Paper makers ran a cartel, rules European court

A cartel of paper producers has had the fines of some members reduced after appealing European Commission-imposed penalties to the European Court of First Instance (CFI). Most of the fines, though, received the backing of the Court yesterday.

In 2001 the European Commission found that 11 producers of special carbonless copy paper had operated a cartel between 1992 and 1995. It fined 10 of them a total of €313.7 million, granting the 11th, South Africa's Sappi, immunity because of its cooperation and the value of the evidence it provided.

The companies appealed to the CFI against the amount that they were fined. They argued that the Commission had overestimated the duration during which the cartel operated, that it had had only a limited affect on the market, and that the Commission had wrongly defined the roles of some of the companies.

The CFI agreed that the fines set for two of the companies were too high, and it reduced them. UK firm Arjo Wiggins Appleton's fine was reduced from €184.27 million because it was said to have provided as much help as another firm whose fines were reduced by 50%. It was reduced by 50% rather than 35%, so fell to €147.75 million. Papelara Guipuzcoana de Zicunaga's fine was dropped from €1.54 million to €1.309 million because the Court ruled that the Commission had not established that the company participated in market sharing practices.

The CFI refused to annul the overall decision against the manufacturers of the paper. Carbonless paper is used to produce two copies of a user's handwriting and is most commonly used in delivery slips and banking forms.

The Commission found that a sophisticated price fixing and profit maximising cartel operated at the highest levels of the companies involved. The cartel agreed a timetable for coordinated price fixes and even carved up the €850 million market between them by percentage market share.

The Commission found that meetings had taken place at high and middle management levels. Chief executives met together, while regional or sales managers from the companies also met to create and implement the plan.

"The conduct of the companies concerned constitutes a very serious infringement of the competition rules laid down in Article 81 of the EC Treaty and Article 53 of the EEA Agreement," said a statement from the European Commission.

Angelo Basu, a competition specialist with Pinsent Masons, the law firm behind OUT-LAW.COM, said that collusion this sophisticated is not a one-off event. "I don't think that there was an extraordinary level of co-operation between the companies, it is the sort of thing that has been found by the Commission, and the Office of Fair Trading in UK cases, in a number of industries," he said.

He said that the changes in the fine levels for the companies were "technical reductions". "The reductions in fines don't undermine the Commission's authority," he said.

The ruling, though, could give some comfort to the large number of companies which appeal Commission fines, said Adrian Wood, another competition specialist with Pinsent Masons. "Appeals are taken to the CFI in over 80% of the Commission's cartel decisions and the ruling by the CFI today will give modest hope to a few of those appellants that some reduction in the fine level might still be possible in appropriate circumstances," said Wood.

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