European Union: EC's Recent Cartel Settlement With Japanese Car Safety Equipment Suppliers

The European Commission (the "Commission") on 22 November 2017 announced its settlement with five Japanese car safety equipment suppliers outside Europe (the "Cartel Settlement"). The Cartel Settlement is noteworthy because it presents that competition authorities from different jurisdictions are cooperating on an international scale, and that the European antitrust watchdog keeps its eyes on cartels, even if cartels are organized outside Europe so long as they affect the European consumers. As the Cartel Settlement was triggered by a leniency application, it further signifies the importance of both the settlement procedure and the whistleblower tool especially for the investigations against the cartels organized outside Europe.

Background of the Cartel Settlement

The Commission fined five Japanese car safety equipment suppliers, namely, Tokai Rika, Takata, Autoliv, Toyoda Gosei, and Marutaka a total of € 34 million in the settlement. The Cartel Settlement was a result of the investigation started by unannounced inspections at the premises of companies on 7 June 2011.¹ During the unannounced inspections, it is reported that the Commission officers were accompanied by their counterparts from the relevant national competition authority, which, by the Cartel Settlement, turned out to be the Japan Fair Trade Commission (the "JFTC"). The coordination between the Commission and the JFTC demonstrated that the Agreement between the European Union and Japan Concerning Cooperation on Anti-Competitive Activities dated 2003² is being effectively used. European Commission further announced recently that EU and Japan started the negotiations for a second-generation cooperation agreement in the field of competition.³

The Japanese suppliers were involved in various cartel agreements for the supply of car seatbelts, airbags and steering wheels to Japanese car manufacturers in the European Economic Area. All five firms acknowledged their involvement in the cartels and agreed to settle the case, whereas four of them utilized the Commission's whistleblower tool and benefitted from reduced fines.

Four different cartel agreements were revealed thanks to the leniency application, in which the prices or markets are coordinated, and sensitive information is shared among the competitors. The coordination between the cartel members was carried out through e-mails and meetings at the suppliers' business premises, restaurants, and hotels outside the EEA, mainly in Japan. It is noted that the collusion between the cartel members intensified especially when specific requests for quotations were launched by the Japanese car manufacturers. The main customers of the cartel are identified as the biggest Japanese car manufacturers Toyota, Suzuki, and Honda in the EEA. The cartels took place between July 2004 and May 2010, each lasted for different terms ranging from 2 to 6 years. The table below presents the participation of each firm's involvement in the four different cartels:

The Cartel Settlement is the latest of the major investigations against the cartels in the automotive parts sector. The Commission previously fined suppliers of air conditioning and engine cooling systems, automotive bearings, wire harnesses, lighting systems, flexible foam for car seats, parking heaters, alternators and starters. With this settlement, the fine rendered for cartels in this sector totaled up to € 1.6 billion.⁴

Importance of the Settlement and Leniency Application Procedures

Although the Commission's short decision is not clear as to how the documents revealing the cartel were collected, it is highly likely that many of the said documents are obtained through, and thanks to the investigated undertaking's cooperation with the Commission. It could be argued that in the absence of the whistleblower tool and settlement procedure, the Commission would not be able to collect enough evidence as the cartel members are located in Japan. It would seem that the Commission considered the cooperation of the parties to a reasonable extent as the parties enjoyed a significant reduction in fines.

The Commission considered the sales value in the EEA achieved by the cartel participants for the products in question, the serious nature of the infringement, its geographic scope and its duration. With respect to Marutaka, the Commission also took into account its role as the facilitator of one of the cartels. The Commission granted full immunity to Takata in three of the cartels, which avoided € 74 million fine. Tokai Rika was granted full immunity for one of the cartel agreements and avoided an aggregate fine of € 15 million. Except Marutaka, all of the parties benefited from a further reduction to fines for their cooperation with the Commission. In addition, the Commission applied a reduction of 10% to the fines due to their acknowledgment of the participation in the cartel.

Conclusion

The Cartel Settlement is the 25th settlement decision since June 2008, which is the date that the settlement procedure was put into practice. Thanks to the simplified investigation in the settlement procedure, both public and the parties benefit as it reduces costs and the decision is rendered quicker than usual. The Cartel settlement showed that the competition authorities from different jurisdictions are cooperating on an international scale to fight cartel organized outside the relevant jurisdiction. It also indicates the importance of both the settlement procedure and the whistleblower tool for the investigations against the cartels organized outside Europe. With the recent Cartel Settlement, the European antitrust watchdog reminded that it will keep its eyes on the cartels organized outside Europe, if they affect the European markets.

Footnotes

1.Antitrust: Commission confirms investigation into suspected cartel in the sector of seatbelts, airbags and steering wheels, 9 June 2011, http://europa.eu/rapid/press-release_MEMO-11-395_en.htm?locale=en

2. Official Journal L 183, 22/07/2003 P. 0012 – 0017, http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:22003A0722(01)

3. Competition: EU and Japan start negotiations for a 2nd generation cooperation agreement in the field of competition, http://ec.europa.eu/competition/international/bilateral/japan.html

4. European Commission Press Release, 22 November 2017, http://europa.eu/rapid/press-release_IP-17-4844_en.htm

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