European antitrust authorities fined Otis Elevator Co. and ThyssenKrupp AG, the world's two largest elevator makers, and three competitors a record €992.3 mln ($1.3 bln) for price-fixing.
The European Commission penalized ThyssenKrupp €479.7 million, the biggest fine against a company for a cartel, and levied €224.9 million on Otis, a unit of United Technologies Corp. It also fined Schindler Holding AG €143.7 million, Kone Oyj €142.1 million and Mitsubishi Elevator Europe BV €1.8 million for fixing prices of elevators and escalators. „It is outrageous that the construction and maintenance costs of buildings, including hospitals, have been artificially bloated by these cartels,” Competition Commissioner Neelie Kroes said in a statement today. The penalty is the highest imposed by the Brussels-based commission for a cartel, surpassing a €790.5 million fine imposed on eight companies for fixing vitamin prices in 2001. Otis, Schindler, ThyssenKrupp and Kone control about 75% of the global elevator and escalator market, which is worth €30 billion in annual sales, said Christian Obst, an analyst at HVB in Munich who has a „hold” rating on ThyssenKrupp shares. Kroes has made fighting cartels a priority for her five-year term. On January 24, she fined Siemens AG, Areva SA and eight other companies that make electricity network gear €750 million. The commission fined seven cartels a total of €1.84 billion last year, an annual record. Today's fines can be appealed to the European Court of First Instance in Luxembourg.
„Today we see the commission really going forward and really emphasizing its commitment not only to penalizing participants in cartels but also sending a very clear deterrent message to companies that might be tempted to get involved in those types of activities,” John Pheasant, a partner at Hogan & Hartson LLP, said in an interview. The commission, the EU's antitrust regulator, said a price-fixing cartel took place in Belgium, Germany, Luxembourg and the Netherlands between at least 1995 and 2004. The companies rigged contract bids, allocated projects to each other and shared confidential information, the regulator said. The companies „were aware that their behavior was illegal and they took care to avoid detection; they usually met in bars and restaurants, they traveled to the countryside or even abroad and they used pre-paid mobile phone cards to avoid tracking,” the commission said.
„The result of this cartel is that taxpayers, public authorities and property developers have been ripped off, big time,” Jonathan Todd, a commission spokesman, told reporters in Brussels. „Its effects will be felt for the next 20 to 50 years.” ThyssenKrupp's fine was raised by 50% because it was a repeat offender, the regulator said. The Dusseldorf, Germany-based company said in a statement that its lawyers „will review the fine notice and then decide whether to appeal.” Peter Murphy, a spokesman at United Technologies, wasn't immediately available when contacted by phone for a comment. He also didn't immediately respond to an e-mail. Under EU law, the commission can fine companies accused of operating a cartel as much as 10% of their annual sales. The agency has typically opted for about 2% to 3% of sales. The EU based the fines against the elevator makers on a calculation method approved in 1998. Under new fining guidelines adopted last year, the EU can double the penalties on companies that have repeatedly engaged in price fixing and impose additional fines on companies that join cartels.
„Kone will examine the commission's decision and decide on potential further action,” the company said in a statement. „Schindler will decide whether to appeal once it has been able to examine the grounds for the commission's decision,” the company said in a statement. „Schindler is very surprised at the size of the fine since the European Commission found no evidence of pan-European collusion among companies in the European elevator industry.” Herman Van De Pasch, senior managing director at Mitsubishi Elevator Europe in Veenendaal, The Netherlands, said he was „disappointed” by the fine. „I had expected a very low fine because of our small role,” Van De Pasch said in a telephone interview. EU spokesman Todd said Mitsubishi's fine wasn't included in the total fine printed in the commission press release earlier today. (Bloomberg)