23) The company is engaged in the development, manufac-
ture and marketing of carbon and graphite products for
the steel, ferroalloys, aluminium, chemicals, aerospace
and transportation industries. Its principal products are
graphite electrodes, carbon electrodes, graphite specialit-

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ies, carbon specialities, cathode blocks and flexible
graphite. Graphite electrodes accounted for [...]* of
UCAR’s total revenues in 1999.

SDK is located in Düsseldorf (Showa Denko Europe
GmbH).

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

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

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

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

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

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

VAW Carbon’s share of the market for graphite elec-
trodes in Europe was around 6 % in 1997. The world-
wide turnover of VAW Aluminium AG in 2000 was
EUR 3 693 million.

(25)

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

SDK’s total group turnover in 2000 was JPY 747 billion
(approximately EUR 7 508 million) worldwide. SDK’s
sales of graphite electrodes in Europe from 1992 to
1996 were mainly in Germany. In 1995 it also had sales
in France, Sweden and the United Kingdom.

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

supplied graphite electrodes

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

Tokai’s total turnover worldwide in 2000 was JPY 65 bil-
lion (approximately EUR 471 million).

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

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

(28)

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

SEC’s sales of graphite electrodes in Europe were con-
fined to the German market and limited to the
years 1992, 1994 and 1995.

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

(29) The Carbide/Graphite Group Inc. (C/G), the successor of
Airco, is a US producer of graphite electrodes, needle
coke and calcium carbide products. It was formed as the

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result of a leveraged buyout (LBO) by management of
Airco in June 1988. C/G is the only manufacturer of
graphite electrodes which produces its own needle coke,
the principal raw material in the manufacture of graphite
electrodes. needle coke is also sold to other manufac-
turers of graphite electrodes. The corporate offices of
the company are in Pittsburgh, Pennsylvania.

total worldwide

C/G’s
USD 207 million (approximately EUR 225 million).

turnover

in 2000 was

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

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

Company

Worldwide turn-
over in graphi-
te electrodes
(1998, EUR
million (7)) +
market share in
the worldwide
graphite elec-
trodes market
(1992 to 1998)

EEA-wide turn-
over in graphite
electrodes
(1998) + market
share in the
EEA-wide
graphite elec-
trodes market
(1992 to 1998)

Total worldwide
turnover (8)
(2000, EUR
million (9))

SGL

UCAR

VAW Carbon
VAW Alumin-
ium

[...]*

[...]*

[...]* (10)

C/G

SDK

Tokai

SEC

Nippon

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

1 262

841

3 693

225

7 508

652

155

189

(7) For the purpose of calculating the respective turnover figures the
following average annual EUR/national currency exchange rates
have been used (source: Eurostat): EUR 1 = DEM 1,96913; EUR 1
= USD 1,12109, EUR 1 = JPY 146,415.

(8) The figures provided are based on the companies’ replies to

Article 11 requests from the Commission.

(9) For the purpose of calculating the respective turnover figures the
following average annual EUR/national currency exchange rates
have been used (source: Eurostat): EUR 1 = DEM 1,95583; EUR 1
= USD 0,921937; EUR 1 = JPY 99,4748.

(10) As with effect from 1 July 1998 the graphite electrode activities
of VAW Carbon were sold to Erftcarbon GmbH, the Commission
will take the turnover figures for 1997 as a basis.

1.3.

PROCEDURE

1.3.1.

PREVIOUS COMMISSION INVESTIGATION

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

1.3.2. THE

COMMISSION’S

INVESTIGATIONS

OF

JUNE 1997

(32) On 5 June 1997, acting under Article 14(3) of Regu-
lation No 17 (11) Commission officials, accompanied by
representatives of the national competition authorities
of the Member States concerned, carried out simul-
taneous and unannounced investigations at the follow-
ing undertakings:

— SGL Carbon (Germany)

— VAW Carbon GmbH and VAW Aluminium AG

(Germany)

— Conradty (Germany)

— UCAR (France).

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

(33) During the investigation at VAW Carbon, one of its
representatives admitted that the undertaking had been
warned by SGL to expect a Commission investigation.
(Appendix 1: minute of notification of 6 June 1997).
SGL itself confirmed in its reply under Article 11 dated
30 July 1997 that it had warned VAW and Conradty of
the forthcoming investigations. UCAR also states [...]*

(11) OJ 13, 21.2.1962, p. 204/62.

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that it was warned by SGL in advance; by the time the
investigation started, all the relevant files had been
‘reviewed’ and incriminating documents destroyed or
moved to a safe location away from offices and private
homes.

1.3.5. THE UNDERTAKING’S REACTIONS

1.3.3. INVESTIGATIONS IN OTHER JURISDICTIONS

(34)

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

1.3.4. ARTICLE 11 REQUESTS

(35)

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

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

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

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

(36)

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

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

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

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

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

16.4.2002

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Official Journal of the European Communities

L 100/9

Conradty has never admitted participating in any collus-
ive arrangements.

from SDK,

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

1.3.6. THE ADMINISTRATIVE PROCEDURE

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

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

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

(41)

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

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

(42)

(39)

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

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

1.3.7.

PROCEEDINGS IN OTHER JURISDICTIONS

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

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

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

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

In addition to the fine on the corporation, SGL’s Chief
Executive Mr Robert Köhler was personally fined and
agreed to pay USD 10 million. In a subsequent round of
cases, the former President and Chief Executive Officer

L 100/10

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Official Journal of the European Communities

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of UCAR, Mr Robert Krass, agreed to plead guilty to
conspiracy, serve a 17-month prison term and pay a fine
of USD 1,25 million; UCAR’s former Chief Operating
Officer was also sentenced under a plea bargain agree-
ment to a 9-month jail term and a fine of USD 1 million.

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

— [...]*

— [...]*

— [...]*

— [...]*

— [...]*

— [...]*

— [...]*

— [...]*

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

1.4.2.

INITIAL CONTACTS

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

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

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

1.4. DETAILS OF THE INFRINGEMENT

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

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

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

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

1.4.1. PRELIMINARY OBSERVATIONS: THE DOCUMEN-

TARY EVIDENCE

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

(43) The facts set out below in points 44 to 93 are based

principally on the following evidence:

— [...]*

— [...]*

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

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

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Official Journal of the European Communities

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

(48)

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

1.4.3. ORGANISATION AND PARTICIPANTS

1.4.3.1. Structure

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

1.4.3.2. Participants in meetings

SGL UCAR SDK Tokai

Nip-
pon

SEC

VAW
Car-
bon

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

‘Top Guy’
meetings

‘Working
Level’
meetings

European/
National

[...]*.

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

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

1.4.4. THE BASIC PRINCIPLES OF THE CARTEL

Cartel meetings were held at several different levels:

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

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

— group meetings of the ‘European’ producers with-

out the Japanese (once or twice per year),

— national or regional meetings for particular mar-

kets,

— bilateral contacts between companies.

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

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

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

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

L 100/12

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Official Journal of the European Communities

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(50) During the meeting the following basic principles were

set out and agreed [...]*:

25 May 1992. The participants [...]* were from SGL,
UCAR, SDK, Tokai, SEC, Nippon and VAW Carbon.

— prices for graphite electrodes should be set on a

global basis,

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

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

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

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

— there was to be no expansion of capacity (the

Japanese were supposed to reduce their capacity),

— there should be no transfer of technology outside

the circle of producers participating in the cartel.

subsequent meetings of

The
involved
implementing, monitoring and, if necessary, modifying
the basic scheme that had been agreed by the ‘Top Guys’
at this meeting.

cartel

the

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

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

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

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

1.4.5. IMPLEMENTATION OF THE CARTEL AGREEMENT

1.4.5.1. Cartel meetings

(i)

‘Top Guy’ and ‘Working Level’ meetings

(51) The London ‘Top Guy’ meeting was followed almost
immediately by a ‘Working Level’ meeting in Zurich on

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

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

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(54)

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

in April 1997 in Tokyo;

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

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

(ii) European group meetings

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

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

including Europe, were

(57) As from 1992,

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

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

(56)

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

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

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

(iii) Bilateral contacts

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

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

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Official Journal of the European Communities

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

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

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

(iv) Precautions to conceal meetings and contacts

(59)

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

— documents were either not distributed at the meet-

ings or were destroyed afterwards,

— expenses for meetings were paid in cash with no
reference to those meetings in travel

explicit
expense claims,

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

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

— a system of code names for the companies and
some individuals was devised to cover their real
identities. SGL was referred to as ‘BMW’; UCAR as

‘Pinot’; the Japanese group were dubbed ‘Cold’, a
derivation from the first letters of their individual
‘Lawn’ and ‘Dry’.
code names ‘Chivas’,
VAW Carbon was known as ‘Wave’. Individuals
were also given code names: UCAR’s [...]* was
known as ‘Artemis’; others were given the names
‘Moustache’ and ‘Taurus’ [...]*.

‘Ocean’,

1.4.5.2. Agreement on European prices

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

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

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

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

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

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

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(62)

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

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

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

(63) During its investigation at SGL in June 1997,

the
Commission discovered several price tables for the
period 1994 to 1997 giving electrode prices for the
different countries and regions in the world. As part of
the price-fixing exercise, targets for future price increases
were set well in advance.

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

The part relating to Western Europe is reproduced
below:

Germany

Italy

France

UK

Spain

Norden (12)

Austria

Belgium

Netherlands

Luxembourg

Switzerland

Greece

Portugal

Turkey

1.10.1994 1.4.1995

1.7.1995 1.10.1995 1.1.1996

1.4.1996

1.7.1996

DEM

ITL

FRF

GBP

ESP

DEM

ATS

BEF

DEM

FRF

DEM

DEM

DEM

DEM

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

[...]*

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

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

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

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

(12) ‘Norden’ covers Denmark, Sweden, Finland and Norway: see

Appendix 4.

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

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

(65)

[...]* also provided handwritten tables made by [...]*
(Appendices 15, 16) which it explains as follows:

(67)

‘These are examples of lists of world graphite electrode
markets with current and future price objectives. [...]*
The price lists were prepared by SGL on a periodic basis
and distributed to the graphite electrode producers.’

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

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

1.4.5.3. Implementation of price increases

(66)

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

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

France and United Kingdom. In the other two major
Community markets for electrodes, Italy and Spain,
where UCAR and SGL had roughly equal market shares,
they decided on each occasion which one of them would
‘publicly’ act as the price leader to get the new price
established in the market [...]*.

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

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

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

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

(69)

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

instituted an increase.

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

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

1.4.5.4. Price increases 1992 to 1997

Since SGL had a more important presence in Germany
and Scandinavia than UCAR, it had the responsibility
for announcing and leading the price increase in those
markets. UCAR generally led the price increases in

(70) At the beginning of the cartel (May 1992) the ‘European’
price for graphite electrodes stood at DEM 3 600/tonne
(markets using the German mark were Germany, Scandi-
navia, the Netherlands, Greece, Portugal and Switzer-
land).

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The price in German marks rose in a series of step
increases (some nine can be identified) to reach DEM
5 400 on 1 July 1996, an increase of 50 % in five years
(see Appendix 14).

(72) At their subsequent ‘Working Level’ meetings, the par-
ticipants reviewed their sales in the different markets
and exchanged information in order to monitor observ-
ance of the quotas allocated.

In 1997 with a view to the upcoming cartel investigation,
the price increase planned for 1 July 1997 was post-
poned to 1998. During 1997/1998 the prices reportedly
stagnated at a level of DEM 5 500/tonne. As of 1 January
1998 the price was DEM 5 600/tonne.

1.4.5.5. Market sharing

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

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

Significantly, however, an SGL internal paper of Nov-
ember 1996 setting out its strategy up to the year 2000
(Appendix 18) observes:

‘Market Share/Competition

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

and later recommends:

‘Follow equilibrium with stable market shares for SGL
(25 %), UCAR (31 %) and Japanese (24 %).’

[They refer to worldwide market shares].

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

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

For the purpose of formalising the exchange of volume
information and making the collection of data more
efficient, SGL proposed at the ‘Top Guy’ meeting in
Tokyo in February 1995 the adoption of a ‘Central
Monitoring System’ (CMS). Tokai was designated by the
cartel to collect the data from the Japanese producers,
UCAR and SGL. Appendix 20 is an example of such a
report. Headed ‘CMS Report/Forecast 1995 & 1996’ it
begins with a general overview on the global market and
the positions on a regional basis of SGL, UCAR and the
Japanese; the three ‘legs’ of the world industry are likened
to a triangle in which a balance of market shares has to
be maintained:

‘The balance in market shares within this triangle in
these 4 years inclines to Pinot ...’ [meaning UCAR].

‘There is a sign of enlarging distortion in the balance of
market shares within the triangle which might result in
some destructive reactions from the losing part. Though
it is not easy to say what the just balance is, we have to
be vary (sic) careful about the balance all the more we
are more or less enjoying the fruit of the cooperation ...’.

‘The coming years till 2000 will be very important and
adequate for us to promote a new way of symbiosis in
which we can all secure reasonable profits, while on the

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other hand from another point of view these years, by
disorderly releasing the power accumulated and reserved
under the cooperation, could be years of destruction of
what we have so far formed into a shape.’

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

(73)

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

‘UCAR’,

‘SGL’,

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

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

1.4.5.6. Local meetings and contacts

(i) General

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

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

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

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

(75)

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

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

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

(ii) Germany

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

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

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

(iii)

France

(76)

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

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

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

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

(iv)

Italy

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

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

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

(78) C/G has provided the Commission with documents from
its Italian sales agent relating to a meeting between ‘our
well known competitors’, meaning the four manufac-
turers/suppliers active on the Italian market: Appen-
dices 21 and 22.

According to C/G’s sales agent (Appendix 22):

‘the announced meeting took place on Friday, 12 Nov-
ember (1993). Agreements and decisions as follows:

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

— official price from the official list: 5 000 ITL/Kg

— net price they are going to quote 4 350 ITL/kg.’

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

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

the beginning of

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(v) Spain

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

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

(UCAR/SGL) meetings,

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

(vi) United Kingdom

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

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

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

VAW Carbon

(i) C/G

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

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

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

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

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

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

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

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

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L 100/21

‘(1) not prepared to take hits anymore, keep volume
under control (2) show restraint (3) Europe consump-
tion of graphite — 24 000 tonnes (4) SGL taking all the
hits (5) [...]* (6) [...]* (7) [...]*.’

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

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

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

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

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

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

In this context the Commission states that as early as
22 July 1992, — two months after the ‘Top Guy’
meeting in London — the weekly report to the Chairman
observed (Appendix 25):

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

‘(We) have effectively booked “our share” in Germany
for the second half. All at DM 4 000 +/MT.’

The reference by C/G to ‘our share’ is strongly indicative
that some understanding already existed that its sales
should be restricted in the particular market. Certainly
VAW Carbon seems to have had the impression (Appen-
dix 26) that C/G had agreed to limit its sales in Germany.
Despite C/G’s professed ignorance as to why VAW

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16.4.2002

Carbon could have gained this impression (Article 11
reply, p. 7), such an understanding would be entirely
consistent with SGL’s repeated insistence that C/G had
sold ‘too much’ in Europe.

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

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

(86) C/G’s policy towards the cartel is summed up in a fax
letter of 11 November 1993 to its German agents.
Explaining why the agents had to withdraw immediately
an offer of a DEM 100 discount to Scandinavian cus-
tomers (who are invoiced in German marks), the C/G
senior executive writes:

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

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

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

‘Let me try and explain why we are taking this position.
As I’ve told you before, we are a distant No 4 in Electrode
production in the world. With UCAR, SGL and the
Japanese as a group controlling over 85 % of the world’s
production, we are not in a position to do anything to
disrupt their willingness and ability to increase prices in
the world.’

(Appendix 29).

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

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

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

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

(ii) VAW

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

(87)

In its initial reply to the Commission’s request for
information of 31 March 1999, VAW Carbon admitted

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

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VAW Carbon claims to have stopped attending ‘infor-
mal’ meetings with competitors at around the end of
1996. There is no information from other cartel mem-
bers which would indicate the contrary (see point 115
below).

1.4.5.8. Continuation of the cartel meetings after the

investigations

in regular contact to coordinate their prices in the
European markets.

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

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

(93)

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

(90)

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

(91)

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

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

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

These bilateral
March 1998 [...]*.

contacts

continued until at

least

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

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

2. LEGAL ASSESSMENT

2.1. THE EC TREATY AND THE EEA AGREEMENT

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

Outside the ‘Working Level’ meetings with the Japanese,
the European Sales Directors of UCAR and SGL remained

2.1.1. RELATIONSHIP BETWEEN THE EC TREATY AND THE

EEA AGREEMENT

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

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

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

2.1.2. JURISDICTION

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

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

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

OF THE EEA AGREEMENT

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

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

2.2.2. AGREEMENTS AND CONCERTED PRACTICES

(98) The prohibition in Article 81(1) of

the Treaty and
Article 53(1) of the EEA Agreement relates to agree-
ments, decisions by associations and concerted practices.

An agreement can be said to exist when the parties
adhere to a common plan that limits or is likely to limit
their individual commercial conduct by determining the
lines of their mutual action or abstention from action in
the market. It does not have to be made in writing; no
formalities are necessary, and no contractual sanctions
or enforcement measures are required. The fact of
agreement may be express or implicit in the behaviour
of the parties.

In its judgment in Joined Cases T-305/94, etc. Limburgse
Vinyl Maatschappij NV and others v Commission (PVC II)
[1999] ECR II-931, the Court of First Instance stated (at
paragraph 715) that ‘it is well established in the case-law
that for there to be an agreement within the meaning of
Article [81(1)] of the Treaty it is sufficient
for the
undertakings to have expressed their joint intention to
behave on the market in a certain way’.

(99) Article 81(1) of the Treaty (13) distinguishes ‘concerted
practices’ from ‘agreements between undertakings’ and
‘decisions by associations of undertakings’. The object is
to bring within the prohibition of that Article a form
of coordination between undertakings which, without
having reached the stage where an agreement properly
so-called has been concluded, knowingly substitutes
practical cooperation between them for the risks of
competition (Case 48/69 Imperial Chemical Industries v
Commission [1972] ECR 619).

The criteria of coordination and cooperation laid down
by the case-law of the Court, far from requiring the
elaboration of an actual plan, must be understood in the
light of the concept inherent in the provisions of the
Treaty relating to competition, according to which each
economic operator must determine independently the
commercial policy which it intends to adopt in the
common market. Although that requirement of indepen-
dence does not deprive undertakings of the right to adapt
themselves intelligently to the existing or anticipated
conduct of their competitors, it strictly precludes any
direct or indirect contact between such operators the

(13) The case-law of the Court of Justice and Court of First Instance
in relation to the interpretation of Article 81 of the Treaty applies
equally to Article 53 EEA.

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object or effect of which is either to influence the
conduct on the market of an actual or potential competi-
tor or to disclose to such a competitor the course of
conduct which they themselves have decided to adopt or
contemplate adopting on the market (Joined Cases 40-
48/73, etc. Suiker Unie and others v Commission [1975]
ECR 1663.)

the market between them, the Commission cannot be
expected to classify the infringement precisely, for each
undertaking and for any given moment, as in any
event both those forms of infringement are covered by
Article [81 EC] of the Treaty’.

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

(102) An ‘agreement’ for the purposes of Article 81(1) of the
Treaty does not require the same certainty as would be
necessary for the enforcement of a commercial contract
at civil law. Moreover, in the case of a complex cartel of
long duration, the term ‘agreement’ can properly be
applied not only to any overall plan or to the terms
expressly agreed but also to the implementation of what
has been agreed on the basis of the same mechanisms
and in pursuance of the same common purpose.

it may be presumed, subject

Although in terms of Article 81(1) of the Treaty the
concept of a concerted practice requires not only
concertation but also conduct on the market resulting
from the concertation and having a causal connection
with it,
to
the contrary, that undertakings taking part in such
concertation and remaining active in the market will
take account of the information exchanged with com-
petitors in determining their own conduct on the market,
all the more so when the concertation occurs on a
regular basis and over a long period: judgment of the
Court of Justice in Case C-199/92 P Hüls v Commission,
[1999] ECR I-4287, at paragraphs 158 to 166.

to proof

(101) It is not necessary, particularly in the case of a complex
infringement of long duration, for the Commission to
characterise the conduct as exclusively one or other
of these forms of illegal behaviour. The concepts of
agreement and concerted practice are fluid and may
overlap. Indeed, it may not even be possible realistically
to make such a distinction, as an infringement may
present simultaneously the characteristics of each form
of prohibited conduct, while when considered in iso-
lation some of its manifestations could accurately be
described as one rather than the other. It would however
be artificial analytically to subdivide what is clearly a
continuing common enterprise having one and the
same overall objective into several discrete forms of
infringement of the present type: see again the judgment
of the Court of First Instance in Case T-7/89 Hercules v
Commission, at paragraph 264.

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

A complex cartel may thus properly be viewed as a
single continuing infringement for the time frame in
which it existed. The agreement may well be varied from
time to time, or its mechanisms adapted or strengthened
to take account of new developments. The validity of
this assessment is not affected by the possibility that one
or more elements of a series of actions or of a continuous
course of conduct could individually and in themselves
constitute a violation of Article 81(1) of the Treaty.

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

In its PVC II judgment (see point 98 above), the Court of
First Instance stated (at paragraph 696) that ‘[i]n the
context of a complex infringement which involves many
producers seeking over a number of years to regulate

The mere fact that each participant in a cartel may
play the role which is appropriate to its own specific
circumstances does not rule out its responsibility for the
infringement as a whole, including acts committed by
other participants but which share the same unlawful
purpose and the same anti-competitive effect. An under-

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taking which takes part
in the common unlawful
enterprise through actions which contribute to the
realisation of the shared objective is equally responsible,
for the whole period of its adherence to the common
scheme, for the acts of the other participants pursuant
to the same infringement. This is certainly the case
where it is established that the undertaking in question
was aware of the unlawful behaviour of the other
participants or could have reasonably foreseen or been
aware of them and was prepared to take the risk
(judgment of Court of Justice in Anic, at paragraph 83).

2.2.3. THE NATURE OF THE INFRINGEMENT IN THE PRE-

SENT CASE

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

‘agreement’

concept of

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

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

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

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

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

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

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

‘agreement’,

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

Although it is not necessary as far as C/G is concerned
to categorise the infringement precisely (see the PVC II
judgment, at paragraph 696) its involvement could well
be considered as having more of the characteristics of a
concerted practice. In the event, however, the exact
classification of its behaviour in terms of Article 81(1)
of the Treaty is immaterial: C/G cannot purport to
dissociate itself from the overall scheme in which it
knowingly participated.

2.2.4. RESTRICTION OF COMPETITION

(108) The complex of agreements in the present case had the
object and effect of restricting competition in the
Community and EEA.

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Article 81(1) of the Treaty and Article 53(1) of the EEA
Agreement expressly include as restrictive of compe-
tition agreements and concerted practices which:

— designating the producer which was to ‘lead’ price

increases in each national market,

— directly or indirectly fix selling prices or any other

trading conditions,

— circulating lists of current and future target prices

in order to coordinate price increases,

— limit or control production, markets or technical

development,

— devising and applying a reporting and monitoring
system to ensure the implementation of
their
restrictive agreements,

— share markets or sources of supply.

— participating in regular meetings and having other
contacts in order to agree the above restrictions
and to implement and/or modify them as required.

(109) These are the essential objectives of the horizontal
arrangements under consideration in the present case.
Price being the main instrument of competition, the
various collusive arrangements and mechanisms adopted
by the producers were all ultimately aimed at an inflation
of the price to their benefit and above the level which
would be determined by conditions of free competition.
Market-sharing and price fixing by their very nature
restrict competition within the meaning of both
Article 81(1) of the Treaty and Article 53(1) EEA.

2.2.5. EFFECT ON TRADE BETWEEN MEMBER STATES AND

BETWEEN EEA CONTRACTING PARTIES

(111) The continuing agreement between the producers had
an appreciable effect on trade between Member States
and between EEA contracting parties.

(110) The present cartel has to be considered as a whole and
in the light of the totality of the circumstances, but the
principal aspects of the complex of agreements and
arrangements which can be characterised as restrictions
of competition are:

— fixing of prices,

— allocating markets and market share quotas,

— requiring ‘non-home market’ producers to with-
draw from or not compete ‘aggressively’ in particu-
lar markets,

— freezing/restricting/closing

down

production

capacity,

— limiting the transfer of technology outside the

cartel.

These principal aspects were implemented by the cartel
members mainly by:

— agreeing concerted price increases,

Article 81(1) of the Treaty is aimed at agreements which
might harm the attainment of a single market between
the Member States, whether by partitioning national
markets or by affecting the structure of competition
within the common market. Similarly, Article 53(1) of
the EEA Agreement
is directed at agreements that
undermine the achievement of a homogeneous Euro-
pean Economic Area.

As demonstrated in the ‘Interstate trade’ section (see
point 19 above), the graphite electrode market is charac-
terised by a substantial volume of trade between Member
States. There is also a considerable volume of trade
between the Community and EFTA: Norway imports
100 % of its requirements, primarily from SGL, UCAR
and VAW Carbon, and prior to the accession of Austria,
Finland and Sweden, Austria imported a substantial
quantity and the other two countries the totality of their
graphite electrode requirements.

The application of Articles 81(1) of the Treaty and 53(1)
of the EEA Agreementto a cartel is not, however, limited
to that part of the members’ sales that actually involve
the transfer of goods from one State to another. Nor is
it necessary, in order for these provisions to apply, to
show that the individual conduct of each participant, as
opposed to the cartel as a whole, affected trade between
Member States (see the judgment of the Court of First
Instance in Case T-13/89 Imperial Chemical Industries v
Commission [1992] ECR II-1021, at paragraph 304).

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In the present case, the cartel arrangements covered
virtually all trade throughout the Community and EEA
in this important industrial sector. The withdrawal from
particular markets of the ‘non-home market’ producers
as well as the existence of a price-fixing and quota
mechanism must have resulted, or was likely to result,
in the automatic diversion of trade patterns from the
course they would otherwise have followed (see the
judgment of the Court of Justice in Joined Cases 209 to
215 and 218/78 Van Landewyck and others v Commission
[1980] ECR 3125, at paragraph 170).

In so far as the activities of the cartel related to sales in
countries that are not members of the Community or
the EEA, they lie outside the scope of this Decision.

2.2.6. PROVISIONS OF THE COMPETITION RULES APPLI-
CABLE TO AUSTRIA, FINLAND, NORWAY AND
SWEDEN

(112) The EEA Agreement entered into force on 1 January
1994. For the period prior to that date during which the
cartel operated, the only provision relevant for the
present proceedings is Article 81 of the Treaty; in so far
as the cartel arrangements covered Austria, Finland,
Norway and Sweden prior to that date (then EFTA
Member States), they will not be regarded as a violation
of Article 81(1) of the Treaty.

In the period 1 January to 31 December 1994, the
provisions of the EEA Agreement applied to the four
EFTA Member States which had joined the EEA; the
cartel thus constituted a violation of Article 53(1) of the
EEA Agreementas well as of Article 81(1) of the Treaty,
and the Commission is competent to apply both pro-
visions. The operation of
in these four
EFTA States during this one-year period falls under
Article 53(1) EEA.

the cartel

After the accession of Austria, Finland and Sweden to
the Community on 1 January 1995, Article 81(1) of the
Treaty became applicable to the cartel in so far as it
affected those markets. The operation of the cartel in
Norway remained in violation of Article 53(1) EEA.

In practice, it follows from the foregoing that in so far
as the cartel operated in Austria, Finland, Norway and
Sweden, it constituted a violation of the EEA and/or
Community competition rules as from 1 January 1994.

2.2.7. DURATION OF THE INFRINGEMENT

(113) Although it is apparent from the statements of both
SDK and UCAR that contacts between UCAR, Sigri and

the Japanese producers had started as early as 1991, the
Commission will in the present case limit its assessment
under the competition rules and the application of any
fines to the period from May 1992, this being the date
of the first ‘Top Guy’ meeting in London when the basic
principles for the cartellisation of the market were
agreed.

It should of course be noted that in so far as the cartel
covered Austria, Finland, Norway and Sweden, this does
not constitute an infringement of the competition rules
prior to 1 January 1994, when the EEA Agreement came
into effect.

The participation in the infringement of UCAR, SGL and
the Japanese producers from 21 May 1992 is established
by the participation in the first ‘Top Guy’ meeting of
their respective Presidents/General Managers or (in the
case of Nippon and SEC) another undertaking rep-
resenting their interests.

In any event, the fact that Nippon and SEC did not
attend the first ‘Top Guy’ meeting of 21 May 1992 is
immaterial since they were both represented by Tokai
and were themselves present at the first ‘Working Level’
meeting only four days later, as was VAW Carbon.

The involvement of C/G in the collusion will be taken
from January 1993 when collusion on pricing was
openly discussed for the first time (see point 81 above).

(114) In spite of the investigations conducted by both the
Federal Bureau of Investigation and the Commission,
cartel meetings continued until at least 13 February
1998, the last known ‘Working Level’ meeting having
taken place on that date with the participation of
representatives of SGL, UCAR and three of the Japanese
producers: SEC, Nippon and Tokai. Indeed SGL and
UCAR continued their illegal contacts for at least another
month (see point 93 above).

Although UCAR has stated (point 93 above) that further
contacts were initiated by SGL over the following six
in the absence of corroboration the Com-
months,
mission will for the purposes of assessing fines proceed
on the basis that the participation of SGL and UCAR in
the cartel ended in March 1998. For the three Japanese
producers — SEC, Nippon and Tokai — the relevant
date will be taken as mid-February.

SDK had by then already withdrawn from the meetings.
Although it states that new senior management in Tokyo
had issued a directive as early as January 1997 to the
effect that participation in anti-competitive behaviour

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would not be tolerated, an SDK representative actually
went to the meeting in Tokyo on 9 and 10 April 1997,
supposedly to inform the other members of the cartel
that it would no longer participate. Other cartel members
who do not mention SDK as participating in later
meetings [...]* (indirectly) confirm this. April 1997 can
therefore be taken as the date SDK withdrew from the
arrangements (Showa Denko’s Reply to the Statement of
Objections, p. 8).

(118) As from 1 January 1996 the entire carbon and graphite
activities (including production and sales) of VAW
Aluminium AG were transferred to its wholly owned
subsidiary company Ingal GmbH, Bonn, which was
renamed (somewhat confusingly) VAW Carbon GmbH
(the ‘new’ VAW Carbon GmbH). In January 1996 it
absorbed the old VAW Carbon GmbH (Grevenbroich),
which was deleted from the companies register.

(115) VAW Carbon claims to have ceased attending meetings
at the end of 1996. In the absence of any contrary
evidence, the Commission will take this as the relevant
date for determining duration in its case.

C/G says that during 1996 its General Manager requested
[...]* SGL to stop telephoning C/G (Article 11 reply,
p. 9). The last meeting it admits attending was in
Frankfurt in November 1996, which will be taken as the
date C/G withdrew from the cartel [...]*.

2.2.8. ADDRESSEES OF THE PRESENT PROCEEDINGS

(116) It is established by the facts as described in Part 1 of the
present Decision that SGL, UCAR, Showa Denko, Tokai,
Nippon, SEC and C/G directly participated in the cartel.
Consequently, each company will bear responsibility for
the infringement and is therefore an addressee of the
present Decision.

(117) The question of the appropriate addressee arises only in
one case, where the attribution of the conduct of the
subsidiary to its parent company must be discussed.
That case is VAW Carbon.

The original VAW Carbon GmbH (registered in Greven-
broich) acted until 31 December 1995 as a ‘mere selling
company’ (reine Vertriebsgesellschaft) for the carbon and
graphite products manufactured by VAW Aluminium
AG. According to VAW Carbon’s reply of 9 July 1999
to the Commission’s request for information of 28 June
1999 (point 2) it was a wholly owned subsidiary of
VAW Aluminium AG.

VAW Aluminium AG is a large industrial group with
diverse activities and a network of subsidiaries.
Its
carbon (and graphite electrode) sector was the subject of
corporate restructuring on two occasions during the
period of the cartel.

In September 1998, under a leveraged buyout operation
by the management (financed mainly by NatWest Ven-
tures (Nominees) Ltd of London (‘NatWest’)), the busi-
ness and assets of the ‘new’ VAW Carbon GmbH were
acquired with the consent of VAW by a newly-formed
company Erftcarbon GmbH & Co KG, in which NatWest
owns 85 % and the management 15 % of the share
capital.

Under Article 14 of the purchase contract, the responsi-
bility for any fines or penalties to which the ‘new’
VAW Carbon GmbH may have been liable under the
Commission’s investigation in the present case however
remained with that company.

The ‘new’ VAW Carbon GmbH continues in existence,
but only as a dormant company with no commercial
activity. Its only current assets are the monies received
from the sale.

(119) The Commission addressed the Statement of Objections
to VAW Aluminium AG, the parent company of VAW
Carbon GmbH.

(120) During the administrative procedure in the present case,
VAW Aluminium AG argued that the Statement of
Objections and any Decision should be addressed not to
itself but to VAW Carbon GmbH. According to VAW
Aluminium AG, its subsidiary was entirely responsible
for the selling and marketing of the product; VAW
Aluminium AG was never involved in the cartel (VAW
Reply to the Statement of Objections, pp. 1 and 2).

(121) The Commission rejects VAW Aluminium AG’s argu-
ments. In its recent judgment in Case C-286/98 P Stora
Kopparbergs Bergslags SG v Commission [2000] ECR I-
9925, at paragraph 28, the Court of Justice upheld the
Court of First Instance finding that a parent company
might be held liable for its subsidiary’s conduct stating
that ‘as [the] subsidiary was wholly owned, the Court of
First Instance could legitimately assume [...]* that the
parent company in fact exercised decisive influence over
its subsidiary’s conduct [...]*’.

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This presumption has not been rebutted in the present
case. VAW Aluminium AG did not submit any evidence
to support its assertion that VAW Carbon GmbH had
behaved autonomously.

Furthermore, VAW Aluminium AG’s allegation that it
was totally unaware of the anti-competitive behaviour
of its wholly owned subsidiary is contradicted by the
fact that the Commission found during its inspection at
VAW Aluminium AG a notice that Mr Müller of VAW
Carbon GmbH had informed VAW Aluminium AG of
the forthcoming cartel inspections by the Commission
(see point 33 above; Appendix 1: minute of notification
of 6 June 1997).

(122) The Commission therefore considers that VAW Alu-
minium AG may be held liable for VAW Carbon’s
conduct.

(123) The Commission notes that until 1 January 1996 VAW
Aluminium AG was itself primarily and directly involved
in the production of carbon and graphite products; the
‘old’ VAW Carbon GmbH (of which it was in any event
the 100 % owner) was merely the corporate identity of
its sales organisation. The fact that for approximately
one year afterwards the carbon and graphite production
activity of VAW Aluminium AG was located in a wholly
owned subsidiary does not affect the Commission’s
assessment in this regard.

Finally, the Commission considers that there might be
difficulties in collecting any fine from a dormant com-
pany with no commercial activity and whose continued
existence depends entirely upon the tax advantages it
brings VAW Aluminium AG.

For all these reasons the present Decision is addressed to
VAW Aluminium AG.

2.3. REMEDIES

2.3.1. ARTICLE 3 OF REGULATION No 17

The infringement continued long after the simultaneous
investigations carried out by the Commission and the
United States authorities. Documentation was destroyed
in advance of the anticipated investigation. In Janua-
ry 1998 SGL also attempted to persuade the Japanese
producers not to cooperate with the Commission. In the
circumstances it is impossible to say with any certainty
if the infringement has ceased and indeed there are some
indications to the contrary.

(125) It is therefore necessary for the Commission to require
the undertakings to which the present Decision is
addressed to bring the infringement to an end (if they
have not already done so) and henceforth to refrain
from any agreement, concerted practice or decision by
an association of undertakings which might have the
same or similar object or effect.

2.3.2. ARTICLE 15(2) OF REGULATION No 17

2.3.2.1. General considerations

(126) Under Article 15(2) of Regulation No 17 (14) the Com-
mission may by decision impose on undertakings fines
of between EUR 1 000 and EUR 1 million, or a sum in
excess thereof not exceeding 10 % of the turnover in the
preceding business year of each of the undertakings
participating in the infringement where, either intention-
ally or negligently, they infringe Article 81(1) of the EC
Treaty and/or Article 53(1) of the EEA Agreement.

(127) In fixing the amount of any fine the Commission must
have regard to all relevant circumstances and particularly
the gravity and duration of the infringement, which are
the two criteria explicitly referred to in Article 15(2) of
Regulation No 17.

(128) The role played by each undertaking party to the
infringement will be assessed on an individual basis. In
particular,
in the fine
the Commission will reflect
imposed any aggravating or mitigating circumstances
and will apply, as appropriate, the Notice on the non-
imposition or reduction of fines in cartel cases (the
‘Leniency Notice’) (15).

(124) Where the Commission finds there is an infringement of
Article 81(1) of the Treaty or Article 53(1) of the EEA
Agreementit may require the undertakings concerned to
bring that infringement to an end in accordance with
Article 3 of Regulation No 17.

(14) Under Article 5 of Council Regulation (EC) No 2894/94 of
28 November 1994 concerning arrangements for implementing
the Agreement on the European Economic Area, ‘the Community
rules giving effect to the principales set out in Articles 85 and 86
[now Articles 81 and 82] of the EC Treaty [...] shall apply mutatis
mutandis’.

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

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2.3.2.2. The basic amount of the fines

impact on the graphite electrodes market in the EEA.
Prices were not only agreed but also announced and
implemented.

(129) The basic amount is determined according to the gravity

and duration of the infringement.

(i) Gravity

(130) In assessing the gravity of the infringement, the Com-
mission will take account of its nature, its actual impact
on the market and the size of the relevant geographic
market.

— Nature of the infringement

(131) It follows from the foregoing that the present infringe-
ment consisted mainly of market-sharing and price-
fixing practices, which are by their nature very serious
violations of Articles 81(1) of the Treaty and 53(1) EEA.

(132) The cartel constituted a deliberate infringement of
Articles 81(1) of the Treaty and 53(1) EEA. With full
knowledge of the illegality of their actions, the leading
producers combined to set up a secret and institutional-
ised system designed to restrict competition in a major
industrial sector.

(133) The cartel arrangements permeated the whole industry,
were mostly conceived, directed and encouraged at
the highest levels of the undertakings concerned and
operated entirely for the benefit of the participating
producers and to the detriment of their customers and
ultimately the general public.

(134) The Commission therefore considers that the present
infringement constituted by its nature a very serious
infringement of Article 81(1) of
the Treaty and
Article 53(1) EEA

(136) The cartel was characterised by a continuous concern
for the setting of target prices (see points 60 to 65
above). Once the two major producers, SGL and UCAR,
had agreed on prices, they arranged in advance which of
them would announce the increases to customers. As
soon as the price increase was accepted by customers,
the smaller producers ‘followed’ the major producers
and applied the new prices. Notwithstanding the fact
that a planned price increase was occasionally postponed
implemented, prices applied on the market
or not
followed those agreed by the cartel to a considerable
extent over a period of six years (see points 66 to 69
above).

(137) Due to a substantial decline in the consumption of
graphite electrodes and a restructuring process affecting
the whole industry in the 1980s, European graphite
electrode prices plunged. As a result, in 1990/91 prices
were around 50 % lower than at the end of 1996. The
cartel agreements were implemented by a series of step
increases between 1992 and 1996. During this period
prices nearly doubled. Only in 1997, with a view to the
upcoming cartel investigation, the price increases already
planned were postponed and stagnated (see point 70
above). Thus the price increases had a clear effect on the
market at least in that the prices agreed were not only
announced but also implemented.

(138) UCAR claims that the cartel had only limited impact on
the steel industry. Because of the unprofitable level of
prices in the early 1990s, price increases were necessary
to justify the continued manufacture of graphite elec-
trodes. Price increases also allowed quality improve-
ments which benefited the steel industry (UCAR’s reply
to the Statement of Objections, p. 18).

— The actual impact of the infringement on the graphite

electrodes market in the EEA.

(135) The Commission considers that the infringement, com-
mitted by producers which for the period relevant to
this Decision represented almost 90 % of the worldwide
and EEA market for graphite electrodes, had an actual

(139) Contrary to UCAR’s argument, the Commission con-
siders that the significant increase in the price of graphite
electrodes between 1992 and 1996/97 (see point 70
above) must be interpreted in the light of the fact that
the cartel members agreed on target prices, market share
allocation and a reporting and monitoring system (see
point 135 above). Although it is difficult to say whether
and to what extent prices would have been different
without the cartel, the conscious implementation of the
cartel agreements created a serious risk that prices were
higher than under normal conditions of competition.

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(140) The Commission also rejects the suggestion that benefits
to industrial and commercial activity such as quality
improvements or employment should be used to offset
the negative effects of infringements of the competition
rules. In any case, UCAR has not established a clear link
between the alleged improvements in quality and the
cartel.

the effective economic capacity of

account of
the
offenders to cause significant damage to competition, as
well as to set the fine at a level which ensures it has
sufficient deterrent effect. The Commission notes that
this exercise seems particularly necessary where, as in
the present case, there is considerable disparity in the size
of the undertakings participating in the infringement.

(141) C/G argues that given its small presence in Europe and
its history as a price follower its conduct had no adverse
impact on competition at all. C/G’s contacts with its
competitors did not change C/G’s pricing behaviour; it
would have priced in exactly the same way if those
contacts had never occurred (C/G’s Reply to the State-
ment of Objections, p. 12 and Economic Study present-
ed at the Oral Hearing).

(142) The Commission agrees that C/G was only a price
follower on the market. However, it is clear that owing
to its participation in the cartel it received crucial price
and sales information. C/G was therefore in a completely
different position from other fringe players on the
market that did not have the same first-hand infor-
mation. Any claim that C/G continued to pursue an
independent price strategy is not at all credible and must
be dismissed.

(143) In conclusion, the Commission considers that the parties
concerned by the present Decision have not been able
to rebut its finding as to the actual
impact of the
infringement on the graphite electrodes market in the
EEA.

— The size of the relevant geographic market

(144) For the purpose of assessing gravity it is important to
note that the cartel covered the whole of the common
market and, following its creation, the whole of the EEA.

— The Commission’s conclusion on gravity

(145) Taking all these factors into account, the Commission
considers that the undertakings concerned by the present
Decision have committed a very serious infringement.

(147) In the circumstances of this case, which involves several
undertakings, it will be necessary in setting the basic
amount of the fines to take account of the specific
weight and therefore the real impact of the offending
conduct of each undertaking on competition.

(148) For this purpose the undertakings concerned can in
principle be divided into three categories according to
their relative importance in the market concerned,
subject to adjustment where appropriate to take account
of other factors and especially the need to ensure
effective deterrence.

(149) As the basis for comparing the relative importance of an
undertaking in the market concerned, the Commission
considers it appropriate to take in the present case the
worldwide product turnover. This is supported by the
fact that this was a global cartel, the object of which
was, inter alia, to allocate markets on a worldwide level,
and thus to withhold competitive reserves from the EEA
market. Moreover, the worldwide turnover of any given
party to the cartel also gives an indication of
its
contribution to the effectiveness of the cartel as a whole
or, conversely, of the instability which would have
effected the cartel had it not participated. The compari-
son is made on the basis of the worldwide product
turnover in the last year of the infringement (1998).

(150) It is very clear from the table at point 30 that SGL and
UCAR were the two major producers of graphite
electrodes in the worldwide and EEA market. They will
therefore be placed in the first category. C/G, SDK and
Tokai, which had significantly lower market shares in
the worldwide market (5 % to 10 %), are placed in
the second category. VAW, SEC and Nippon, with
worldwide market shares each of them below 5 %, are
placed in the third category.

(151) On the basis of the foregoing, the appropriate starting
point for a fine resulting from the criterion of relative
importance in the market concerned is for each category
as follows:

— Differential treatment

(146) Within the category of very serious infringements, the
proposed scale of likely fines makes it possible to apply
differential treatment to undertakings in order to take

— SGL and UCAR: EUR 40 million

— C/G, SDK and Tokai: EUR 16 million

— VAW, SEC and Nippon: EUR 8 million.

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(152) In order to

(a)

(b)

ensure that the fine has a sufficient deterrent effect;
and

take account of the fact that large undertakings have
legal and economic knowledge and infrastructures
which enable them more easily to recognise that
their conduct constitutes an infringement and to
be aware of the consequences stemming from that
conduct under competition law;

the Commission will determine whether any further
adjustment of the starting point is needed for any
undertaking.

(157) C/G committed an infringement of medium duration of
three years and 10 months. The starting amount of the
fine determined for gravity is therefore increased by
35 %.

(iii) Conclusion on the basic amounts

(158) The Commission accordingly sets the basic amounts of
the fines for SGL and UCAR at EUR 62 million, for
VAW Aluminium AG at EUR 14,5 million, for SDK at
for
EUR 58 million,
C/G at EUR 21,6 million and for SEC and Nippon at
EUR 12,4 million.

for Tokai at EUR 24,8 million,

2.3.2.3. The individual fines

(153) In the cases of VAW Aluminium AG (16) and SDK, the
the appropriate starting
Commission considers that
point for a fine resulting from the criterion of the relative
importance in the market concerned requires further
upward adjustment to take account of their size and
their overall resources.

(159) On the basis of its conclusions on the basic amount of
fines, the Commission will assess for each company
on an individual basis any aggravating or mitigating
circumstances and will apply, as appropriate, the Lenien-
cy Notice.

(154) On the basis of the foregoing, the Commission considers
that in the case of VAW Aluminium AG, the need for
deterrence requires that the starting point of its fine
determined in recital 151 should be increased by 1,25
to EUR 10 million. In the case of SDK, being by far the
largest undertaking concerned by this Decision, the
starting point of its fine determined in recital 151 should
be increased by 2,5 to EUR 40 million.

(ii) Duration of the infringement

(155) As mentioned, the Commission considers that SGL,
UCAR, Tokai, Nippon and SEC infringed Article 81(1)
of the Treaty and Article 53(1) of the EEA Agreement
from May 1992 until February/March 1998. They com-
mitted a long-term infringement of five years and 9 to
10 months. The starting amount of the fines determined
for gravity is therefore increased by 55 % for each
company.

(156) SDK and VAW committed a medium-term infringement
of four years and 7/11 months respectively. The starting
amount of their fines determined for gravity is therefore
increased by 45 % for each company.

(i) SGL

— Aggravating circumstances

(160) The gravity of the infringement is aggravated in SGL’s

case by the following circumstances:

— SGL’s role as one of the ringleaders and instigators

of the cartel,

— its attempts to obstruct the Commission proceed-
ings by giving warnings to other companies of the
forthcoming investigations,

— its continuation of this clear-cut and indisputable

infringement after the investigations.

— Arguments of SGL

(161) SGL contests the Commission’s finding that it was one
of the ringleaders and instigators of the cartel. It argues
that UCAR and its former parent companies Union
Carbide and Mitsubishi Corporation initiated the con-
tacts and played the leading role (SGL’s reply to the
Statement of Objections, pp. 14 to 16).

— Arguments of the Commission

(16) As stated above (see recitals 117 to 123), the Commission holds
the parent company VAW Aluminium AG responsible for the
anti-competitive behaviour of VAW Carbon GmbH, its wholly
owned subsidiary.

(162) It is apparent from the facts as described in Part 1 of this
decision that SGL was the ‘European’ leg of the cartel
(see recital 47). It was SGL together with UCAR which
took the main decisions with regard to target

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prices and market allocation in the Member States and
which had regular contacts with VAW Carbon and C/G.

and adequate recognition should be accorded in the
reduction granted.

(163) Finally, the fact that UCAR also played a leading role
in the infringement does not excuse or lessen SGL’s
behaviour. Both undertakings were by far the most
powerful cartel members with the same ambition,
namely to be the leader in the world graphite market.

— Arguments of SGL

— Conclusion

(164) The abovementioned substantial aggravating circum-
stances justify an increase of 85 % in the basic amount
of the fine.

— Mitigating circumstances

(165) There are no mitigating circumstances relating to the
infringement in SGL’s case that could justify a reduction.

(166) The appropriate fine is therefore EUR 114,7 million.

— Application of the Leniency Notice

(167) The Commission will grant a reduction of the otherwise
appropriate fine in recognition of SGL’s cooperation
under its Leniency Notice.

(168) Under Section D of the Notice an undertaking which
does not comply with all the conditions set out in
Sections B or C can still benefit from a significant
reduction of 10 % to 50 % of the fine that would
otherwise have been imposed where (for example):

— before a Statement of Objections is sent, it provides
the Commission with information, documents or
other evidence which materially contribute to
establishing the existence of the infringement,

— after receiving a Statement of Objections, it informs
it does not substantially
the Commission that
contest the facts on which the Commission bases
its objections.

(169) Even if the infringement did continue for several months
after the investigation, SGL cooperated at an early stage,

(170) SGL claims that

its cooperation went

in substance
far beyond the contributions of other companies and
occurred at an earlier stage. First contacts with the
Commission took place as early as April 1998, when
the company announced its willingness to cooperate. It
was however the parallel criminal and civil law proceed-
ings in the United States and the incompatibility between
the different prosecution systems which prevented SGL
from providing any relevant information.

(171) SGL argues further that as soon as a plea agreement had
been reached with the US Department of Justice,
it
provided the Commission on 8 June 1999 with a
detailed and voluntary statement (SGL’s reply to the
Statement of Objections, pp. 2, 5 to 8).

— Arguments of the Commission

(172) The conditions under which a company wishing to
cooperate with the Commission may be granted a
reduction in its fine are clearly set out in the Leniency
Notice. It is up to each company to consider carefully
the benefits resulting from any cooperation with the
Commission and difficulties which could possibly arise
in other proceedings and in particular in the United
States. As any cooperation under the Leniency Notice is
provided on a voluntary basis,
it is each company’s
individual decision to choose the appropriate means and
timing. The Commission can however only take into
account real and effective contributions.

(173) Given that no actual cooperation had been provided
by SGL since the first contacts in April 1998,
the
Commission on 31 March 1999 sent the company a
formal request for information pursuant to Article 11 of
Regulation No 17. Contrary to SGL’s arguments, the
Commission was perfectly entitled to ask the questions
as set out in its request. SGL only replied in part,
however. Only after a further reminder of 31 May 1999,
in which the Commission reserved the right to adopt a
formal decision pursuant to Article 11(5) of Regulation
No 17, did SGl provide on 8 June 1999 a corporate
statement as to its participation in the cartel.

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(174) Given that any cooperation under the Leniency Notice
must be voluntary and in particular outside the exercise
of any investigatory power, the Commission considers
that a substantial part of the information provided in
this statement in fact constitutes SGL’s reply to the
Commission’s formal request for information. SGL’s
statement will be regarded as a voluntary contribution
within the meaning of the Leniency Notice only where
the information provided went beyond that requested
under Article 11, in particular, with regard to details of
certain meetings of which the Commission was unaware,
and on the national implementation of the cartel in
Europe.

(175) After due consideration of all these circumstances, the
Commission will reduce the fine that it would otherwise
have imposed on SGL by 30 % in accordance with the
first indent of Section D(2) of the Leniency Notice.

(176) SGL will therefore be required to pay a fine of EUR 80,29

million.

— Liability for the infringement with regard to the ne bis in

idem principle

(177) During the procedure SGL raised several arguments with
regard to its liability to any fine from the standpoint of
ne bis in idem (see SGL’s written reply to the Statement
of Objections, pp. 17 to 21, and a Legal Study of the ne
bis in idem principle presented at the Oral Hearing).

(178) SGL claimed variously (and not entirely consistently)

that:

(a)

(b)

(c)

under the general ne bis in idem principle of criminal
law, it should not be prosecuted or sanctioned a
second time for the same action under EC compe-
tition law, the conviction and the fine in the United
States having already expunged the totality of its
culpability;

the United States had fined SGL on the basis of
total world turnover;

on the basis of general principles of justice and
equity, the Commission in calculating any fine
should ‘set off’ against the appropriate amount the
fine imposed in the United States and any punitive
element in the civil damage awards.

exercise by the United States (or any third country) of its
(criminal) jurisdiction against cartel behaviour can in no
way limit or exclude the Commission’s jurisdiction
under EC competition law.

(180) More importantly, it is in any case untrue that (as SGL
argued) the Commission was intending to sanction it for
exactly the same facts as the US courts had. By virtue of
the principle of territoriality, Article 81 of the Treaty is
limited to restrictions of competition in the common
market and Article 53 EEA is limited to restrictions of
competition in the EEA market. In the same way, the US
antitrust authorities only exercise jurisdiction to the
extent that the conduct has a direct and intended effect
on United States commerce.

(181) For the sake of completeness, the Commission also
refers to the reduction of the US criminal fine. As the
Commission demonstrated during the Oral Hearing
when it produced the sentencing memorandum and
fining calculations from the US procedures (both are
public documents), the basic fine in the United States
had been calculated only on SGL sales in the United
States and had been agreed to by SGL. Indeed, as the
fine calculations showed, SGL had negotiated a very
substantial reduction in the US criminal fine to below
the normal minimum in order to take account under the
‘ability to pay’ test of its expected liability to penalties in
the Community and Canada and to civil damages.

(182) SGL is thus acting in a contradictory manner in securing
a reduction in the appropriate fine in the United States
by reference to likely penalties in the Community and
then claiming in the latter jurisdiction that it should not
be subject to any fine at all.

(183) Finally, the possibility that undertakings may have been
required to pay damages in civil actions is of no
relevance. Payments of damages in civil
law actions
which have the objective of compensating for the harm
caused by cartels to individual companies or consumers
cannot be compared with public law sanctions for illegal
behaviour.

— Arguments of the Commission

— Ability to pay

(179) The Commission rejects all of SGL’s arguments. It does
not consider that fines imposed elsewhere, especially in
the United States, have any bearing on the fines to be
imposed for infringing European competition rules. The

— Arguments of SGL

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(184) SGL argues that the company’s financial situation was
weakened by the high fines imposed by other compe-
tition authorities and civil damage payments. Further
sanctions by the Commission might force the company
into bankruptcy.

(189) Both UCAR and SGL were the driving forces behind the
cartel. They initiated the contacts in 1991, developed
the whole plan to set up a cartel and organised the first
‘Top Guy’ meeting in May 1992 at which they adopted
a ‘common position’ vis-à-vis the other producers.

— Arguments of the Commission

(185) In consideration of this argument, the Commission
requested detailed information on the company’s finan-
cial position (17). After examining the company’s reply
of 6 June 2001 the Commission concludes that it is not
appropriate in the present case to adjust the amount of
the fine. To take account of
the mere fact of an
undertaking’s loss-making financial situation due to
general market conditions or changes in the company’s
corporate structure would be tantamount to conferring
an unjustified competitive advantage on undertakings
least well adapted to the conditions of the market.
in the present case there is no justification
Finally,
for setting off
fines imposed by other competition
authorities or civil damage payments (see points 179 to
183 above).

(186) The total fine imposed on SGL will therefore be EUR

80,29 million.

(ii) UCAR

(190) With regard to the EEA market, it appears from the facts
that UCAR and SGL agreed on new target prices for
each national market, the respect of home markets and
the maintenance of ‘key account clients’. It is UCAR
itself which admits that it generally led the price increases
in France and the United Kingdom (see point 66 above;
[...]*). For several other EEA markets it was decided on
each occasion whether UCAR or SGL would take the
lead.

(191) The fact that SGL also played a leading role in the
infringement does not excuse UCAR’s behaviour. Both
undertakings were by far the most powerful cartel
members with the same ambition, namely to be the
leaders on the market.

(192) Having regard to the foregoing, the basic amount of the
fine should be increased in the case of UCAR by 60 %.
The appropriate fine is therefore EUR 99,2 million.

— Aggravating circumstances

— Mitigating circumstances

(187) The gravity of the infringement is aggravated in UCAR’s

case by the following circumstances:

— Compliance programme

— UCAR’s role as one of the ringleaders and insti-

gators of the cartel,

— its continuation of this clear-cut and indisputable

infringement after the investigations.

— Arguments of UCAR

— Arguments of UCAR

(188) UCAR argues that SGL played the leading role in
the EEA market (UCAR’s reply to the Statement of
Objections, p. 4). SGL took the general lead in the price
increases and had a higher market share than UCAR.

— Arguments of the Commission

(193) UCAR claims that it was the only company involved in
the infringement which took specific actions against
employees responsible for the infringement and set up a
comprehensive compliance programme (UCAR’s reply
to the Statement of Objections, pp. 14 to 16).

— Arguments of the Commission

(17) Commission’s request for information pursuant to Article 11 of

Regulation No 17 dated 23 May 2001.

(194) The Commission welcomes the fact that after the cartel
investigations UCAR conducted an internal investigation
and set up a compliance programme. This initiative

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however cannot dispense the Commission from its duty
to sanction the very serious infringement of competition
rules that UCAR committed in the past.

— Economic difficulties of

the whole graphite electrodes

industry

— Arguments of UCAR

(195) According to UCAR the Commission should take into
account the mitigating circumstance that the graphite
electrodes industry as a whole and UCAR in particular
was facing economic difficulties in the early 1990s
(UCAR’s reply to the Statement of Objections, p. 17).

— Arguments of the Commission

(196) The Commission does not consider that the situation
invoked by UCAR constitutes a mitigating circumstance.

(197) It has to be made clear that, in attempting to cope
with difficult market conditions or falls in demand,
undertakings must use only means that are consistent
with the competition rules. Price-fixing and market-
sharing are certainly not legitimate means of combating
difficult market conditions. Nor are undertakings entitled
to flout Community competition rules because of alleged
overcapacity.

— Conclusion

(198) The Commission concludes that there are no mitigating
that
circumstances relating to UCAR’s infringement
could justify a reduction of the fine.

(199) The fine calculated for UCAR is EUR 99,2 million.
However, since the final amount calcultated according
to the above method may not in any case exceed 10 %
of the worldwide turnover of UCAR (as laid down by
Article 15(2) of Regulation No 17) the fine will be set at
EUR 84,1 million, so as not to exceed the permissible
limit.

— Application of the Leniency Notice

(201) UCAR contacted the Commission in March 1998 and
indicated its intention to cooperate. In June 1998 it
provided several documents and in particular a price
table identical to that which the Commission had found
during its investigation at SGL. It was the first company
which acknowledged ‘illicit contacts with competitors’,
in reply to a formal request for information. In March
and April 1999 it submitted to the Commission two
statements by former employees giving details of the
organisation and structure of the cartel, at both inter-
national and European level. In June 1999 UCAR pro-
vided a detailed corporate statement.

(202) The Commission will therefore grant UCAR under the
first indent of Section D(2) of the Leniency Notice a
reduction of 40 %.

— Ability to pay

— Arguments of UCAR

(203) UCAR argues that due to the recent decline of prices and
sales in the graphite electrodes industry its financial
situation has deteriorated to the extent that its ability to
pay a fine is largely reduced. As approximately 70 % of
UCAR’s business consists of graphite electrodes, it is
particularly concerned by this situation (UCAR’s reply
to the Statement of Objections, pp. 27 to 34).

(204) UCAR also claims that its former parent companies,
Union Carbide and Mitsubishi, benefited from the cartel
through a series of dividends and other transactions
culminating in a leveraged recapitalisation in Jan-
uary 1995.

(205) Finally, UCAR argues that

the company’s financial
situation was further weakened by the high fines
imposed by the United States and Canadian competition
authorities and civil damage payments.

— Arguments of the Commission

(206) With regard to UCAR’s first argument, the Commission
requested detailed information on the company’s finan-
cial position (18). After examining the company’s reply
of 25 May 2001 the Commission concludes that it is
not appropriate in the present case to adjust the amount
of the fine. To take account, when determining the fine,

(200) The Leniency Notice will be applied to UCAR. Although
it was not the first company that provided the Com-
mission with decisive evidence, it contributed substan-
tially to establishing important aspects of the case.

(18) Commission’s request for information pursuant to Article 11 of

Regulation No 17 dated 10 May 2001.

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of an undertaking’s loss-making financial situation due
to general market conditions or changes in the compan-
y’s corporate structure would be tantamount to confer-
ring an unjustified competitive advantage on undertak-
ings least well adapted to the conditions of the market.

over a long period, but also from their behaviour
during the meetings, where they actively took part in
discussions. This is true particulary of Tokai and SDK,
being the largest Japanese producers.

(207) UCAR’s second argument does not change the gravity
of UCAR’s participation in the cartel nor the need for
effective deterrence. Finally, in the present case there is
no justification for setting off fines imposed by other
competition authorities or civil damage payments (see
recitals 179 to 183).

(208) The total fine imposed on UCAR will therefore be

EUR 50,4 million.

(iii) SDK, Tokai, SEC and Nippon

— Aggravating circumstances

(209) For Tokai, SEC and Nippon the Commission must take
into account one aggravating circumstance, namely
their continuation of this clear-cut and indisputable
infringement after the Commission had carried out its
investigations.

(210) The fines of Tokai, SEC and Nippon will therefore be

increased by 10 %.

(213) Although the Japanese producers did not attend specific
European group meetings, they were kept up to date by
SGL and UCAR on the target prices. Furthermore, it is
not contested that one of the basic principles of the
cartel, namely that non-home producers should not
compete aggressively, was valid also for the EEA market.
The abstention of the Japanese producers from the EEA
market must therefore be considered in the context of
their adherence to the basic principales of the cartel and
not as a sign of passive behaviour.

(214) This has to be taken into consideration also with
regard to Tokai’s second argument, namely partial non-
implementation of the home-producer principle. Even if
Tokai slightly increased its sales between 1992 and
1996, it respected the basic principles of the cartel.

(215) The Commission therefore concludes that there are no
mitigating circumstances which could be applied to
Tokai, SEC or Nippon.

(216) The following fines for the undertakings are therefore
considered to be appropriate (before any reduction
under the Notice on the non-imposition or reduction of
fines):

— SDK: EUR 58 million,

— Mitigating circumstances

— Tokai: EUR 27,28 million,

(211) Tokai and SEC argue that

the Commission should
take into account as a mitigating circumstance their
exclusively passive role in the arrangements concerning
the EEA market. Similar to that, Nippon Carbon argues
that
it played a very limited role (SEC’s Reply to
the Statement of Objections, pp. 16 and 17; Nippon
Carbon’s Reply of 17 May 2000 to the Statement of
Objections, p. 2). Tokai further suggests that its partial
non-implementation of the ‘home producer principle’
by increasing its sales to the Community in the period
under investigation should also be considered as mitigat-
ing (Tokai’s Reply to the Statement of Objections, pp. 12
and 13).

(212) As to the role of the Japanese producers, the Commission
is of the opinion that in substance they must be regarded
as active members. This follows not only from their
participation in ‘Top Guy’ and ‘Working Level’ meetings

— SEC: EUR 13,64 million,

— Nippon: EUR 13,64 million.

— Application of the Leniency Notice

— SDK

(217) Under the Leniency Notice, the Commission will take
into account the fact that SDK was the first company
which actually provided substantial and decisive evi-
dence on the cartel. Several crucial documents were
handed over to the Commission in March 1998 (in
particular the ‘CMS Report’ and several price lists), [...]*.
This evidence assisted the Commission significantly in
establishing the facts on which this Decision is based.

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(218) In accordance with Section C of the Leniency Notice, the

fine on SDK will be reduced by 70 %.

and its participation in meetings was not necessary for
the success of the cartel [...]*.

— Tokai, SEC and Nippon

(219) Tokai, SEC and Nippon Carbon did not contest the
factual allegations made in the Statement of Objections.
SEC also submitted a list of meetings and its participants
(Annex 7 to its Reply to the Statement of Objections).

(220) The Commission rejects however both SEC’s and Nippon
Carbon’s argument that they maintained continuous
and complete cooperation throughout the investigation
(SEC’s Reply to the Statement of Objections, pp. 12 and
13; Nippon Carbon’s letter of 17 May 2000). Their quite
vague replies to several of the Commission’s requests
for information under Article 11 of Regulation No 17
cannot be regarded as voluntary cooperation in the
context of the Leniency Notice.

(221) The Commission further rejects SEC’s attempt to justify
its behaviour by maintaining that SGL and another
Japanese company recommended it not to cooperate.
This might well be true, but it is clearly SEC’s own
corporate decision and responsibility to cooperate in the
Commission’s investigation.

(225) VAW carbon must be regarded as an active member of
the cartel. Its representatives were present at several
‘Working Level’ meetings in Europe and at separate
European group meetings. It was involved in discussions
on prices and the monitoring of sales volumes (see
recital 88). Its active involvement in price discussions
also contradicts VAW Carbon’s second argument that it
was only a ‘price follower’. Finally, the Commission
dismisses VAW Carbon’s last argument. VAW Carbon’s
participation in the cartel was part of the overall scheme
of the cartel to control the worldwide market and to
include the most important producers.

(226) VAW Carbon also suggests that it acted under some
pressure from SGL. The Commission notes however
that this does not relieve VAW of its own corporate
responsability. In particular, it could have reported the
case to the Commission.

(227) The Commission concludes that there are no mitigating
circumstances which could be applied to VAW.

(222) Each of the three companies will therefore receive a
reduction under the second indent of Section D(2) of the
Leniency Notice of 10 %.

— Application of the Leniency Notice

— Conclusion

(223) The total fines imposed on the four undertakings will

therefore be as follows:

(228) In its reply of 10 May 1999 to the Commission’s detailed
request for information of 31 March 1999 pursuant to
Article 11 of Regulation No 17, VAW Carbon initially
claimed that it was under no obligation to answer certain
questions and that, in any event, it was unable to provide
documents or information.

— SDK: EUR 17,4 million,

— Tokai: EUR 24,5 million,

— SEC: EUR 12,2 million,

— Nippon: EUR 12,2 million.

(iv) VAW

— Mitigating circumstances

(224) VAW Carbon claims that it played only a passive role in
the cartel. Like C/G, it had a position as a ‘price follower’

(229) It was only in its letter of 12 July 1999 that VAW
Carbon announced its willingness to cooperate and
provided a statement as to its participation. The Com-
mission considers however that a substantial part of the
information provided in this statement in fact constitutes
VAW Carbon’s reply to the Commission’s formal request
for information of 31 March 1999.

(230) Only to the extent that the information provided went
beyond that requested under Article 11 and beyond the
information already in the Commission’s possession
could VAW Carbon’s statement be considered as a
relevant contribution within the meaning of the Leniency
Notice.

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(231) Taking into consideration the fact that VAW Carbon’s
cooperation started before the Commission adopted its
Statement of Objections and continued afterwards, VAW
Aluminium AG will receive a reduction of 20 % in
accordance with the first indent of Section D(2) of the
Leniency Notice.

(232) As stated in recitals 117 to 123, the Commission holds
VAW Aluminium AG, as the parent company of VAW
Carbon GmbH, responsible for the anti-competitive
conduct of its wholly owned subsidiary.

(233) The total fine imposed on VAW Aluminium AG will

therefore be EUR 11,6 million.

(v) C/G

— Mitigating circumstances

(234) As a mitigating circumstance the Commission will take
into account the fact that C/G played only a passive role
in the infringement. It did not attend any ‘Top Guy’ or
‘Working Level’ meetings and took the position of a
‘price follower’ (see recital 81).

its partial non-implementation of

(235) A further reduction will be granted to C/G on the basis
of
the offending
agreements. Between 1993 and 1996 C/G actually
increased its sales in Europe, thereby not respecting the
basic principle of the cartel of restricting sales in ‘non-
home’ markets.

(236) The fine on C/G will therefore be reduced by 40 %. The
appropriate fine for C/G is therefore: EUR 12,96 million.

(237) The Commission will not however accept C/G’s argu-
ment that it acted under economic pressure. Even if it
might be correct that other producers put pressure on
C/G, it remained C/G’s own decision and responsibility
to participate in the infringement.

(238) With regard to any structural overcapacity in the
sector, it has already been stated (see recital 197) that
undertakings may use only means which are consistent
with Community competition rules to cope with difficult
market conditions.

20 % in recognition of
information to the Commission.

its having supplied certain

(240) Contrary to what C/G claims it is however not entitled
to a reduction of at least 50 %. Although already in
July 1998 it supplied certain documents on contacts
between competitors to the Commission, it was only in
October 1999 that a Corporate Statement was submitted
in which C/G was however ambiguous with regard to its
role in the cartel. The reply of 21 July 1999 to the
Commission’s formal request for information pursuant
to Article 11 of Regulation No 17 cannot be regarded as
a voluntary contribution within the meaning of the
Leniency Notice.

— Ability to pay

(241) C/G claims that its current financial situation is very
serious. Due to a downturn in the market for graphite
electrodes, the steel crisis, high oil prices and the strength
of the US currency it is highly leveraged today. High
civil damage payments resulting from lawsuits in the
United States have further weakened the company.

(242) In consideration of this argument, the Commission
requested detailed information on the company’s finan-
cial position (19). After examining the company’s reply
of 25 May 2001 the Commission concludes that it is
not appropriate to adjust the amount of the fine in the
present case. To take account of the mere fact of an
undertaking’s lossmaking financial situation due to
general market conditions or changes in the company’s
corporate structure would be tantamount to conferring
an unjustified competitive advantage on undertakings
least well adapted to the conditions of the market.
Finally,
in the present case there is no justification
fines imposed by other competition
for setting off
authorities or civil damage payments (see recitals 179 to
183).

(243) The total fine imposed on C/G will therefore be EUR 10,3

million.

2.3.2.4. The amount of the fines imposed in the

present proceedings

(244) In conclusion, the Commission sets the fines to be
imposed pursuant to Article 15(2) Regulation No 17 as
follows:

— SGL Carbon AG: EUR 80,2 million

— UCAR International Inc.: EUR 50,4 million

— Application of the Leniency Notice

— VAW Aluminium AG: EUR 11,6 million

(239) In accordance with the first indent of section D(2) of the
Leniency Notice, the fine on C/G will be reduced by

(19) Commission’s request for information pursuant to Article 11 of

Regulation No 17 dated 10 May 2001.

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— Showa Denko K.K.: EUR 17,4 million

(b) UCAR International Inc.: EUR 50,4 million;

— Tokai Carbon Co. Ltd: EUR 24,5 million

(c) VAW Aluminium AG: EUR 11,6 million;

— Nippon Carbon Co. Ltd: EUR 12,2 million

— SEC Corporation: EUR 12,2 million

— The Carbide Graphite Group: EUR 10,3 million,

(d)

Showa Denko K.K.: EUR 17,4 million;

(e) Tokai Carbon Co. Ltd: EUR 24,5 million;

(f) Nippon Carbon Co. Ltd: EUR 12,2 million;

HAS ADOPTED THIS DECISION:

(g)

SEC Corporation: EUR 12,2 million;

Article 1

The following undertakings have infringed the provisions of
Article 81(1) of
the EEA
Agreement by participating in a complex of agreements and
concerted practices in the graphite electrodes sector:

the Treaty and Article 53(1) of

SGL Carbon AG: from May 1992 to March 1998,

UCAR International Inc.: from May 1992 to March 1998,

VAW Aluminium AG: from May 1992 until the end of 1996,

Showa Denko K.K.: from May 1992 until April 1997,

Tokai Carbon, Co. Ltd: from May 1992 to February 1998,

Nippon Carbon Co. Ltd: from May 1992 to February 1998,

SEC Corporation: from May 1992 to February 1998,

The Carbide Graphite Group Inc.: from January 1993 until
November 1996.

(h) The Carbide Graphite Group Inc.: EUR 10,3 million.

Article 4

The fines imposed in Article 3 shall be paid, within three
months of the date of notification of this Decision to the
following Bank account:

Account No 642-0029000-95
European Commission
Banco Bilbao Vizcaya Argentaria (BBVA)
SWIFT Code: BBVABEBB — IBAN Code: BE 76 6420 0290
0095
Avenue des Arts, 43
B-1040 Brussels

After expiry of that period,
interest shall automatically be
payable at the interest rate applied by the European Central
Bank to its main refinancing operations on the first working
day of the month in which this Decision is adopted, plus
3,50 percentage points, namely 8,04 %.

Article 2

The undertakings referred to in Article 1 shall immediately
bring to an end the infringements referred to in that Article, in
so far as they have not already done so.

Article 5

This Decision is addressed to:

They shall refrain from repeating any act or conduct referred
to in Article 1, and from adopting any measure having
equivalent object or effect.

1.

SGL Carbon AG
Rheingaustraße 182
D-65203 Wiesbaden

Article 3

For the infringements referred to in Article 1 the following
fines are imposed:

(a)

SGL Carbon AG: EUR 80,2 million;

2. UCAR International Inc.

3102 West End Avenue, Suite 1100
Nashville, Tennessee 37203
USA

3.

VAW Aluminium AG
Georg-von-Boeselager Straße 25
D-53117 Bonn

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4.

5.

Showa Denko K.K.
13-9, Shiba Daimon 1 — Chome
Minato-ku
Tokyo 105-8517
Japan

Tokai Carbon Co. Ltd
Aoyama Building
2-3, Kita — Aoyama, 1 — Chome
Minato-ku
Tokyo 107
Japan

6. Nippon Carbon Co. Ltd

6-1, Hatchobori, 2 — Chome
Chuo-ku
Tokyo 1047-0032
Japan

7.

8.

SEC Corporation
Doi Building
5, Misonomachi
Amagasaki
Hyogo HY 660
Japan

The Carbide Graphite Group Inc.
One Gateway Center, 19th Floor
Pittsburgh, PA 15222-1416
USA.

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

Done at Brussels, 18 July 2001.

For the Commission

Mario MONTI

Member of the Commission