COMMENTARY: Only minor dents from the crash of a big cartel

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By Pentti Laitinen
     
      The bigger the cartel that goes down, the greater the sense of unreality that is left behind: was it really as basic as all that, is this what went behind all the lofty speeches by captains of industry about tough competition in the market-place?
      The combined fines of nearly a billion euros imposed by the European Commission are staggeringly large. When they are dealt out to the four biggest players in this sector, the market position will remain more or less unchanged. Each of the four companies will get a similar-looking blot on its escutcheon, or a dent in its public affairs fender.
     
Baked into the cartel investigation pie is a rather distasteful "leniency programme" clause, without which apparently no such cases will ever again be satisfactorily resolved.
      It is pretty difficult for the average Finno-Ugrian sense of justice to take on board the idea that in order to be granted absolution you only have to blow the whistle on your colleague, even if you are yourself quite as guilty as he is.
      This immunity clause for informers does bring some questionable features into the investigation process, admits Rainer Oesch, Professor of Commercial Law at the University of Helsinki.
      From the perspective of judicial principles, one could discuss whether the companies being investigated are on a level playing-field or not, but in the same breath Oesch points out that the practice certainly brings an extra efficiency to the table.
     
Those large international concerns who were exposed in this latest lifts & elevators price-fixing scandal have followed the same formula that has been uncovered in other past cases.
      There is no paper-trail to speak of to be followed, meetings are held in bars, travelling expenses are paid in cash, and personal mobile phones (often with pre-paid SIM cards) and home fax machines are used for contacts.
      Against this background, the competition authorities are powerless or at least faced with a mountain to climb when embarking on such a case, unless they have an informer card up their sleeve.
     
Last week in Finland we also saw a decision on an investigation into a domestic cartel in the roofing felt sector.
      It did not lead to any further action or a visit to the Market Court for those involved, although the Finnish Competition Authority determined that the companies were guilty of exchange of information in breach of national and EU rules on competition between 1996 and 2001. The companies had managed to mend their ways before the law caught up with them.
      In the inner circles of the roofing felt trade it was known back in the 1980s that every Monday morning there was a "divvying-up" or market sharing meeting held in a private dining room at Hotel Marski, at which the manufacturers of the said roofing felt went through all contracts in excess of 1,000 square metres. These were divided out by turns among the roofing contractors who were affiliated or otherwise connected with each manufacturer.
      The procedure was almost identical with the lift cartel, but it was able to pass the statute of limitations and to be dismantled when there was no proof to be had, and as yet there was no informer's carrot to be dangled.
     
This spring the Market Court will issue a ruling on the asphalt cartel in Finland. If it goes the way the Finnish Competition Authority would like, then the level of fines applied hereabouts will also take a considerable leap upwards.
      Back in 2004, the FCA called for competition infringement sanctions on the branch of EUR 97 million, with Lemminkäinen liable for the lion's share: EUR 68 million.
     
The EUR 142 million fine handed down to Kone last week can already be considered as forgiven.
      The company's stock price barely quivered when the news of the decision came from Brussels, as it had already been factored into the price on the Helsinki Exchanges.
      The Kone Board Chairman, principal owner, and former CEO Antti Herlin had already been absolved from any possible fines before he was appointed as Chairman of the Confederation of Finnish Industries (EK) in October 2006. Lemminkäinen's Heikki Pentti vacated his seat as Chairman of the Board of the then Confederation of Finnish Industry and Employers in June 2003, when the company was still only under suspicion of being involved in a price and bidding cartel.
     
Helsingin Sanomat / First published in print 23.2.2007


Previously in HS International Edition:
  Herlin not stepping down from EK Board, despite Kone price-fixing fines (26.2.2007)
  Kone fined EUR 142 million in elevator cartel case (22.2.2007)
  Kone CEO Antti Herlin to head Confederation of Finnish Industries EK (12.10.2006)
  Lemminkäinen rejects asphalt cartel allegations, lashes out at Competition Authority (15.4.2004)
  Kone partly concedes cartel allegations from European Commission (18.3.2004)
  Asphalt firms face record fines over allegations of price fixing (1.4.2004)

PENTTI LAITINEN / Helsingin Sanomat
pentti.t.laitinen@hs.fi