EU: Glass Makers Are Fined $1.7 Billion in Europe's War on Price Fixing

Publisher Name: 
The New York Times

BRUSSELS - The European Commission
fined companies controlling the Continent's auto glass market a record
1.4 billion euros ($1.77 billion), on Wednesday for price-fixing over
five years. Two of the companies have been caught engaging in cartel
practices before.

A week earlier, investigators raided
several big cement makers in Europe, including other repeat offenders.
Antitrust specialists said such signs of chronic price fixing raised
questions about whether European enforcement efforts could be effective
without the threat of jail terms, as are routinely handed down in the
United States.

The European Union
competition commissioner, Neelie Kroes, insisted that stiff fines
should be enough to dissuade executives from fixing prices, restricting
supplies and dividing markets in Europe.

"If you cheat, you will
get a heavy fine," Ms. Kroes said at a news conference. The biggest
fine, 896 million euros ($1.1 billion), on the French glass maker
Saint-Gobain, was set so high - a record for a single company - partly
because it was a repeat offender, she said. The other repeat offender,
Pilkington, which is the British unit of Nippon Sheet Glass of Japan,
was fined 370 million euros ($470 million).

Both were fined last
year for fixing the prices of flat glass for buildings and homes.
Saint-Gobain was also fined twice in the 1980s for cartel pricing in
Belgium, Italy, Luxembourg and the Netherlands.

The fine for
Saint-Gobain, though substantial, is not likely to cripple the company.
It had net income of 2.1 billion euros ($2.6 billion) in 2007 on sales
of 43.4 billion euros.

Sophie Chevallon, a spokeswoman for
Saint-Gobain, said the employees involved with the cartel had been
demoted. She was unable to say whether they might face further
disciplinary or legal action.

In a statement, the company called
the fine "excessive and disproportionate," and said it planned to
appeal the decision in European courts in Luxembourg. The fine
represented "several decades" of profit for its automotive glass
business in Europe, it said.

Other companies involved were
Asahi, a Japanese company, fined 113.5 million euros ($144 million),
and Soliver, a Belgian company, fined 4.4 million euros ($5.6 million).

The auto glass cartel came to light after an anonymous tip, Ms. Kroes said.

Executives
had met at airports and hotels in Brussels, Frankfurt and Paris to
discuss contracts with automakers and the allocation of glass supplies
for new models, she said.

The result was that the European auto industry - currently struggling with plummeting sales as a global credit crisis tightens its grip - had been paying more than needed for windshields, windows and sunroofs.

Prices
were also higher than they should have been for branded replacement
glass sold to consumers, she said, although the commission did not say
by how much.

European officials last week raided the offices of
several big cement makers, including the French company Lafarge, fined
in 2002 for participating in a plasterboard cartel, and
HeidelbergCement, fined in 2003 by German authorities for rigging
markets there.

The fine against the glass makers was the largest
fine against a single cartel in the European Union, topping the 992
million euros ($1.2 billion) levied against elevator makers last year.
Even so, experts said that the efforts by the European Commission to
raise penalties to ever-higher levels showed the limits of their
enforcement abilities.

Policy makers in the United States
decided a decade ago that prison terms were the most effective way to
deter cartel formation, said Julian Joshua, a former competition
official at the commission.

"Perceptions of acceptable behavior change when people who are members of your country club end up behind bars," he said.

Ms. Kroes said she was pressing to make it easier for consumers and
industries that had been hurt by high prices from cartels to sue for
damages, as in the United States. That could make discovery of price
fixing even more costly for companies.

Yet even in European countries where prison is an option, authorities have shied away from using such a strong sanction.

Only Britain has imprisoned price fixers under a law passed in 2002
that makes cartel participation punishable by a sentence up to five
years, Mr. Joshua said. France and Ireland have the option but have not
imprisoned anyone.

AMP Section Name:Manufacturing