October 1, 2008 / 9:51 AM / in 9 years

UPDATE 4-EU fines "paraffin mafia" wax makers' cartel

4 Min Read

(Adds ENI reaction, para 12)

By Paul Taylor

BRUSSELS, Oct 1 (Reuters) - The European Commission fined nine petrochemicals companies a total of 676 million euros ($955 million) on Wednesday for forming a "paraffin mafia" to fix prices and carve up markets for paraffin wax.

"There is probably not a household or company in Europe that has not bought products affected by this 'paraffin mafia' cartel, with all that implies in terms of paying over the odds, higher costs and economic damage," EU Competition Commissioner Neelie Kroes said.

Paraffin waxes are used in a wide range of products from candles to paper cups and plates, the wax coating of cheese, chemicals, tyres and chewing gum.

The biggest individual fine of 318.2 million euros was imposed on Sasol (SOLJ.J) of South Africa and Germany, which the European Union executive described as the leader of the illegal cartel, an official statement said.

Anglo-Dutch oil major Shell (RDSa.L) escaped a potential fine of 96 million euros because it blew the whistle first to the EU competition authorities.

Kroes said the cartel was known inside Shell as the "paraffin mafia" and in Sasol as "Blauer Saloon" (Blue Saloon) after the hotel bar in Hamburg, Germany, where the first meetings of executives from the companies were held.

It was a very serious infringement of EU treaty antitrust rules, compounded by the duration of the cartel, she said.

It was the fourth-highest fine ever imposed by EU regulators on a sector, topped only by the record 992.3 million euros on elevator companies last year, 790.5 million on makers of vitamins in 2001 and 750.5 million on manufacturers of gas insulated switchgear in 2007.

Sasol Appeal

Sasol, the world's biggest maker of motor fuel from coal, said it would likely appeal the ruling.

"Sasol is surprised by and does not understand the reasons for the magnitude of this fine and will be studying the reasons for the finding with a view to lodge an appeal against it," the company said in a statement.

The other companies fined were Total (TOTF.PA) (128.1 million), Exxon Mobil (XOM.N) (83.6 million euros), RWE (RWEG.DE) (37.4 million), ENI (ENI.MI) (29 million), Hansen & Rosenthal <24 million), MOL (MOLB.BU) (23.7 million), Repsol (REP.MC) (19.8 million), and Tudapetrol (12 million).

Eni said it would appeal, adding it noted "the Commission has estimated the company's involvement ... as marginal and limited in time (2002-2005)."

The Commission said the cartel activity took place between 1992 and 2005, when it began investigating with raids on petrochemicals companies prompted by an application from Shell for leniency in return for information provided.

The companies were well aware their activity was illegal, Kroes added.

"I sincerely hope... that these high fines will encourage the management of these companies and others to look very carefully at what their staff are doing, and I hope that in turn the shareholders... will look very carefully at the management," she said.

THe Commission said individuals or companies that were victims of the cartel were entitled to seek damages in national courts of EU member states. See related factbox [nL1211812] (Additional reporting by Jeremy Smith, Ingrid Melander and James Macharia in Johannesburg, Svetlana Kovalyova in Milan; Editing by Dale Hudson, Richard Hubbard and Jon Loades-Carter)

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