Border Lines

The European Commission is taking the unprecedented step of seeking private damages from an illegal cartel that it fined a record £992 million for anti-trust violations in the escalator and elevator industry. The Commission as well as European Union facilities have contracts with corporations in the cartel, and the Commission is seeking damages due to the anti-competitive conduct. The amount of damages sought by the Commission has not been definitively stated but it has been reported the final award may be up to 10 million Euro. The cases have been filed in the Tribunal de Commerce in Brussels.

The Commission’s decision to both act as market regulator and seek private enforcement sends a signal that it is serious about its goal of protecting the European Union marketplace from anti-competitive business behavior.

Like the Sherman Act in the United States, European law prohibits agreements in restraint of trade and abuses of dominant position. These Community competition rules are directly applicable by the national courts of Member States. In contrast to the United States, however, in Europe private antitrust actions for damages have traditionally played a limited role in the enforcement of the Community competition rules, which has been primarily accomplished by the European Commission acting in its regulatory role. In fact, in its recent White Paper on Damages Actions for Breach of EC Antitrust Rules, the Commission estimates that “the amount of compensation these victims are foregoing is in the range of several billion Euros a year”.

The Commission’s private legal action is calculated to encourage affected citizens to file their own suits, and to provide an additional deterrent to anti-competitive commercial behavior. Because many of the cartels also risk substantial fines and private damages in the United States, the higher fines and increasing potential for private damages in the EU makes anti-competitive commercial behavior more costly than ever.

The EU is also considering additional private suits against cartels. One such case is against a cartel that unlawfully manipulated the cost of furniture shipping costs, which affected European diplomats.

The Commission is also increasing its coordination with other international authorities, including the United States Department of Justice. This multi-jurisdictional approach increases the likelihood of early detection and harm reduction in commercial anti-trust operations.

BACKGROUND

European Commission Treaty rules forbid anti-competitive business practices (Article 81). In February, 2007, the Commission imposed fines on 18 subsidiaries of four major European corporations that knowingly entered into an illegal escalator and elevator cartel. The restrictive practices spanned Belgium, Germany, Luxemburg and the Netherlands. The Commission’s €992 million ($1.5 billion) fine is the largest ever imposed in a European anti-trust case. None of the companies contested the Commission’s evidence or requested an oral hearing, although the decision is currently pending appeal before the Court of First Instance of the European Communities.

The Commission based its action on evidence that 18 subsidiary companies of Otis, KONE, Schindler, and ThyssenKrupp unlawfully fixed prices and froze market shares by exchanging confidential industry information, rigging projects, and allocating tenders and other contracts.
Escalators and elevators are a staple of many commercial, residential and industrial buildings, and the cartel’s actions manipulated the prices of construction and maintenance throughout the European Union. Because maintenance on existing escalators and elevators is often conducted by the company who manufactured and installed the original equipment, the effects of this market distortion will continue for decades.