The last CRT makers take a hit in EU trust bust

Sony, Fujifilm, and Hitachi have been fined €74.8 million for fixing the prices of standard definition videotapes most commonly used for broadcasting. Manufacturers of cathode ray tubes are up next.

Commissioner Neelie Kroes, former Belgian cabinet minister, and current head of the EU Competition Commission has spearheaded another effort at discouraging unfair trade practices in the European Union, without even the aid of a whistleblower.

The Commission has levied fines totaling €74.8 million ($110.5 million) against Sony, Fujifilm, and Hitachi (Maxell) for fixing the prices on broadcast-quality videotapes between 1999-2002. The tapes in question were the two most popular formats at the time, Betacam SP and Digital Betacam. These standard definition formats were the preference, if not the outright requirement, for most broadcast source footage; and the three Tokyo-based companies held 85% of the market. In 2001, sales of these videotapes totalled €115 million.

In surprise inspections in 2002, concrete evidence was discovered by the Commission that the three companies had organized three rounds of price increases, and had ongoing contact to monitor and implement price-fixing agreements. Sony was allegedly uncooperative, and denied any participation until it received a formal charge sheet from the commission. The three companies were found to be in violation of the EC Treaty's ban on cartels and restrictive business practices.

Sony's reluctance to cooperate actually cost it substantially. Fines against the company were raised by 30%, bringing the total to €47.2 million, more than three times higher than the fines against Fuji and Hitachi. This is the first case under new guidelines that allowed regulators to increase fines based on the size of the market and length of the violation.

In keeping with the apparent war on standard definition, two weeks ago the Commission began surprise inspections of manufacturers of cathode ray tubes. These manufacturers are believed to be violating the same treaty rules as Sony, Fujifilm, and Hitachi. However, no proof has been publicly disclosed, and there is no strict deadline to complete cartel inquiries.

In a speech yesterday at a celebration of the 50th anniversary of the Treaty of Rome - the document that paved the way for the founding of the European Union - Comm. Kroes suggested that her Competitiveness team might have better luck in dealing with firms suspected in participating in cartels such as this, if they were given incentives to cooperate sooner.

Under proposed legislation, she said, "the Commission will reward admissions of liability by companies that are made after the investigative stage, and that lead to procedural savings on the part of the Commission...Companies that want to get the maximum reduction of fine will therefore have a strong interest to ask for leniency. And, as the reductions of fine are cumulative, companies will always have an incentive to ask for settlement too.

"Leniency and settlements will therefore be separate and complementary tools in the Commission's enforcement arsenal," Comm. Kroes continued.

Kroes and the EC have been cracking down on corporations in the interest of a fair and free business environment in the EU. In October, Microsoft was fined €497 million for violating EC treaty rules on abuse of its dominant maketing position. The Redmond software giant was also required to disclose interoperability information, and agree to offer a version of Windows without Windows Media Player.