What has happened?
The European Commission handed down record fines totalling nearly € 2.93 billion on four truck manufacturers yesterday after concluding that they were involved in a price fixing cartel arrangement lasting 14 years. Daimler, Volvo/Renault, Iveco and DAF were fined amounts ranging from around €500m to €1bn each. A fifth manufacturer, MAN, was also involved but was spared the penalty under the Commission’s whistle-blower immunity rules. This fine is almost double the previous largest fine for cartel arrangements.
What was the anti-competitive behaviour?
The firms held meetings at senior management level, often on the fringes of trade fairs, as well as talking on the phone and exchanging information electronically. The discussions centred around co-ordinating the factory-level (“gross-list”) price of medium to heavy trucks, the timing of emissions technology introductions and how they could pass the costs of emissions technology onto consumers. The Commission was keen to stress, however, that this was nothing to do with the so-called ‘defeat devices’ that some manufacturers were using to get around emissions tests.
The five firms accounted for 90% of the medium/heavy trucks produced in Europe and, rather than competing with each other, they worked together. This collusion and price-fixing falls into the category of “hard core” competition law breaches that can never be justified.
The Commission conducted unannounced inspections of the firms in 2011 which ultimately led to yesterday’s decision. Separate proceedings were also opened against Scania, which was not covered by this settlement and which is currently being investigated under the standard (non-settlement) cartel procedure.
Why were the fines reduced?
Since MAN blew the whistle on the cartel, under the Commission’s 2006 Leniency Notice they received full immunity – avoiding a fine of around €1.2bn. Volvo/Renault, Daimler and Iveco subsequently admitted the existence of the cartel and co-operated with the Commission’s investigation and their fines were reduced in accordance with their level of co-operation. Furthermore, under the Commission’s 2008 Settlement Notice, all five firms were eligible for an additional reduction of 10% for acknowledging their participation in the anti-competitive practices.
When setting the level of the fine, the Commission has the power to fine up to 10% of the worldwide group turnover. In this way, competition law disregards the normal rules of corporate legal personality and means that large groups of companies cannot evade liability by conducting anti-competitive practices through a small subsidiary company.
In this case, the Commission took account of the serious, widespread and ongoing nature of the breaches, the firms’ combined market share and the revenue generated by their sales of these vehicles in the EEA.
What can you do if you have been affected by this?
Any individual or business that considers it has been affected by this anti-competitive behaviour can sue the firms in their national courts and seek damages. The decision of the Commission is held as binding proof that this behaviour took place and was illegal.
What can we learn from this?
Firstly, that the Commission takes competition law breaches extremely seriously and is willing to impose huge monetary penalties.
Secondly, that trade fairs and trade association meetings are a risk-area for businesses. While it might seem that ‘talking shop’ with fellow business people at a trade fair is normal, it can lead to information exchanges that cross the line into competition law breaches.
Thirdly, that whistle-blowing is heavily incentivised. By giving full immunity to whistle-blowers, anti-competitive arrangements are destabilised and cartel members cannot trust each other to keep silent.
Who can you speak to at Brodies if you have a competition concern?
If you would like to discuss any of the issues covered in this decision, or any other aspect of competition law, please do not hesitate to contact Rod Lambert, Charles Livingstone or Stephen Wright.
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