Karanovic & Nikolic

Categories:Competition/EU

EU/ EC imposes fines for cathode ray tube cartels

The European Commission (EC) recently fined seven international company groups with a total fine of around €1.47bn for two distinct cartels related to cathode ray tubes (CRTs) used in colour television sets and computer monitors.

The investigation was initiated after a leniency application by one of the cartel members. The cartel concerned price-fixing, market-sharing, production quotas and prohibited information exchanges.

Seeing CRT-based technology gradually being phased out in favour of more advanced electronic appliances such as LCD and plasma displays (‘flat-screens’), the sanctioned companies established a complex anti-competitive system to preserve dropping profits at the expense of the consumers, through colluding to control their production levels and prices and reaping the extra profit.

The European Commission determined that the cartels were operating worldwide and lasted for almost 10 years, between 1996 and 2006. The Commission’s notice on this case almost reads like a handbook for competition practitioners, including everything from price-fixing and market-sharing to the allocation of customers and restriction of output, ultimately spiced with capacity and output coordination and prohibited information exchanges.

Furthermore, the Commission stressed the level of organisation of both cartels, including continuous monitoring of their implementation and even auditing compliance through factory visits in relation to computer monitor tubes. Regular meetings were held all around Europe and Asia, the top management for cartel strategy (dubbed ‘green’ meetings, as they were often followed by a golf game) and the lower ranks for enforcement (‘glass’ meetings), on a quarterly, monthly or even weekly basis.

Some of the largest players in the sector participated in one or both cartels, including names such as LG Electronics, Philips, Samsung SDI, Panasonic, Toshiba and Technicolor.

The Taiwan-based Chunghwa first revealed the cartels to the European Commission under the leniency policy, in order to benefit from the exemption from fines. The investigation revealed that the companies were quite aware that they were breaking the law. The European Commission even cited correspondence between the companies warning about the importance of keeping the cartel a secret lest it cause damage in front of the regulator and stressing the need for disposing with documents.

The total amount of the fines imposed in these two closely related cases amounted to around €1.47bn, the highest cartel fine ever imposed, transcending the previous record set by the 2009 Car Glass case. It is interesting to note that Chungwa, the whistleblower, could have received a fine of around €17m had it not applied for leniency, which would have represented a relatively negligible part of the total fine. The largest direct sanction was imposed on Phillips, totalling around €313m, ahead of the penalties of €295m for LG Electronics and €157m for Panasonic. Samsung SDI, Phillips and Technicolor received fine reductions under the Commission’s Leniency Notice, ranging from 10 to 40 per cent for their cooperation during the investigation.

Apart from the severity of the competition infringements, the European Commission paid special attention to the fact that CRT represented a very important component in the production of television and computer screens, accounting for 50 to 70 per cent of the price of a screen. The Commission especially encouraged citizens to file lawsuits for private damages in order to realise direct compensation for the anti-competitive harm done.

With this latest ruling, the European Commission had decidedly proven that neither the economic crisis nor outdated technology can be used as an excuse for competition infringements. In fact, in times of recession, strict adherence to the law and fair market competition become all the more important. The competition authorities are certainly both ready and willing to pursue any infringers vigorously.

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