Competition Council Imposes Fines on High-Voltage Cable Suppliers - International Law Office

Facts
Competition Council Decision
Fines

On July 26 2007 the Competition Council imposed fines on several high-tension cable suppliers for entering into an anti-competitive agreement with regard to two bidding processes organized by EDF, the incumbent electricity supplier.(1)

Facts

EDF regularly organizes bidding rounds in order to meet its needs for high-voltage cables. Only approved companies may participate. Following two bids submitted in 2001, EDF referred its suppliers' practices to the Competition Council, thus initiating the proceedings that led to the decision at issue.

The first bid concerned the procurement of high-voltage cables for both aerial and underground networks from February 1 2002 to May 31 2002, which was valued at approximately €35 million. EDF resorted to an online reverse auction between four approved companies.

Various documents seized on the premises of the companies during the investigation revealed that the companies had organized three meetings before the bid. During these meetings, the companies not only exchanged sensitive information on their bidding strategy, but also planned the allocation of the market. Before the day of the bidding, the companies carried out several simulations in order to set the price levels of their offers and determine the order in which each company would bid on each lot.

The second bid concerned the procurement of high-voltage cables for both aerial and underground networks from June 1 2002 to May 31 2004, which was valued at approximately €200 million. The same four approved companies and Grupo General Cable Sistemas SA participated in the bidding process. The evidence collected during the investigation revealed a similar pattern to the first bid. The companies exchanged sensitive information on their bidding strategy and agreed on the price level of their respective offers through various simulations.

Competition Council Decision

Under both national and EU case law, agreements which aim to prevent competition through market sharing and price fixing cannot be justified. The Competition Council held that the practices at issue were particularly serious for two reasons. First, even though the companies argued that the duration of the agreement was limited to the bidding process (ie, six months), the council took into account the period during which both prices and market shares were influenced by the agreement. On this basis, the anti-competitive practices lasted 28 months. The council considered that the continuation of the agreement for the second bid highlighted the companies' will to extend the duration of the initial agreement for higher bids. Second, the council considered that the sophistication of the simulation mechanism used by the companies in order to set the price levels of their offers for the first bid was an aggravating factor.

Fines

The undertakings decided not to challenge the alleged facts pursuant to Article L464(2)(III) of the Commercial Code, which provides as follows:

"Where a body or company does not contest the truth of the allegations made against it and undertakes to alter its conduct in the future, the general rapporteur may recommend that the Competition Council, which hears the parties and the government representative without a report being drawn up in advance, impose the financial penalty referred to in Paragraph I and take into account the fact that no challenge was raised. In such cases the maximum amount of the penalty incurred is reduced by half."

Although each company made a number of general commitments (ie, personnel training and raising awareness of competition rules among their employees), the council found that such commitments were unlikely to have a significant impact on the level of competition in the market. However, the council considered that the use of the no-challenge clause contributed to facilitating and speeding up the investigation, which led to a further fine reduction of 10%.

Following the 50% reduction under Article L464(2)(III) and the further 10% reduction, the fines were set as follows:

• Nexans France - €9.5 million;
  
  
• Prysmian Energies Câbles et Systèmes - €4.8 million;
  
  
• Safran - €3.8 million;
  
  
• Draka Paricable - €675,000; and
  
  
• Grupo General Cable Sistemas - €900,000.

For further information on this topic please contact Joëlle Salzmann at Gide Loyrette Nouel by telephone (+33 1 40 75 61 67) or by fax (+33 1 40 75 69 37) or by email (salzmann@gide.com).

Endnotes

(1) Decision 07-D-26.