OFT imposes fines for double glazing price fixing cartel

20 January 2005

Richard Eccles

The OFT has concluded that five companies operating in the double glazing product market have been party to an overall price fixing arrangement where a number of sub-agreements or concerted practices were held to form part of a common plan. Three of the parties benefited from the OFT’s leniency programme for having acted as whistle-blowers.

Outcome/Facts

The OFT concludes that UOP Ltd, the UK’s leading supplier of a chemical used in double glazing called desiccant, and four double glazing manufacturers were involved in an agreement and/or concerted practice from 1 March 2000 until 12 March 2003 to fix and/or maintain minimum resale prices for UOP’s desiccant in infringement of the Chapter 1 prohibition of the Competition Act 1998. The OFT identified five sub-agreements and/or concerted practices which formed a pattern of continuous conduct with the common objective of maintaining the resale price.

The OFT stated that it was not necessary to split up the conduct by treating it as a number of separate infringements. The separate acts of the parties were part of a series of efforts made by the five companies in pursuit of a single economic aim. The parties were aware of each others’ involvement and knew their conduct was part of an overall strategy. The OFT held that although individual roles were not identical, this had no impact on the finding of a single overall agreement.

In particular, UOP met with its UK distributors to put into place a price matching policy, used financial support to encourage single source distributorships and prevent price cutting and acted as mediator between distributors in the case of pricing disputes. The distributors participated in the policy by complaining to UOP about undercutting. Evidence was also found of sub-agreements to co-ordinate price rises.

Regarding co-ordinated price rises, a fax was sent out to the distributors setting out the price increase and suggesting co-ordinated action. When an undertaking has participated in price fixing discussions and is then informed of prices that its competitors intend to charge, there is a presumption that the undertaking cannot fail to take account directly or indirectly of the information (Cimenteries). The OFT suggests that by receiving the communication without objecting, and by implementing the increase as suggested, the recipient at least gives tacit acquiescence to the price fixing agreement. If in the context the parties knew the communication’s meaning, the OFT states that this amounts to full co-operation with the price fixing policy.

Financial penalties have been imposed on all the parties, subject to the OFT policy of giving lenient treatment to undertakings coming forward with information about a cartel. One supplier (UKae) received full immunity as it was the first member of the cartel to come forward to the OFT. UOP and another supplier, Thermoseal, received reductions in the fine of up to 50% as they came forward before the OFT had given written notice of its proposal to make an infringement decision. Reductions can also be granted where the undertaking would have qualified for total immunity had it not been the instigator or leader of the cartel or compelled others to join.

Comment

This case particularly demonstrates the approach used by the OFT to finding the existence of overall concerted practices from a pattern of conduct demonstrating the common objective of the parties. The decision also contains interesting analysis of what amounts to acceptance of a price fixing policy in the context of a series of agreements.

Source can be found here.

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