Car makers gearing up for damages pay outs

On 19th March 2014, the European Commission announced it had fined a number of companies engaged in a cartel on the EU automotive bearings market €953 million for their conduct.

The companies involved were two European companies (Sweden’s SKF and Germany’s Schaeffler) and four Japanese companies (JTEKT, NSK, NFC and NTN with its French subsidiary NTN-SNR). The Commission’s Decision brings to an end an investigation which started with unannounced inspections in November 2011. The Decision was taken under the EU Commission’s cartel settlement procedure as all the companies agreed to settle the case and received reduced fines as a result.

Automotive bearings are used by car, truck and car part manufacturers to reduce friction between moving parts inside a vehicle (e.g. in wheels, gearboxes, transmission systems and air conditioning systems). It is estimated that the size of the EU automotive bearings market is worth at least €2 billion a year.

In selecting their suppliers, the customers, namely car, truck or car part manufacturers, issued ‘Requests for Quotations’ as part of a selection process. In addition, after the award of the contract, customers would often request yearly discounts from the bearings suppliers often referred to as ‘Annual Price Reduction’ requests.

For a period of seven years (April 2004 until July 2011) the cartelists in this case operated a series of multi-, tri- and bilateral exchanges of commercially sensitive information which allowed them to co-ordinate the passing-on of steel price increases to their customers, collude on Requests for Quotations and the amount of Annual Price Reductions they were willing to pay to their customers.

The Japanese company JTEKT took the benefit of immunity under the Commission’s 2006 Leniency Notice for revealing the existence of the cartel to the Commission and was not fined. NSK, NFC, SKF and Schaeffler received reductions of their fines for their cooperation in the investigation under the Commission’s leniency programme. Since all companies agreed to settle the case with the Commission, their fines were further reduced by 10%.

The decision is part of a major investigative effort into suspected cartels in the sector of car parts. The Commission already found cartels for wire harnesses in cars (IP/13/673) and for flexible foam used in car seats (IP/14/88). The Commission is investigating more products, such as airbags, safety belts and steering wheels (see MEMO/11/395), air conditioning and engine cooling products (see MEMO/12/563) and lighting systems.

The effect of this cartel was to artificially raise the price paid by car, truck and car part manufacturers for the bearings they purchased from the cartelists and ultimately the price of cars purchased by European consumers.

Under EU law any person or firm affected by anti-competitive behaviour as described in this case may bring an action for damages against the cartelists before the courts of the Member States. The Commission’s decision in this case is conclusive on the question of liability in any damages proceedings. All the cartelists, whether or not they were granted immunity under the Commission’s leniency programme, are liable on a joint and several basis for any damage caused by the cartel.

Consequently car, truck and car part manufacturers which have suffered loss and damage as a result of this cartel should consider whether they wish to launch proceedings to recover the overcharge and other damage they suffered.