Kuhne+Nagel of Switzerland, which is one of the largest transport
and logistics companies in Europe, also took part in the cartel
but was not fined as it was granted immunity for revealing the
existence of the cartel.
'Blocktrains' refers to a rail shipping system to transport cargo from one hub to another without wagons being split up or stored on the way. This saves time and money for customers from a wide range of industries, in particular those with large volumes to transport. In principle, blocktrains are economically more efficient than traditional rail cargo transport, notably for single commodity shipping. The 'blocktrains' covered by the cartel, named "Balkantrain" and "Soptrain", were jointly operated by Kuhne+Nagel, Express Interfracht and Schenker. "Balkantrain" ensures the connection between Western and Central Europe with Southeast Europe. "Soptrain" connects Central Europe with Romania.
In order to limit competition between them, the companies agreed on several restrictive practices:
" they agreed and allocated existing and new customers as
well as setting up a customer allocation scheme including a
'notification system' for new customers;
" they exchanged confidential information on specific
customer requests;
" they shared transport volumes contracted by downstream
customers;
" they coordinated prices directly by providing each other
with cover bids in respect of customers protected under their
customer allocation scheme and coordinated sales prices offered to
downstream customers.
The infringement lasted from July 2004 to June 2012 for all companies.
Cartels Off The HookThese are just a few of the cases brought to a successful conclusion by the Competition Commission. However, the fact that these cases were brought and fines levied does not mean that these fines were actually imposed or collected. The EU clearly recognises that cartels are the leitmotiv of European business and have prosecuted some cases, but that does not mean that the cartels are deterred or fined.
When these cases were heard and a fine imposed the EU allows for a mitigation of the penalty. It reaches a "settlement" with the cartels reducing the fines and limiting the liabilities of the companies found to be operating cartels. Recent settlements include cartels in the following cases: DRAMs, animal feed phosphates, washing powder, glass for cathode ray tubes, compressors for fridges, water management products, wire harnesses, Euro and Yen interest rate derivatives, polyurethane foam, power exchanges, bearings, steel abrasives, mushrooms, Swiss Franc interest rate derivatives and bid-ask spreads, envelopes and parking heaters.
The Commission has established variations to its antitrust legislation which permits a policy of leniency. Some companies are let off entirely because they co-operate with the Commission; others have their liabilities reduced by 75% plus an additional 10% for later co-operation. Some are let off because the fine would "destroy" the company. Others are let off because it would be better for consumers if their products remained in the market. All in all, EU competition and anti-trust policy is largely for show and for giving the lobbyists a reason for collecting their large fees; a useful sham. They can also deduct these fines from their income as a business expense.
I have had first-hand experience with how these cartels work. My company was engaged in the international trade in cement. We traded in Africa, the U.S. and in Britain. When we established our UK operation we were approached by several producers seeking to discuss our place in the orderly marketing arrangements. We were informed that on the last Thursday of every month the European cement producers would have their monthly meeting at the Hyde Park Hotel where access to the European market and projects coming up would be discussed and contracts allocated in the "ring" of the producers. We decided that this was not the way we wanted to do business so thought we could do business without the cartel. It was not a wholly successful position to take as we faced retaliation. It was not that they companies took any action against us per se but they informed all of our cement buyers that if they bought from us they would not be able to buy sand or stone or other materials except at a very high price.
We went to Brussels to meet with Leon Brittan, the European
Competition chief and told him about the cartel and what it was
doing. He investigated and proceeded to examine the evidence. In
an ironic turn of events the Cement Cartel had put a Swiss man
from Holderbank as the secretary of the cartel. He took notes and
circulated them to the attendees at the Hyde Park meetings. Being
Swiss he was very efficient and thorough in his notes. When Leon
Brittan's investigators raided the offices of the largest Belgian
cement producer they found the circulars sent out by the Swiss
secretary of the cartel, labelled "European Cement Cartel". The
Belgians had a hard time trying to explain that no such cartel
existed.
The EU announced a fine of 93 million against the various
producers identified as being members of the cartel. The lobbyists
were able to reduce this by more than 85%. In the spring of 2002,
the German Federal Cartel Office (FCO) uncovered a hard-core
cartel in the cement sector. Numerous cement producers had divided
the German cement market among them, agreed on sales quotas, and
fixed prices, since the beginning of the 1990s at the latest.
Readymix AG disclosed the cartel agreements to the FCO and applied
for leniency under the German leniency programme. In April 2003,
the FCO imposed a fine totalling 702 million on 12 companies and
their representatives, 660 million thereof on the six largest
German producers. The lobbyists were able to get this reduced
substantially and there are current proceedings seeking to reduce
it further.
While I was in the UK cement business I was frequently approached by my competitors to attend 'ring' meeting on upcoming construction projects in Canary Warf, Limehouse Link, the Ashford Bypass, Stanstead Airport and many roads to discuss the price of cement to be supplied to these projects. Aggregate manufacturers, ready-mix manufacturers, road builders and engineers, architect and others were there. They operated a ring of established and famous corporate tenderers for these construction products and they wanted to us to fix the prices of the components; cement was only one. Once the price was agreed by the big companies their lawyers would get together to prepare the bids for the tender to the government agency. They told me that there was too much money involved to leave it to chance or a new company coming in with a lower bid. I chose not to attend.
This is exactly what is happening in the EU. International tenders are constructed by a series of rings within and among countries. The government only gets the tenders based on the agreed minimum price. Competitors are kept out. In recent days the British entrepreneur, James Dyson, has complained about the EU and has backed Brexit. He has a good reason for this. He sued the EU for creating a standard for vacuum cleaners which was biased in favour of German manufacturers. Although his technology was far in advance of his German cartel competitors he lost. He has recommended that Britain leave the EU for its bias and lack of receptivity to new technology. In November 2014 he stated on BBC Radio 4 "I think it's a European Union dominated by Germany, and in our particular field we have these very large German companies who dominate standards setting and energy reduction committees, and so we get the old guard and old technology supported and not new technology. I want to keep EFTA -- European free trade -- and free movement of peoples, but I don't see that we need to be dominated and bullied by the Germans."
It's not only the Germans; it is the EU itself and many of its constituent countries which restrict trade, make the EU consumer pay high prices for what they buy, and restrain technologies which would allow innovative corporations to enter their markets. It is small wonder the elite of British business feels comfortable and secure in staying with such a cosy bunch. The EU business community was rocked when the U.S. fined the banks for price-fixing on LIBOR and other cases. They were shocked that they couldn't reduce the fine to negligible proportions as is common practice in Europe.It is pathetic that the British public is cajoled by these captains of industry to vote to keep these cartels in place. Getting rid of cartels and allowing real price and technological competition will allow Britain to prosper. I am reminded of my old friend, Jim Carey, present of the International Union of Electrical Workers. He told me a story I never forgot. When the six General Electric Corporation executives were found guilty of price-fixing and sent to jail, the union sent them all a present at Christmas during the first year. They sent them each a Monopoly set.
[1] Christopher Harding , Julian Joshua , "Regulating Cartels in Europe "Oxford Studies in European Law 2016
[1] Cartel Damage Claims, 29/10/15
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