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Glassmakers hit back after EU’s record fine

Post Time:Nov 18,2008Classify:Industry NewsView:334

Record antitrust fines levied by European Union competition authorities on four glass groups last week could lead to higher glass prices by stifling capital investment, according to the head of one of the penalised glassmakers.

Stuart Chambers, chief executive of Nippon Sheet Glass, Pilkington’s Japanese parent, told the Financial Times that there was “no question” that Pilkington would reduce investment in plant and equipment because of the “astronomical” joint penalty of €1.38bn ($1.75bn).

He also claimed the penalty broke EU rules limiting antitrust fines to 10 per cent of a company’s turnover.

“They’re going so far that they’re in danger of doing the customer a disservice, and that needs to be questioned,” he said.

Brussels said on Wednesday that Pilkington, Saint-Gobain of France, Asahi Glass of Japan and Belgium’s Soliver had conspired to fix prices of windscreens and other automotive glass between 1998 and 2003. Neelie Kroes, EU competition commissioner, said the glassmakers – which controlled 90 per cent of the €2bn European autoglass market – had “cheated the car industry and car-buyers”.

Mr Chambers’ comments echoed criticism by France’s Saint-Gobain, the most heavily penalised of the four companies. It described its €896m share of the fine as “excessive and disproportionate” and said it would appeal to the European courts.

UK-based Pilkington, acquired by NSG in 2006, faces a €370m penalty; Asahi must pay €113.5m; and Soliver faces a relatively modest fine of €4.4m.

Pilkington is also considering an appeal. Mr Chambers said he would decide how to proceed after reviewing a detailed report on the EU’s findings, which he said he expected to receive from the commission today. Accused companies have two and a half months to lodge appeals.

Three of the four glassmakers – Saint-Gobain, Pilkington and Asahi – had also been fined by the EU last year for fixing prices in building glass. Mr Chambers said the building and auto-glass operations were parts of a single business, so the EC’s maximum penalty rule should have applied to both fines together.

Instead, the EU treated the cases as two separate cartels. It fined Pilkington the full 10 per cent value of its turnover in the autoglass case, on top of a €140m fine for the building glass violation, which Pilkington has not contested.

The fines come at a difficult time for the glass industry, which is grappling with slumping demand from both the car and building sectors, its biggest customers.

NSG on Friday cut its group net profit forecast for the year to March by two-thirds to Y9bn. It booked a one-time Y8.9bn ($91m) charge to cover the fine, which exceeded a £250m ($370m) reserve it had set aside against a possible penalty in the case.

Source: Financial Times.com Author: shangyi

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