European Commission Seeks To Stamp Out Envelope Cartel With Fines Totaling 19.48 Million Euros

A View from Constantine Cannon’s London Office

By Ana Rojo Prada and Richard Pike

The European Commission has announced that it has imposed fines totaling 19.48 million euros on five European envelope producers for coordinating prices and allocating customers through an anticompetitive cartel.

The Commission imposed fines on the five companies – Bong (of Sweden), GPV and Hamelin (both of France), Mayer-Kuvert (of Germany) and Tompla (of Spain) – after they agreed to a settlement that required them to acknowledge their participation in the envelope cartel and their liability for violating European Union antitrust rules.

The Commission found that from October 2003 to April 2008 the cartel allocated customers and coordinated prices for standard/catalogue and special printed envelopes.  The companies’ high-level executives met at multilateral and bilateral meetings at which they arranged for their companies to exchange commercially sensitive information and to coordinate prices that they offered to major European customers.

In September 2010, the Commission started an investigation on its own initiative. Some observers believe that the investigation was triggered by an individual who informed the Commission.  Competition Commissioner Margrethe Vestager welcomes such “single tip-offs,” which enable the Commission’s staff to expose cartels.  Unlike this proceeding, most exposures of cartels in the European Union result from corporate applicants coming forward to seek immunity.

Although no immunity was granted, Tompla, Hamelin, Mayer-Kuvert and GPV, collaborated with the investigation.  This led to reductions in their fines of 50%, 25%, 10% and 10% respectively.  All the companies benefited from an additional 10% reduction of their fines for acknowledging their participation in the cartel and settling with the Commission.

The cartelised products represented a large proportion of the cartelists’ total turnover.  Therefore, the Commission departed from the usual fine-setting procedure, and exercised its power under paragraph 37 of the Fines Guidelines to reduce the fines, in order to ensure adequate deterrence and proportionality.  The Commission calculated the fines by taking into account such factors as the companies’ sales within the European Economic Area (EEA), the seriousness of the infringement, its geographic scope and duration.

The Commission noted that two unnamed companies claimed an inability to pay the fines as initially calculated.  After an analysis of the companies’ financial statements from past years, projections into the future, the profitability, solvency and relationship with outside financial partners and shareholders, the Commission reduced the fines for these two producers.

This is the 17th settlement since the Commission adopted a simplified settlement procedure for cartels in June 2008, and the first under the administration of Ms. Vestager, who became Competition Commissioner last month.  She has stated her intention to continue with the determined fight against cartels supported by former Competition Commissioner Joaquín Almunia.  She expressed such determination by stating that “On this case we have closed the envelope, sealed it and returned it to the sender with a clear message: don’t cheat your customers, don’t cartelise.”

Customers affected by the cartel, particularly stationery distributors, can be expected to pursue compensation for the losses caused.  The countries affected include the United Kingdom.  The fact that at least one of the cartelists’ entities is also domiciled in the UK makes it likely that claims will be brought in London.

– Edited by Gary J. Malone