On 5 December 2012, the European Commission imposed its largest ever fine of €1.47 billion on seven international producers in the cathode ray tubes (CRTs) sector for their involvement in either one or both of two distinct cartels over a period of 10 years.  The fine represents the largest antitrust fine that the Commission has ever imposed, sending a strong warning to companies engaging in anti-competitive activity.

Background

The Commission began its investigation into the CRT sector in November 2007 when it carried out unannounced inspections at the premises of various manufacturers of CRTs.  At that time, CRTs were the main component in colour televisions and computer screens but have now been gradually replaced by LCD and plasma displays. 

Decision

The Commission found that there were two cartels: one involving colour display tubes (CDTs) and the other involving colour picture tubes.  Chunghwa, LG Electronics, Philips and Samsung SDI participated in both cartels while Panasonic, Toshiba, MTPD and Technicolour participated in the CDT cartel. 

The two cartels were among the most organised cartels that the Commission has ever investigated.  Described as ‘textbook’ cartels by Commission Vice President, Joaquín Almunia, the cartels featured the most harmful anti-competitive practices including price fixing, market sharing, customer allocation, capacity and output coordination and exchanges of commercially sensitive information for a period of 10 years and on a worldwide basis.  Top management meetings, dubbed “green(s) meetings” by the cartelists as they often followed a game of golf, designed the orientations for the two cartels.   Preparation and implementation were often carried out through lower level meetings often referred to as “glass meetings”, on a quarterly, monthly, even weekly basis in various locations in Asia and Europe. 

The investigation revealed that meetings usually started with a review of demand, production, sales and capacity in the main sales areas, including Europe.  Prices were then discussed, including for individual customers such as TV and computer manufacturers.  The Commission considered that the cartels had a direct impact on customers in the European Economic Area, ultimately harming final consumers.  Documentary evidence uncovered by the Commission revealed that the cartelists were well aware that they were in breach of EU competition rules.

Fines

In setting the level of fines the Commission considered the companies’ sales of the products in the EEA, the very serious nature of the infringement, its geographic scope, its implementation and duration. 

The whistleblower for both cartels, Chunghwa, received full immunity under the Commission’s 2002 Leniency Notice.  Samsung SDI, Philips and Technicolor received reductions of 40%, 30% and 10% respectively for their co-operation under the Commission's leniency programme.  A reduction was also granted to one company that invoked its inability to pay the fine.

Conclusion

The fine represents the largest fine in EU history.  However, the story is unlikely to end there.  Potential follow-on actions from TV and computer manufacturers are likely to follow.

The decision reinforces the need for companies to implement thorough and robust competition law compliance training.  Many companies now have such programmes in place. However, training may only be partially effective. The decision also illustrates the need for clear internal approval processes and regular competition audits of business units so that such behaviour can either be prevented, or detected and addressed at an early stage.

The competition team at CMS has considerable experience of advising companies on compliance, and introducing internal procedures so that the warning signs of anti-competitive behaviour are quickly recognised and such behaviour never occurs.