French Comp Council first implementation leniency procedure

28 July 2006

Orion Berg

April 2006

On 11 April 2006 the French Competition Council issued its decision fining nine companies for having infringed the cartel prohibition on price-fixing in the market for the manufacturing of wooden doors. The fines amounted to a total of €5 million. For the first time, the Competition Council applied its new leniency program and, as a result, exempted the company “France Portes” from financial penalties.

Given its role in the cartel, France Portes would have initially incurred a €1.25 million fine. It received total immunity as a result of its total cooperation with the Council:

  • France Portes was the first company to provide convincing evidence, which established the existence of two cartels (one cartel on flush doors and another cartel on lacquered doors) and helped to identify the other members of the cartel;

  • France Portes fully co-operated with the Competition authorities throughout the proceedings;

  • France Portes refrained from taking any steps to coerce other members of the cartel to participate in the infringement;

  • France Portes ended its involvement in the cartel at the start of the leniency procedure and refrained from disclosing its withdrawal from the cartel to the other members.

The Council noted that leniency aims to introduce a level of uncertainty among cartel members since it gives a legal incentive to any cartel member to withdraw from the cartel at any time. The Council also indicated that since its first implementation, the French leniency program has been successful: the Council has recorded 17 requests which are still under scrutiny. 80 per cent of these requests have been filed since 1 May 2004, when the European Network for Competition (ECN) authorities was set up.

In the case at hand, France Portes applied for immunity, by disclosing the existence of a cartel in the market for wooden doors in France in May 2002. In support of its application, France Portes provided strong evidence and produced a memorandum describing the historical and operational background of the cartel. France Portes subsequently disclosed another cartel implemented in the market of lacquered doors. As a result, in an opinion issued on 23 July 2002, the Council granted France Portes conditional immunity from fines and initiated proceedings ex officio. The Council launched an immediate investigation which led to searches in the following days. Evidence provided by France Portes together with evidence seized during this investigation, enabled the Council to establish the existence of two domestic cartels. The aim of the cartels was to stabilise prices by drafting common minimum price grids in the context of difficult market conditions for all the companies of the sector.

The first cartel called “C5” or “the famous five” had been in place until the end of 2001, in the market for the manufacturing of wooden flush doors. The cartel included the following companies: France Portes, Ekem, Magri, Fonmarty, JH Industries, Righini, Malerba and Blocfer. These competing companies met on a regular basis following meetings organised by the National Union of industrial carpentry manufacturers (SNFMI) in Bordeaux.

The second cartel was in place until 2000 in the market for the manufacturing of lacquered doors. It involved the main producers of lacquered doors, namely Frances Portes, Berkvens-Svedex and Polydex. The members met on an annual basis in Paris.

The Council held that fixing common minimum sale prices had the aim of affecting competition in the markets. Price fixing also prevented the entry of foreign operators. However in setting the amount of fines, the Council took into account the fact that the cartel members had not strictly applied the minimum level of prices which had mitigated the damage caused to the economy.

The Council imposed the following fines:

  • Righini: €430,000
  • Malerba: €1.4million
  • JHIndustries: €1.6million
  • Ekem: €300,000
  • Fonmarty: €700,000
  • Magri: €250,000
  • Blocfer: €300,000
  • Berkvens-Svedex: €40,000
  • Polynorm, successor of Polydex: €15,000

Source: Decision of 11 April 2006 of the Competition Council;
http://www.conseil-concurrence.fr/user/standard.php?id_rub=185&id_article=565