EC fines four for rubber chemical cartel: Bayer to pay Euros 58.8m

By Liz White, ERJ staff

Brussels-Following yesterday's report that Chemtura has been fined Euros 13.6 million by the European Commission in its rubber chemicals cartel case, the commission has announced that it has fined four firms-Chemtura, Flexsys NV, Bayer AG and General Quimica-a total of €75.86 million.

The penalty was imposed, "for operating a cartel in the rubber chemicals market, in clear violation of EC Treaty competition rules which forbid cartels and other restrictive business practices (Article 81)," said the EC statement.

In practice, Flexsys has not been fined, since it blew the whistle on the case, while Bayer has been fined Euros 58.8 million-an amount which include a 20 percent leniency reduction for cooperation. Crompton was let off half its fine for early cooperation, while General Quimica's 10 percent leniency reduction meant it was fined only Euros 3.38 million.

The EU said three rubber chemicals suppliers, Flexsys, Bayer and Crompton-now Chemtura-agreed to exchange information about prices and/or raise prices of certain rubber chemicals (antioxidants, antiozonants and primary accelerators) in the European economic area (EEA) and world-wide markets at least from 1996 to 2001.

The EC took the step of quoting one of the participants, presumably from Flexsys: There was a contact among competitors from at least the mid 1990's, before, during and after every price increase for rubber chemicals or at least an attempt to have such contact.” And it quotes another employee of the same company as calling the 1998 price increase, the most orchestrated and collusive 'agreement' he ever made.”

The EC points out that it suspects this to be a long term practice in the rubber chemicals sector. Its investigators saw indications that "collusive activities within the rubber chemicals industry were already taking place at least occasionally in the 1970s," but said it could only find sufficiently hard evidence of the cartel's existence for 1996-2001

General Quimica, a subsidiary of Spain's Repsol YPF SA and Repsol Quimica SA, was held to have participated to this agreement in 1999 and 2000.

In the EEA, the market value in 2001 for rubber chemicals-used in all rubber applications, the largest of which is tyres-was estimated at about €200 million, with a world-wide value of €1500 million.

In its press statement the EC stressed that the high fines confirm, "the Commission's determination to crack down hard on firms that take part in cartels." This is the fifth EC decision in 2005 against hard-core cartels.

Cartels are a scourge. I will ensure that cartels will continue to be tracked down, prosecuted and punished, With this latest decision, I am sending a very strong message to company boards that cartels will not be tolerated, and to shareholders that they should look carefully at how their companies are being run. ”said competition commissioner Neelie Kroes in the EC ruling.

This investigation followed an application for conditional immunity by Flexsys in April 2002. In September 2002, the commission inspected premises at Bayer, Crompton Europe and General Quimica. Crompton, Bayer and General Quimica all applied for leniency, on 8 Oct 2002, 24 Oct 2002 and 7 June 2004, respectively.

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Press release from European Commission