alerts & publications
Marine Hose Cartel - Back in the SpotlightMarch 27, 2009
On 28 January 2009, the infamous Marine hose cartel once again came under the spotlight of regulators. In conjunction with the criminal prosecution, which has led to three former British executives being sentenced to jail by the UK courts, the European Commission imposed fines totalling €131 million on five of the six producers of marine hoses for participating in a market-sharing and price-fixing cartel in the European Union (EU).
These fines may at first seem modest given the tendency of increasing fines in the EU and the high fines imposed in other cartels. However, considering that the marine hose market value in the EU is no more than €32 million, the fines amount to approximately four years of revenue in the market.
The Commission’s guidelines for the calculation of fines in antitrust cases (the “2006 Guidelines”) have been applied by the regulator for more than two years, but this is the first time that the criterion of duration of the infringement has had such a significant impact on the final amount of the fine. The 2006 Guidelines refined the methodology applied to set fines, so that companies involved in a long-lasting infringement could receive significantly higher fines than in the past. Indeed, the starting point for setting the fines now takes into account up to 30% of the value of the sales to which the infringement relates, and this amount is then multiplied by the number of years of participation in the infringement.
The duration element is therefore a key factor of the 2006 Guidelines, and illustrates the Commission’s desire to reinforce the deterrent effect of its fining policy.
The participants in the Marine hose cartel found that their 21-year participation in the cartel had the consequence of multiplying the initial amount of the fine, resulting in a fine exceeding – for some companies – the total value of the market.
For Bridgestone, which was fined €58.5 million (including a 30% markup due to its leadership role in the cartel), this represents an initial amount of around €2.1 million multiplied by the 21 years it participated in the infringement. Ultimately, its fine is higher than the total annual value of the market, which the Commission estimated to be €32 million per annum. Under the previous fining methodology, Bridgestone would have suffered a substantially lower fine.
Interesting to note here is the fact that the Commission is not only investigating high-value markets, such as the market for flat glass, methacrylates, or fittings valued at €1,700 million, €665 million, and €525 million per year, respectively. The Commission’s action here demonstrates once again its commitment to prosecute any infringement of European competition law, in any type of product market and whatever the size of the market. Companies active in small or niche markets will be hit as hard as large corporate groups, such as Microsoft, Saint-Gobain, or ThyssenKrupp.
Finally, the Marine hose cartel also marks the first time the Commission conducted a dawn raid at the private home of one of the executives of the companies participating in the cartel.
 Yokohama, the sixth member of the cartel, received immunity from fines, being the first company to
file an immunity application to the European Commission. See the official press release IP/09/137 - http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/137&format=HTML&aged=0&language=EN&guiLanguage=en.
 In 2008, Saint-Gobain was fined €896 million and Pilkington €370 million for their participation in a cartel in
the car-glass sector. In 2007, ThyssenKrupp received a fine of €480 million for its participation in a cartel in the elevator sector.
 Pursuant to Article 21 of Council regulation n°1/2003, the Commission has the power to search private homes if it has reasonable suspicion that evidence is being kept on the premises.
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