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EU Commission Slaps Huge Fine on Siemens for Price Fixing

The EU has fined power equipment manufacturers for their roles in a price-fixing scheme. It's the largest fine ever imposed on a single cartel and German engineering giant Siemens will take the brunt of the penalty.

Siemens said it would appeal the EU's decision

The fines imposed by the European Commission for breaking antitrust rules on 10 companies based in the EU, Switzerland and Japan amount to more than 750 million euros ($975 million), the commission said.

German firm Siemens will be punished with a fine of 396.6 million euros ($513 million). According to the commission, it is the largest fine ever imposed on a single company for a single cartel infringement.

The 10 companies penalized are: Alstom, Areva, Fuji, Hitachi, Japan AE Power Systems, Mitsubishi Electric Corporation, Schneider, Siemens, Toshiba and VA Tech.

The heavy equipment in question is gas-insulated switchgear, which is used to control energy flows in electricity grids and is the major component of turnkey power substations. Substations are auxiliary power stations where electrical current is converted from high to low voltage or the reverse.

"Between 1988 and 2004, the companies rigged bids for procurement contracts, fixed prices, allocated projects to each other, shared markets and exchanged commercially important and confidential information," the commission said.

The European Commission began their investigations in 2004

The investigation began back in May 2004 when EU and national antitrust officials conducted surprise inspections on company premises. The firms then received official notification of the charges in May last year.

An 11th firm, ABB Ltd., the globe's largest builder of electricity networks, tipped off the EU and escaped any fine.

"ABB has been the whistleblower and has been cooperating with the commission," Wolfram Eberhardt, a spokesman for the Zurich-based company, told Bloomberg News.

Appeal

Siemens, Europe's biggest engineering company, responded to the announcement of fines saying it plans to appeal.

"Siemens intends to go to the European Court of Justice to take legal action against antitrust fines … charged by the EU Commission," the company said in a statement. It added that it "denies the blanket accusation" that it was part of a cartel between 1988 and 2004.

"Agreements about gas-isolated switchgear systems only took place between October 2002 and April 2004 with just a few projects in Europe," the company said.

Getting tough

Neelie Kroes

EU Competition Commissioner Neelie Kroes said that the EU executive had ended a cartel "which has cheated public utility companies and consumers for more than 16 years."

The commission was poised "to bring down such cartels even if the companies concerned use sophisticated technology to cover their tracks," she added.

Kroes has made fighting cartels a priority of her term in office. The commission fined seven companies a record 1.84 billion euros ($2.38 billion) last year.

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