The Marine Hoses Cartel: Maurits Pino

Competition Policy Newsletter
The Marine Hoses cartel
CARTELS
Maurits Pino
1. Introduction or other people working for an undertaking. In or-

der to safeguard the effectiveness of inspections,
On 28 January 2009, the Commission adopted a de- therefore, officials and other persons authorised
cision relating to proceedings under Article 81 of by the Commission should be empowered to enter
the EC Treaty imposing a fine of over EUR 131 mil- any premises where business records may be kept,
lion (1) on six producers of marine hoses. including private homes.’ The marine hoses inspec-
There was a key novelty in the marine hoses case: tions show that this idea was indeed correct and that
it was the first to involve a search in a private home such inspections can be very successful.
(see below). Otherwise, the marine hoses cartel was The Commission had carefully coordinated its in-
a textbook bid-rigging case. The arrangement be- spections with the US and UK authorities. The
tween the companies was a classic cartel with price- former arrested at the same time a number of in-
fixing and quotas, which the case team dealt with in dividuals involved in the cartel in Houston, Texas.
little more than two years. They had just held a meeting at which they dis-
cussed price-fixing of marine hoses. Subsequently,
2. The marine hoses industry most of the individuals and companies involved
Marine hoses are used to load sweet or processed pleaded guilty and agreed to long prison terms and
crude oil and other petroleum products from off- large fines (3). The latter pursued the employees in-
shore facilities (for example, buoys, floating produc- volved under UK criminal law resulting in a number
tion, storage and offloading systems) onto vessels of criminal convictions.”
and to offload them back to offshore or onshore
facilities (for example, buoys or jetties). 4. Functioning of the cartel
The investigation by the Commission uncovered
3. Procedure evidence that during the relevant period the parties
Yokohama applied for immunity under the Com- concerned by the decision had been participating in
mission’s 2006 Leniency Notice (2) on 22 December anticompetitive arrangements which consisted of:
2006. (a) allocating tenders,
On 2 May 2007, the Commission launched surprise (b) fixing prices,
inspections on the premises of Dunlop Oil & Ma-
rine, Trelleborg, Parker ITR, Manuli and PW Con- (c) fixing quotas,
sulting and at the home of the owner/manager of (d) fixing sales conditions,
the latter. In the months which followed, a series
of requests for information were sent to the parties (e) sharing the market geographically, and
involved and other undertakings that might be able (f) exchanging sensitive information on prices,
to provide details. sales volumes and procurement tenders.
These were the first inspections by the Commission Evidence uncovered revealed that, at least since
under Article 21 of Regulation (EC) No 1/2003 1986, members of the marine hoses cartel had been
which allows searches in private homes. In this case, running a scheme to share out amongst themselves
the decision to conduct such an inspection proved the tenders awarded by their customers. Under the
to be justified: abundant evidence of the cartel, in- scheme, any member of the cartel who received an
cluding evidence of a cartel dating back to as long inquiry from a customer would report it to the car-
ago as 1986, was found in the home, but not at any tel coordinator, who, in turn, would allocate the cus-
of the other sites inspected. tomer to a ‘champion’, which means the member of
According to the recitals of Regulation 1/2003 the cartel who was supposed to win the tender. To
‘Experience has shown that there are cases where make sure that the tender was awarded to the ‘cham-
business records are kept in the homes of directors pion’, in the tendering procedure the cartel agreed
on the prices that each of them should quote so
(1) Case COMP/39406 Marine Hoses.
(2) Commission Notice on immunity from fines and reduc- (3) See the US Department of Justice press releases at
tion of fines in cartel cases (OJ C 298, 8.12.2006, p. 17). http://www.justice.gov/opa/pr/2008/July/08-at-663.html
Number 2 — 2009 53
Cartels
that all their bids would be above the price quoted the fines, the cartel was considered to have operated
by the champion. for more than 19 years, so the variable amount was
multiplied by up to 19.
Moreover the cartel members agreed on a number
of measures to facilitate the implementation of the There were no mitigating circumstances and no ag-
cartel: reference prices, quotas and sales conditions gravating circumstances (such as recidivism) other
backed up by penalties to compensate any cartel than leadership. The fines of two undertakings were
members who lost tenders which the cartel had al- increased because they played the leading role.
located to them to another member of the cartel.
Yokohama was the first undertaking to submit in-
The marine hoses cartel was, therefore, in many formation and evidence which opened the door for
ways a textbook example. In one important sense, the Commission to carry out a targeted inspection in
however, it was different. An ex-employee of one of connection with the alleged cartel. The fine imposed
the undertakings involved in the cartel performed on Yokohama was reduced by 100 %. Manuli was
the role of coordinator. Cartel members communi- granted a 30 % reduction. Parker ITR’s and Bridge-
cated with the coordinator regularly by fax, e-mail stone’s contributions were not considered as being
and, sometimes, telephone for each new tender. The of ‘significant added value’. Therefore the Commis-
coordinator gave members market share reports, sion did not grant these two companies any reduc-
market development reports and specific instruc- tion of their fine.
tions on their bids. In addition, the coordinator se-
lected a ‘champion’ for each contract. This ‘cham- 6. Decision
pion’ would win the tender, while other members of
the cartel would submit ‘cover bids’ so as not to give The following fines were imposed (with the duration
away the cartel. of the infringement indicated in brackets):
• Bridgestone Corporation (1 April 1986 to
5. Remedies 2 May 2007): EUR 58.5 million, of which
EUR 48.1 million jointly and severally with
Under the 2006 Guidelines on fines (4), when deter-
Bridgestone Industrial Limited (19 December
mining the basic amount of the fine to be imposed,
1989 to 2 May 2007).
the Commission starts from the value of the under-
taking’s sales of the goods or services to which the • Yokohama Rubber Company Limited, immunity
infringement relates in the relevant geographic area applicant (from 1 April 1986 to 1 June 2006):
within the EEA. EUR 0.
The Commission calculates the fines to be imposed • Dunlop Oil & Marine Ltd (12 December 1997
on each undertaking concerned on the basis of the to 2 May 2007): EUR 18 million, of which
value of sales of each. As this was a worldwide car- EUR 16 million jointly and severally with Conti
tel and EEA sales do not reflect the strength of the Tech AG (28 July 2000 to 2 May 2007), of which
different parties, it is appropriate, in line with Point EUR 7.1 million jointly and severally with Conti-
18 of the Guidelines on fines, to apply the world nental AG (9 March 2005 to 2 May 2007).
market share of each undertaking to the total sales
within the EEA. The criteria that were considered to • Trelleborg Industrie SAS (1 April 1986 to
determine the percentage of the undertakings’ sales 2 May 2007): EUR 24.5 million, of which
were the nature of the infringement, the combined EUR 12.2 million jointly and severally with Trel-
market share of the cartel members, the geographic leborg AB (28 March 1996 to 2 May 2007).
scope of the cartel and the degree to which the car-
tel was implemented. On this basis, the percentage • Parker ITR Srl (1 April 1986 to 2 May 2007):
for the variable amount and the additional amount EUR 25.61 million, of which EUR 8.32 million
(‘entry fee’) was set. jointly and severally with Parker Hannifin Cor-
poration (31 January 2002 to 2 May 2007).
Although the cartel lasted from April 1986 to May
2007, a period of two years of only limited activity • Manuli Rubber Industries SpA (1 April 1986 to
on the part of the cartel was excluded when calculat- 1 August 1992 and 3 September 1996 to 2 May
ing the fines. Therefore, for the purpose of setting 2007): EUR 4.9 million.
(4) Guidelines on the method of setting fines imposed pursu-

ant to Article 23(2)(a) of Regulation No 1/2003, OJ C 210,
1.9.2006, p. 2.
54 Number 2 — 2009

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Competition Policy Newsletter

The Marine Hoses cartel

1. Introduction or other people working for an undertaking. In or-

(4) Guidelines on the method of setting fines imposed pursu-

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