Philips and other cartel members fined $1.9 billion by EU

An EU commission ordered the biggest antitrust penalty  in the history of the union last Wednesday against LG Electronics, Philips, and Panasonic for a total of 1.47 billion euros. The EU Commission is fining the mentioned companies for allegedly running cartels related to cathode ray tube technology for almost 10 years.

The Commission revealed that heads from Asian and European companies agreed until 6 years ago to set artificial prices and divide up markets for TV and computer monitor cathode-ray tubes, which have been made obsolete today by more popular flat screens. The executives, according to the Commission, met between 1996 and 2006 in Paris, Rome, Amsterdam, and in Asia. The said meetings were termed “green meetings” as they always ended in a round of golf.

A statement by Joaquin Almunia, EU Competition Commissioner said:  “These cartels for cathode-ray tubes are ‘textbook cartels’: they feature all the worst kinds of anti-competitive behavior that are strictly forbidden to companies doing business in Europe.”

Philips was hit the hardest for its significant role in the price fixing scheme and division of markets. The Netherlands-based company was fined 313.4 million euros and will face a series of penalties through a joint venture.

Philips Chief Executive Frans van Houten commented that the group accused by the commission will challenge the ruling, in what he called an overly unjustified and disproportionate penalty.

The South Korean LG will pay 295.6 million euros and is also included in a joint venture of penalty. Panasonic Corp is paying 157.5 million.

However, Japanese firm Panasonic said that it will appeal the ruling.

“Panasonic believes the EU decision is factually and legally erroneous … and will carefully review the decision and consider our options for appeal to the European courts,” the company said.

Another South Korean TV maker, Samsung SDI will pay 150.6 million euros while Toshiba Corp 28 million.

French company Technicolor will shoulder 38.6 million euros.

The joint venture of LG Electronics and Philips was penalized by the commission for 391.9 million. Panasonic’s own two joint ventures were sanctioned.

Joaquin Almunia said that the price fixing and market division was harmful for consumers because cathode-ray tubes made up 50 to 70 percent of the total price of the TV screens or monitors.

While effective and popular the other decade, cathode-ray tubes have now been replaced by more advanced screen technologies like organic light-emitting diodes, plasma display, and liquid crystal display (LCD).

Dutch -based Philips had sold its division which committed the unlawful act in 2001 but promised the commission to set-up a provision of 509 million in the current financial quarter for the fine.

Fabian Smeets, an ING analyst told ANP-Reuters that the fine was a big one for Philips, though the company has prepared for it.

Technicolor believes that the fine would not affect its 2012 earnings and cash flow targets. It will book the penalty under an exceptional item category in its second-half accounts.

The biggest antitrust penalty before this one had been imposed on members of a car glass cartel in 2008 for an amount of 1.38 billion.

The most recent antitrust ruling followed that Commission’s imposition of penalty over the makers of glass used in cathode-ray tubes last year, which was ordered to pay 128.74 million euros.

Samsung Electronics, Chunghwa Picture Tubes, LG Display, etc were fined a total of 648 million euros two years ago for participating in a cartel two years ago.

source: reuters

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