EU fines autoglass firms EUR 1.36 billion

Among a total of EUR 1.36 billion in fines issued to four European auto glass makers for fixing the price of glass supplied to Europe“s car manufacturers, the European Commission hit Saint-Gobain SA …

Among a total of EUR 1.36 billion in fines issued to four European auto glass makers for fixing the price of glass supplied to Europe“s car manufacturers, the European Commission hit Saint-Gobain SA with its largest ever penalty on a single company for operating a cartel, fining the French glass maker EUR 896 million (USD 1.12 billion). The fines are the latest in a series of aggressive penalties the European Union has issued to punish price-fixing cartels under Neelie Kroes, the EU“s antitrust regulator. Seven of the top 10 cartel fines the EU has levied have come in the past three years. Its total 2007 cartel fines set a record at EUR 3.3 billion. Also fined on 12 November 2008 were Pilkington Plc of the United Kingdom, Japan“s Asahi Glass Co. and Belgium“s Soliver NV. The four companies together control 90% of the global market for car glass, valued at EUR 2 billion in 2003, when the commission began its investigations after receiving an anonymous tip-off. From 1998 to 2003, the commission said, the companies collaborated in “a series of meetings and other illicit contacts” to keep prices for car windscreens, windows and sun roofs higher than demand would dictate. The companies “cheated the car industry and car buyers for five years”, Ms. Kroes said, adding that the fines were needed for “companies to learn the lesson the hard way”. The commission raised the fine on Saint-Gobain by 60% as a repeat offender. The company, which is based near Paris and is the largest supplier of building materials in the EU, was fined for operating glass cartels in 1984, 1988 and again in 2007. Saint-Gobain called the fine “excessive and disproportionate” and said it will appeal. The fine represents approximately 95% of the annual sales of Saint-Gobain“s automotive-glass business in Europe and several decades“ net income for the unit, the company said. Saint Gobain provisioned EUR 560 million for the potential fine in 2007, although this figure fell short of the fine by more than EUR 300 million. The company“s shares fell 4.6% on 12 November 2008 to EUR 28.35 in Paris. Ms. Kroes defended the record-setting levy as appropriate because the company has overall annual revenue of EUR 43 billion. EU rules limit cartel fines to 10% of annual revenue, several times more than the commission“s proposed fine. The commission also imposed a penalty of EUR 370 million on Pilkington, which said it had budgeted for the fine and would book it as an extraordinary item in the current year. The commission said it halved Asahi“s fine to EUR 113.5 million, because the Japanese firm cooperated with investigators. Soliver received the smallest penalty because it participated in only a few of the price-setting meetings, the commission said. Ms. Kroes is charged with guaranteeing fair competition among multinationals with substantial market share throughout the EU, but she is unable pursue jail time for cartel offenders, as can her US counterpart, for example. A fine is the only meaningful punishment the commission can hand out.