EU shocks electric cartel with 750 million euro fine

BRUSSELS/TOKYO Wed Jan 24, 2007 9:50pm EST

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BRUSSELS/TOKYO (Reuters) - The European Commission shocked an intercontinental cartel of electric power switchgear makers on Wednesday with its toughest fine yet for a single price-fixing offence, 750.7 million euros ($977 million).

More than half the fine, 396.6 million euros, was leveled against Siemens (SIEGn.DE) because of the German company's size and role as a ringleader. Japanese and European firms shared the rest.

Siemens, whose stock fell on an early Reuters report of the fine, will appeal to European Union courts.

"The fines are completely exaggerated and we cannot understand how the Commission arrived at these amounts," said Udo Niehage, president of Siemens' Power Transmission and Distribution unit.

Siemens said the fine would impact its profits, adding no provision had been made for such a fine. It reports first-quarter results on Thursday.

The cartel accounted for all European sales of gas insulated switchgear, which is needed at sub-stations used to carry electricity to homes, offices and factories.

"The Commission has put an end to a cartel which has cheated public utility companies and consumers for more than 16 years," Competition Commissioner Neelie Kroes said.

The cartel used encrypted emails sent to anonymous addresses to help coordinate global cartel quotas. European companies agreed not to sell in Japan and Japanese companies stayed out of Europe, the Commission said.

SHAM TENDERS

Cartel members arranged sham tenders to maintain their global cartel quotas, spelled out in two written agreements, the Commission said.

Japan's Mitsubishi Electric (6503.T) was fined 118.6 million euros and Toshiba Corp. (6502.T) 91 million euros, of which 4.7 million euros was an overlap to be sorted out by the two firms.

Toshiba said in a statement it had not violated European competition laws and that it planned to appeal the decision in European courts. Mitsubishi Electric also said it may appeal.

France's Alstom (ALSO.PA) was fined 65 million. A few months before the cartel ended Alstom sold the unit involved to Areva CEPFi.PA, which knew nothing of the cartel. It and Alstom have joint liability for 53.6 million, which they must decide how to split.

Hitachi Ltd. (6501.T) was fined 51.8 million euros and Fuji Electric Holdings Co. Ltd. (6504.T) of Japan 3.8 million. Their joint venture Japan AE Power Systems was fined 1.4 million, which overlaps with the two big fines. The companies must figure out how to divide liability.

Hitachi said it may appeal. Fuji Electric said it was still considering its response but would make efforts to see that such an incident did not happen again.

Schneider Electric (SCHN.PA) of France was fined 8.1 million euros and Siemens of Austria 22.1 million euros.

ABB (ABBN.VX) of Switzerland had its fine reduced to zero from 215 million euros because it blew the whistle on the cartel and turned over extensive evidence.

"ABB companies and employees are not permitted under any circumstances to engage in any anti-competitive practices," the company said in a statement after the fines were announced.

The companies may face problems yet in other countries for their actions.

Gas insulated switchgear is heavy, expensive equipment that controls the flow of energy in electrical power systems. It is sold as a distinct product, and as part of fully functional power sub-stations.

Although it is the highest fine for an individual violation by companies, the overall fine for the sector is behind the record 790.5 million euros imposed by the Commission on a vitamin cartel in 2001.

As for individual company fines, the biggest was Hoffman-La Roche's 462 million euro fine, for multiple violations.

(Additional reporting by Catherine Hornby and Jens Hack in Frankfurt, Katie Reid in Zurich, Edwina Gibbs in Tokyo)

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