Europe Upholds Citric Acid Cartel Fines

BRUSSELS - Sep 27/06 - SNS -- Fines levied in the European Commission's citric acid cartel case were upheld by the European Court of First Instance.

In December 2001 the commission found Jungbunzlauer (JBL) and Archer Daniels Midland Company (ADM) had engaged in an illegal price fixing cartel. Five producers of citric acid a total of € 135.22 million for participating in a secret worldwide cartel between 1991 and 1995. JBL was fined a total of €17.64 million and ADM €39.69 million.

The three other companies fined for their participation in the cartel did not challenge the Commission's decision before the European Court of First Instance.

JBL brought an action against the Commission before the Court of First Instance on 25 February 2002 claiming that the Court should annul the Commission's decision or alternatively reduce the fine imposed on it on the grounds that the Commission directed the decision to the wrong addressee, did not adequately establish the actual effects of the cartel on the market, did not take into account the applicant's special role in the cartel, imposed an excessive, discriminatory and disproportionate fine, did not take into account the fines already imposed in the USA and Canada and violated its right to be heard.

The Court of First Instance dismissed all JBL's claims, upheld the Commission's 2001 decision and the fine on the applicant in its entirety, and ordered the undertaking to pay all costs of the action before the CFI.

ADM brought an action against the Commission before the Court of First Instance on 28 February 2002 claiming that the Court should annul the Commission's decision or alternatively annul or reduce the fine imposed on it on the grounds that the Commission did not state proper reasons regarding the impact of the cartel on competition, its decision not to use ADM's turnover in the affected product market to assess the fine, its decision to apply a 100% uplift for deterrence and for assessing ADM's role as a leader. The applicant also claimed a violation of the principles of legal certainty, equal treatment, protection of legitimate expectations and proportionality and the Commission's wrong assessment of ADM's cooperation.

The Court of First Instance dismissed all ADM's claims except for two pleas referring to two "superfluous" factors which the Commission did not include in the Statement of Objections (that ADM restricted production capacity and that ADM designated a price leader in each national segment of the market) and upheld the fine on the applicant in its entirety. The Court ordered the undertaking to pay all costs of the action except for 10% of ADM's costs to be paid by the Commission.

Citric acid is the most widely used acidulant and preservative in the world. It exists in different types and is used in a variety of applications, mainly in food and beverages, household detergents and cleaners, pharmaceuticals and cosmetics, and in various industrial processes.

In the period 1991-1995, US companies Archer Daniels Midland (ADM) and Haarmann & Reimer (H&R), Dutch company Cerestar Bioproducts B.V., and Swiss companies Hoffmann-La Roche and Jungbunzlauer (JBL), participated in a worldwide cartel through which they fixed the price and shared out the market for citric acid. During the infringement period, the annual market was worth around €320 million in the EEA.

The cartel pursued four main objectives: allocating sales quotas, fixing 'target' and 'floor' prices, exchanging specific customer information and eliminating or limiting price discounts. The companies met at technical level within the "Sherpa" meetings and at high or strategic level within the "Masters" meetings. A monitoring system to ensure compliance with the quotas was established, as well as a compensation scheme obliging any member that over-sold its allocated quota to provide compensation to the others. Concerted action was also taken against Chinese imports to regain some of the customers lost to the Chinese suppliers (the "Serbia list") through a concerted and targeted price war.