EU brings down lift cartel with record billion-euro fine

(BRUSSELS) - EU competition regulators imposed their biggest fine ever on Wednesday, hitting lift makers Otis, Schindler, ThyssenKrupp and Kone with a penalty of nearly a billion euros for running an illegal cartel.

"The result of this cartel is that taxpayers, public authorities and property developers have been ripped off big time," said the competition commissioner's spokesman.

The European Commission, the EU's antitrust watchdog, accused the companies of operating a cartel for the installation and maintenance of lifts and escalators in Belgium, Germany, Luxembourg and The Netherlands between at least 1995 and 2004.

It said it was fining them a combined 992 million euros (1.3 billion dollars) for rigging bids for procurement contracts, fixing prices, sharing out projects, carving up markets and exchanging sensitive information.

The total fine also included a 1.8-million-euro penalty against Japanese company Mitsubishi for a role in the cartel limited to The Netherlands.

Competition Commissioner Neelie Kroes, Europe's top antitrust regulator, is leading a campaign against illegal cartels and has been chalking up record fines against companies targeted by her crackdown.

"It is outrageous that the construction and maintenance costs of buildings, including hospitals, have been artificially bloated by these cartels," Kroes stormed on Wednesday after the record fine was announced.

"The national management of these companies knew what they were doing was wrong, but they tried to conceal their action and went ahead anyway," she said.

Her spokesman Jonathan Todd told journalists that the lift cartel's effects "will be felt for the next 20 to 50 years because a lot of these companies make their money from the maintenance which is done following the installation of escalators and elevators."

ThyssenKrupp was handed the heaviest fine ever imposed by EU regulators on a single company in a cartel case because it was a repeated offender. The German group's fine was increased by 50 percent to a total 480 million euros because of its history of participating in cartels.

Otis, a unit of US conglomerate United Technologies Corp., was given a fine of 225 million euros for its role, followed by Switzerland-based Schindler with a penalty of 144 million euros and Kone of Finland with 142 million euros.

United Technologies said that Otis would lodge an appeal with an EU court while ThyssenKrupp, Kone and Schindler said separately they would examine the commission's case against them before deciding whether to challenge it.

Schindler said in a statement that it was "very surprised at the size of the fine since the European Commission found no evidence of pan-European collusion among companies in the European elevator industry."

EU antitrust investigators conducted so-called "dawn raids" on lift and escalator makers across Europe in January 2004 after getting a tip-off about the cartel.

After the raids, the companies handed over more evidence in the hope of winning leniency or reduced fines.

The European Commission said that high-ranking national-level management ran the cartel by holding secret meetings in bars and restaurants. They also visited the countryside and travelled abroad and used pre-paid mobile phone cards to avoid regulators' scrutiny.

After bumper fines in 2006, EU regulators in January ordered 10 companies to pay 750 million euros for fixing prices and carving up the market in electrical generation equipment.

After the lift makers case, that fine is now the third biggest ever against a cartel.

Until Wednesday, the biggest fine in a European cartel case was 855 million euros in penalties imposed on eight vitamin makers in 2001. The vitamin makers' fine was later reduced to 790 million euros by an EU court.

Despite the record fine on the lift makers, higher penalties are likely in future cases after the commission tightened its rules for calculating fines, making them heavier for repeat offenders and long-lasting cartels.

European Commission action against cartels - Questions and answers