News and Press
European Commission confirms cartel investigation into the electronic distribution systems market

The European Commission recently confirmed that it has conducted unannounced inspections at the premises of companies in several Member States, investigating suspicions of their involvement in a secret price fixing cartel.

The European Commission did not identify the companies but confirmed that they are leading players in the lucrative automotive electronic and electrical distribution systems market. More specifically, they supply car manufacturers with wire harnessing products, used to link a car's computers to the relevant functions in the vehicle (e.g. stereos and electric windows).

The raids formed part of a coordinated global investigation involving several competition authorities worldwide. So far, companies in Europe, Japan and the United States have been identified.

A cartel is an arrangement (which need not be in writing) between competitors to take a particular course of conduct that will have the effect of raising prices of a product or service above the level that would be obtained under normal market conditions. Cartels are illegal under both EU and UK competition law and breaches can result in heavy fines of up to 10% of group worldwide turnover.

Typical aspects of cartel activity include competing companies joining together to:

• Fix prices – direct or indirect fixing of purchase or selling prices or any other trading conditions may be considered anticompetitive. Examples include agreements to set minimum prices or co-ordination of the timing of price increases;
• Limit production – this includes activities which have the effect of limiting or controlling production, markets, technical development or investment;
• Share markets, customers or sources of supply – while this often involves agreements not to sell the same product in the same area it also includes agreements to share sources of supply to the detriment of other competitors;
• Bid rigging – where parties agree the outcome of a tender process amongst themselves either by deciding in advance which company will bid or who will bid the best price, thereby eliminating fair competition from the tender process.

Cartel activity is almost always accompanied by the exchange of commercially sensitive information between competitors.

Firms should bear in mind that both the European Commission and the Office of Fair Trading operate leniency policies under which the first party to blow the whistle on anti-competitive behaviour may benefit from up to a 100% reduction of the fine payable. This approach is intended to encourage companies to hand over evidence of cartel activity. It should be noted that such raids are considered a preliminary step. It remains to be seen, therefore, what the outcome of this large-scale investigation will be. Depending on the complexity of the case and the level of co-operation from the companies involved, the investigation could take a number of years to complete.

Nicola Kingaby, Competition associate at TLT, comments, “the outcome of this investigation will be of interest to both firms involved in similar cartelistic behaviour, and to purchasers who believe they have been on the receiving end of such anti-competitive practices.”

Firms concerned that they too may be involved in prohibited behaviour:

• should consider adopting a competition compliance programme to avoid future infringements; and
• ought to consider the benefits of blowing the whistle to take advantage of current leniency provisions.

Firms which believe they have suffered damage as a result of anti-competitive behaviour should be aware that they are able to take steps to end such practices and make a claim for damages.

For more information, please contact Nicola Kingaby.