On 14 July 2020, the European Commission ("Commission") fined ethylene purchasers Orbia, Clariant and Celanese EUR 260 million for having colluded and exchanged information on purchase prices on the ethylene merchant market with a fourth participant, Westlake, who received full immunity for blowing the whistle.
| what you need to know - key takeaways |
- This case is the first purchasing horizontal cartel detected in the chemical industry sanctioned under the Commission's 2006 Fines Guidelines.
- Unlike in most cartels, where companies collude to increase their sale prices, the four companies colluded to lower the value of ethylene, to the detriment of ethylene sellers – also known as a purchasing cartel.
- When calculating the penalties, the Commission used the value of purchases in the EU rather than the value of sales to set the level of the fines. As the Commission presumed that those figures were artificially lowered by the cartel conduct, it used its discretion to increase the amount of the fine for all companies by 10%.
- The cartelists settled the investigation with the Commission and benefited from fine reductions in exchange for their cooperation with the Commission and acknowledging their participation in the cartel.
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The cartel
In May 2016, Commission officials conducted dawn raids on companies active in the market for the purchase of ethylene. The purchase price of ethylene is very volatile and, in order to reduce the risk of price volatility, ethylene supply agreements refer to a pricing formula, which often includes a Monthly Contract Price ("MCP") - an industry price reference resulting from individual negotiations between ethylene buyers and sellers.
During its investigation, the Commission found that the four ethylene purchasers coordinated their price negotiation strategies before and during the bilateral MCP ‘settlement' negotiations with ethylene sellers to push the MCP down and therefore colluded to buy ethylene for the lowest possible price to the detriment of ethylene sellers. The Commission also found that the four ethylene purchasers exchanged price-related information.
The purchasing cartel took place during the process of establishing the MCP and lasted from December 2011 to March 2017. The conduct concerned markets in Belgium, France, Germany and the Netherlands.
The fines
On 14 July 2020, the Commission fined Orbia, Clariant and Celanese EUR 260 million for breaching the Article 101 TFEU prohibition on anticompetitive agreements. A fourth participant in the purchasing cartel, Westlake, received full immunity for revealing the existence of the cartel to the Commission, avoiding a fine of approximately EUR 190 million. All four companies admitted their involvement and settled the case.
As the cartel concerned a collusion on purchase prices, the Commission used the value of purchases in the European Union, rather than the value of sales, to set the level of the fines. The Commission also used its discretion under the 2006 Guidelines on fines to increase the amount of the fine for all companies by 10% under the assumption that those figures were presumably artificially lowered because of the price coordination. Furthermore, in setting the amount of the fine, the Commission took account of the fact that Clariant had previously been sanctioned for a similar infringement.
Applying its 2006 Leniency Notice, the Commission granted Westlake full immunity for revealing the existence of the cartel. Orbia, Clariant and Celanese benefited from reductions of their fines for their cooperation with the Commission investigation. The reductions reflect the timing of their cooperation and the extent to which the evidence they provided helped the Commission to prove the existence of the cartel in which they were involved. In addition, Orbia, Clariant and Celanese received a further 10% discount each for settlement, under the Commission's 2008 Settlement Notice.
This case is the Commission's first purchasing horizontal cartel relating to the chemical industry sanctioned under the 2006 Guidelines on fines.
With thanks to Camille Ammeloot of Ashurst for her contribution.
