The European Commission has slapped fines totaling 290 million euros ($339 million) on 16 industrial plastic bag makers for operating a price-fixing cartel, some of them for more than 20 years.
A three-year probe into bag sector practices found that sales directors and even managing directors of competing suppliers, often meeting at their trade association Valveplast, secretly agreed on sales prices for Germany, France, Spain and the Benelux countries, according to the European Commission.
Quoting from internal association memos, the EC highlighted calls for documents linking Valveplast with ``figures for allocating markets and prices'' to be destroyed.
Documents and other evidence originally was seized by European Union antitrust inspectors in dawn raids on bag producers in June 2002. The EC probe was launched after British Polythene Industries plc, Europe's top polyethylene film and bag producer, revealed the cartel's existence.
Operating cartels is considered a serious breach of EU antitrust legislation and companies found guilty in the past have faced heavy fines.
Although fines imposed on some former cartel members were reduced or dropped altogether where a company assisted the EC investigation, other suppliers appeared shaken by the severity of the penalties.
The biggest single fine of 56.5 million euros ($66 million) was imposed on UPM-Kymmene Oyj of Helsinki, Finland, in connection with its Rosenlew PE film and sack business. UPM-Kymmene sold that subsidiary, with plants in France and Finland, to Rheinische Kunststoffwerke GmbH (RKW) of Worms, Germany, in December 2000.
Spain's largest PE film converting company, Armando Alvarez SA, and its offshoot, Plasticos EspaÃ±oles SA, based in Torrelavega, jointly face a fine of 42 million euros ($49 million).
Other suppliers fined large sums include Greven, Germany-based Nordenia International AG and its former unit Nordfolien GmbH of Steinfeld, Germany, with a joint fine of 39.1 million euros ($45.7 million); Rheinische Kunststoffwerke GmbH, now a top European film maker and converter, 39 million euros ($45.6 million); and German producer Bischof + Klein GmbH & Co. KG, 29.2 million euros ($34 million). Its French branch, Bischof + Klein France SA, was fined nearly 4 million euros ($4.7 million).
Smaller fines were imposed on a number of Dutch, French and German bag producers found to have been involved in the cartel.
Announcing its decision, EC pointed out it has waived completely the original 53 million euro ($62 million) fine facing Greenock, Scotland-based British Polythene Industries under European Commission ``leniency arrangements,'' applied because the company was first to provide evidence in the probe.
``It is gratifying that, after so many years of uncertainty, hard work, and cooperation with the Commission, the group has been granted full immunity. We hope that this marks the end of the matter,'' BPI Chairman Cameron McLatchie said, after the decision was announced.
He acknowledged that the European Commission still may pursue an original competition law infringement probe, launched in August 2001, into BPI and other producers of agricultural and industrial films. It was when BPI checked its competition practices companywide that it uncovered evidence of the bags cartel.
In the latest case, several other bag producers were fined smaller sums, including 12.2 million euros ($14.3 million) to London-based Low & Bonar plc and its subsidiary Bonar Technical Fabrics NV. That case related to L&B's former heavy-duty sacks and silage stretch-wrap business, Bonar Phormium Packaging NV of Zele, Belgium, which it sold to BPI in 1997.
Following the European Commission's announcement, L&B called the fine ``disproportionate,'' adding that it will consider appealing once it receives the detailed decision. Those fined should receive the full EC ruling within days.
In Spain, Alvarez admitted shock at the size of the fine it and its offshoot face. ``We will study the Commission's ruling and prepare a response. But the size of the fine is incredibly big and out of proportion to the activity involved,'' said financial manager Gonzalo Gomez.
Announcing the fines, the EC said it had proved that the bag producers involved were aware their behavior was illegal.
``Together, the producers concerned controlled most of the market in industrial bags in the countries covered by the cartel. In 2001 this was estimated at some 265 million euros [$310 million],'' the EC stated. It called the case ``a very serious offense.''
Neelie Kroes, EU competition commissioner, said of the decision: ``Cartels are the worst obstacle to competition and I intend to penalize firms that operate them and so jeopardize the basis of our market economy. ... I am sending a very clear message to company directors that such practices are unacceptable.''
EC has encouraged any company affected by the cartel's anti-competitive behavior to take the matter to courts of EU member states, using the EC findings to seek damages. If awarded, these damages would be in addition to the European Commission fines, it said.