29 June 2010

Bathroom 'cartel' rage at EU ruling

Big-name bathroom companies have been accused by the EU’s Antitrust Commission of operating an illegal price-fixing cartel across six countries.

The price fixing and anti-competitive practices are said to have taken place over 12 years and involved 17 companies who held ‘illegal discussions’ during trade association meetings held across Europe, but excluding the UK. Heads are said to have rolled.

While the UK is excluded from countries said to be involved in price-fixing, most of the companies cited in the alleged malpractice are household names in the UK. Bathroom giant Masco, whose brands include Bristan, Heritage Bathrooms, Hansgrohe, and Hüppe, came clean about the 1992-2004 malpractice and gained immunity in exchange for information on the cartel. It says it now operates a “strict zero-tolerance policy”.

Grohe and Ideal Standard US, who both co-operated with the investigation, each won a 30% reduction of their fines – Grohe’s was reduced to €55m, and Ideal Standard US, to a still massive €326m.

While Ideal Standard's bill adds up to more than half of the total fines, the company won't have to pay a penny. This is because the fine relates to activities in the days when American Standard Group owned the European Bath and Kitchen business. It was sold in 2007 to Ideal Standard International Holding SARL. Part of the sale deal involved one of the spin-off companies, Wabco, indemnifying the Group "against any liability relating to this case". Ideal Standard says the UK is unaffected.

But not everyone is accepting either the EU's 'guilty' findings or the fines meted out. At least four – Duravit, Villeroy & Boch, Sanitec, and Roca – are defying both the EU decision, and the legality of the ruling. And even Grohe, who won a reduction in its fine, is rethinking its position, saying it is "currently studying the decision in detail and reviewing our options, including our right to appeal".

Duravit ceo Franz Kook, says: "We do not understand the ruling and will also not accept it. We have said at every stage that we consider the reproaches against Duravit to be unjustified. We will oppose the ruling in a suitable way."

A spokesman at Villeroy & Boch's German HQ says:"In our view, the allegations against Villeroy & Boch are unjustified.” The statement says: “For the bathroom ceramics market, the Commission is to blame for insufficient investigations. The alleged price co-ordination never took place. The exchange of information at the association level has demonstrably not affected competitiveness, and has therefore not harmed customers and consumers in any way."

The company says it "challenged the Commission from the beginning and called for a termination to the proceedings". Now it says it will appeal. "Until a decision with legal effect has been reached, the order imposing the fine can be satisfied with a bond."

How the UK navigates the EU minefield
The UK Bathroom Manufacturers Association's chief executive Yvonne Orgill says that the BMA goes to great lengths to ensure it keeps within the rules, even employing a corporate lawyer who is present at Management and General Council meetings, and offering an online training course for manufacturers' sales teams to avoid falling foul of the rules.

She adds: "The BMA does not collate data on prices and we never discuss prices in any of our meetings."