EC fines cable-makers €310m for rigging prices, markets in global cartel

The European Commission has fined ten copper cable-makers, including Nexans and Prysmian, for rigging underground and sub-sea cable supply tenders and colluding to carve up sales in regional markets.

The European Commission has fined ten copper cable-makers, including Nexans and Prysmian, for rigging underground and sub-sea cable supply tenders and colluding to carve up sales in regional markets.

The EC investigation is part of a worldwide probe into a pricing ring operated by cablemakers for nearly ten years starting from 1999. Six European, three Japanese and two South Korean companies were fined on Wednesday April 2, after a five-year investigation by the commission.

“These producers entered into mutual agreements according to which the European and Asian producers would stay out of each other’s home territories and most of the rest of the world would be divided amongst them,” the commission announced on Wednesday.

Acting on a tip-off from cartel member ABB, the commission raided the offices of a dozen companies in 2009, and formally charged the companies with allocating markets and fixing global copper cable prices in 2011.

After defences were heard in 2012, the scope of the investigation was scaled back to exclude investigation of cartel activities in markets other than the underground and subsea cable markets.

Italy-based cable-maker Prysmian set aside €207 million in provisions for risks and charges related to investigations launched by the EC and other regulators in the USA and Canada.

Prysmian, along with former owners Pirelli and Goldman Sachs, was ordered to pay €104 million on Wednesday. The investment bank, which bought, floated and sold out of Prysmian between 2005 and 2010, is jointly liable for €37.3 million, the commission said.

Prysmian also faces an investigation in Brazil that it has not provisioned for, according to its last annual report.

Nexans, the France-based cable-maker, set aside €200 million in provisions, and since the 2009 raid it has warned investors that an adverse ruling could have a material effect on the financial position of the group, even excluding the potential fine imposed by the EC.

The company was fined €70.7 million by the commission on Wednesday. Its shares rose as much as 5.5% following the announcement.

Nexans has not made provisions for potential fines arising from related investigations in Australia, South Korea, the USA, Brazil and Canada.

The eight other companies fined by the commission were J-Power Systems (previously Sumitomo Electric and Hitachi Metals), VISCAS (previously Furukawa Electric and Fujikura), EXSYM (previously SWCC Showa and Mitsubishi Cable), Brugg, NKT, Silec (previously Safran), LS Cable and Taihan.

ABB received immunity from €33 million in fines for revealing the existence of the cartel. J-Power Systems and its parents Hitachi Metals and Sumitomo Electric received a 45% reduction of the fine for co-operating with the investigation.

Rigging tenders
The investigation revealed that whenever the Japanese and South Korean cartelists received supply quotes from European customers, they would notify their European counterparts and decline to bid.

The cartelists met regularly at hotels in Southeast Asia and Europe and communicated regularly by email to organise their activities, which also included agreeing on price levels to bid in tenders held by buyers of sub-sea and underground cables, the commission said on Wednesday.

Through a forensic investigation, the commission also found evidence that a Nexans employee had deleted several thousand electronic documents, most of which were closely linked to the activities of the cartel.

The EC case follows on from an investigation launched by French competition authorities which concluded in 2007 with Prysmian, Nexans and other copper cable makers being fined €20 million for colluding in cable sales tenders run by French power supplier EDF.

The French authorities found that between June and May 2004, the cable makers made sophisticated arrangements to rig the results of the EDF deals, including organising prior simulations of the bidding process on the day before tenders took place.

In the French case, Nexans France was fined almost €10 million, Prysmian Energies Câbles et Systèmes almost €5 million, Safran almost €4 million, Draka Paricable €675,000, and Grupo General Cable Sistemas €900,000.

In its notice on Wednesday, the commission said that the parties were “well aware” that they were breaking competition rules, as proven by evidence of meetings where the advantages and disadvantages of forming a cartel were discussed.

“It would be tough unless the pie for each company increases and the merits exceed the risk of having cartel,” one party wrote in a note about the meeting.

Mark Burton
Twitter: @mburtonmb

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