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European Commission Slaps Smart Card Chips Cartel With Fines

Posted  September 9, 2014

A View from Constantine Cannon’s London Office

By Irene Fraile

The European Commission has imposed fines totaling 138 million euros on smart card chips producers Infineon, Philips and Samsung for breaching European Union antitrust laws that prohibit cartels.

According to the Commission, from September 2003 to September 2005, the companies engaged in a cartel to restrain competition relating to the smart card chips used in mobile telephone SIM cards, bank cards, identity cards, passports, pay TV cards, and various other applications.  The cartel used a network of bilateral contacts in order to coordinate responses to customers’ requests to lower prices and, ultimately, keep prices up.  The companies discussed and exchanged sensitive commercial information on pricing, customers, contract negotiations and production capacity, thereby damaging competition by reducing uncertainty concerning future behavior in the market.

Although some of the cartelists took measures to conceal the collusion, one of them – Renesas (a joint venture between Hitachi and Mitsubishi) – finally blew the whistle and revealed the existence of the cartel to the antitrust authorities under the Commission’s Leniency Programme.  As a result, Renesas received full immunity and avoided a fine of more than 51 million euros.  Samsung, which also cooperated with the investigation, received a 30 percent reduction in the level of its fine in return for its cooperation.

As is increasingly becoming common procedure, the Commission had held preliminary talks with some of the companies involved in order to conclude the probe with a voluntary settlement, which would have afforded the infringers the possibility of a 10 percent reduction in their fines in exchange for an admission of liability.  However, due to a clear lack of progress in the discussions, the Commission put an end to the talks in 2012.  This was the first time that the Commission has discontinued a settlement procedure and reverted to its normal investigation procedure.

After a six-year investigation, the final infringement decision was adopted last Wednesday.  It is worth noting that in relation to one of the companies – Phillips – the Commission was very close to passing the 10-year maximum time limit for imposing antitrust sanctions, given that Phillips’ anticompetitive behaviour supposedly ended in September 2004.  However, as Competition Commissioner Joaquín Almunia reminded journalists in the press briefing, even when this is the case, the completion of the limitation period only prevents the Commission from imposing a fine, but not from finding that the company was part of the cartel and, therefore, still subject to potential damages actions.  The same applies to the leniency applicant, which can be sued for damages even though it is not fined by the Commission.

Phillips has already stated it will appeal the decision, and Infineon is likely to appeal as well, on both procedural grounds and substantive grounds, challenging the nature of the evidence used by the Commission.  Samsung, however, is reportedly still considering its options.

In any event, given the broad scope of applications that were affected by the cartel, customers and other potential victims of the cartel may well begin to file damages actions in national courts sooner rather than later.

Edited by Gary J. Malone

Tagged in: Antitrust Enforcement, International Competition Issues,