Kbb News
Posted: 30/06/2010
Bathroom companies fined £500M in EU cartel crackdown
17 bathrooms companies fined by EU Commission.
EU antitrust regulators fined 17 bathroom companies a total of 622 million Euros (£506m) on 23 June for fixing prices, with five companies receiving lower penalties because of the economic crisis.
The European Commission, the European Union's competition watchdog, said the companies operated a cartel between 1992 and 2004 in Germany, Austria, Italy, Belgium, France and the Netherlands.
The Ideal Standard International Group received the biggest fine at 326 mill Euros -- a sum reduced by 30 percent for cooperating with the regulator.
Indemnity arrangement
Ideal Standard said it did not have to pay the fine as it has an indemnity arrangement with U.S. auto safety system supplier WABCO Holdings Inc and other third parties.
The EC investigation began in November 2004, when the former American Standard Group and 16 other bathroom manufacturers were contacted by the European Commission as part of its investigation into possible infringement of EU competition law relating to the distribution of bathroom fixtures and fittings in certain European countries.
In February 2007, the American Standard Group announced its decision to split its three business units into separate companies i.e. spinning off the WABCO division as a global tier-one supplier to the commercial vehicle industry, selling its global Bath and Kitchen business and renaming itself Trane Inc. a commercial and residential air conditioning business.
Global turnover
The scale of the 326. mill Euro fine levied by the European Commission has been influenced by the global turnover level of the former American Standard Group entities involved in the investigation - the 27-country European Union's antitrust watchdog, can fine firms up to 10 percent of annual sales for breaching EU rules.
WABCO has never manufactured or marketed any of the products that are the subject of this investigation and no one from WABCO had any involvement with the matter. However, as disclosed by WABCO in connection with its spin-off from American Standard Companies Inc. in 2007, and as disclosed in WABCO's Form 10K and 10Q filings, WABCO is obliged to indemnify American Standard Companies Inc., now known as Trane Inc., and the Ideal Standard entities involved in the Commission's investigation against any fine related to this investigation.
WABCO can pay this fine using its existing cash balances and available credit lines.
"We welcome that the European Commission has finally made a decision after several years of delay. However, based on the facts and circumstances of this case, we believe that this fine is excessive," said Jacques Esculier, Chairman and Chief Executive Officer. "We also believe that we have strong grounds to appeal, although we are waiting for the full text of the Commission's decision before we confirm whether to appeal."
The other companies in the cartel include Dornbracht, Duravit, Grohe, Hansa, Kludi, Roca, Sanitec, Villeroy & Boch and Zucchetti.
Immunity for Masco
Masco, whose main subsidiaries includes Hansgrohe, received immunity as it was the first to provide information about the cartel, the Commission said.
In 2004, as a result of its legal and ethical compliance program, Masco says it discovered and stopped certain subsidiaries from participating in anticompetitive business practices in the bathroom tap and shower enclosure sectors in certain countries in Europe. Masco says it took immediate steps to report the infringement to the appropriate authorities and Masco and its subsidiaries cooperated fully throughout the investigation.
As a result of its reporting of the infringement and cooperation throughout the investigation, Masco and its subsidiaries were given complete immunity from the European Commission following the investigation of the anticompetitive practices.
Geberit came under investigation by the EU Commission as well, but the investigation against Geberit was closed without imposing a fine. The original charges were not maintained by the EU-Commission. Geberit had constantly stressed that these charges were completely unfounded.
Considering appeals
Duravit, Sanitec and Grohe are considering appeals or waiting to see the full ruling so they can consider their legal position regarding the Commission's ruling.
"We do not understand the ruling and will also not accept it," said Franz Kook, the CEO of Duravit. "We have said at every stage that we consider the reproaches against Duravit to be unjustified.
"According to our interpretation the manufacturer, who is to bear over half of the penalty as a whole, is making claims which constitute unfair accusations against us. His aim by doing so was to obtain a discount, and he has apparently also achieved that. We will oppose the ruling in a suitable way. We cannot however say more until we have seen the detailed reasoning."
Press statement
The Commission's decision imposes a fine of 57.69 mill Euro on Sanitec Europe Corporation; it provided kbb News with the following press statement:
"Sanitec Europe Corporation and its operational companies have cooperated fully with the European Commission throughout the process.
"Sanitec is currently considering its response to the European Commission's decision, including a possible appeal of the decision to the General Court of the European Union. Once it has received the full decision of the European Commission, Sanitec will review its content and take appropriate action.
"Sanitec takes compliance very seriously. Sanitec complies with relevant laws, including the competition rules, in every jurisdiction in which it operates."
Grohe said in a statement that the fine would negatively impact its investment decisions and it was reviewing its legal options.
Antitrust watchdog
The 27-country European Union's antitrust watchdog has levied more than 10 bill Euros in penalties since 2004.
"The cartel will have harmed businesses such as builders and plumbers and, ultimately, a large number of families," Competition Commissioner Joaquin Almunia said in a statement. He said the Commission had not softened its fining policy despite the reduced penalties. "We consider a positive reaction to an inability-to-pay request as an exception, not a rule," Almunia told a news conference.