EC fines for preserve fixing

The European Commission has found four chemical processing companies guilty of operating a a cartel in the sorbates market between 1979 and 1996. The companies are Hoechst, Chisso Corporation, Daicel Chemical Industries, The Nippon Synthetic Chemical Industry and Ueno Fine Chemicals. Sorbates are one of the most widely used chemical preservatives in Europe to preventthe development of moulds, bacteria and other micro-organisms in foods, forexample in mayonnaise and sausages as well as beverages. They are also usedfor the coating of cheese wrapping paper or in cosmetics. "Because of thisconspiracy, European consumers paid more for many everyday product than ifthe companies had competed against each other. I am determined thatparticipation in a cartel should not pay. The only way for companies toavoid high fines is to come clean and stop participating in cartels whoseonly purpose is to extort from unknowing consumers, be they intermediate orfinal, illicit profits," said Competition Commissioner Mario Monti. Today's decision follows a careful investigation which, according to the Commission, showed beyond anydoubt that between the end of December 1978 and 31 October 1996 (30 November1995 for Nippon) Hoechst, Chisso, Daicel, Nippon and Ueno operated a cartelby which they agreed prices and allocated volume quotas for each other. In 1995 the five companies controlled about 85 per cent of the sorbates market inthe European Economic Area. Until it transferred its sorbates business to Nutrinova in 1997, Hoechst was the largest producer of sorbicacid the main type of sorbates followed by Daicel. Hoechst is based in Germany. The other four companies are all headquartered in Japan. Sorbates are anti-microbial agents capable of retarding or preventing growthof micro-organisms such yeast, bacteria and moulds primarily in foods andbeverages. They are also used as stabilisers in pharmaceutical products andcosmetics. There are three types of sorbates: sorbic acid, used inmargarine, mayonnaise, beverages and bakery products, among other things;potassium sorbate used in products with a high water content; and calciumsorbate used for the coating of cheese wrapping paper in France and Italy. The probe started in the autumn of 1998 when the Commission was approachedby representatives of Chisso under the Commission's Leniency policy, whichenables companies to obtain full immunity, if they are the first to provide information on a cartel, or a reduction from fines. The Commission said that the evidence it gathered clearly established the existence ofa cartel in breach of of the European Union Treaty. The participants in the infringement usually met twice a year to discussprices for each country and volume allocations. These meetings alternatedbetween various locations in Europe and Japan. The Japanese producers wouldhold preparatory meetings in order to agree on prices and volumes to bediscussed at the joint meetings most of which took place in Tokyo, the Commission said. Calculation of the fines Taking into account the gravity of each company's involvement in the cartel the Commission served up fines accordingly. Chisso fulfilled the conditions for full immunity and, therefore, did notreceive a fine. Hoechst was imposed the highest fine because of "its overall size as well asits share of the relevant market and the fact that it had committed asimilar violation in the past". The fine also reflected its position asco-leader in the cartel together with Daicel. However, the final amount forHoechst also included a 50 per cent reduction for co-operating in the investigation. The Commission said that the fines imposed on the Japanese producers also include different levels of reductions according to the quality of the cooperation provided to theCommission.Ultimately Hoechst was fined €99 million, Daicel Chemical Industries €16.6 million, Ueno Fine Chemicals Industry, €12.3 million and The Nippon Synthetic Chemical Industry €10.5 million.