European Commission fines optical disc drive suppliers for cartel

Eight optical disc drive makers, seven of them headquartered outside Europe, were fined a total of €116m for their role in a global procurement cartel.

On 21 October 2015, the European Commission announced that it had fined eight optical disc drive manufacturers - seven of which are headquartered outside Europe - a total of €116m for colluding in procurement tenders organised by two computer manufacturers.

The cartel investigation

Optical disc drives (ODDs) record or read data stored on optical discs, such as Blu-ray, DVDs or CDs. They are used in a number of devices including DVD players, video game consoles and personal computers. The suppliers colluded in procurement tenders for ODDs to be used in laptops and desktops produced by Dell and Hewlett Packard (HP).

Philips, Lite-On and their joint venture Philips & Lite-On Digital Solutions (Philips/Lite-On) were the first companies to reveal the existence of the cartel to the Commission. On 24 July 2012, the Commission announced that it had sent a statement of objections to thirteen companies involved in the supply of ODDs in the European Economic Area (EEA), accusing them of involvement in a worldwide cartel.

Commission decision

On 21 October 2015, the Commission announced that eight suppliers of ODDs had been fined a total of €116m for participation in the cartel. The Commission stated that Philips/Lite-On, Toshiba Samsung Storage Technology, Hitachi-LG Data Storage, Sony, Sony Optiarc and Quanta Storage had coordinated their behaviour in relation to procurement tenders organised by Dell and HP. Only Philips is headquartered in Europe, with the remaining seven companies being headquartered in Asia. Each company’s period of involvement in the cartel varied and ranged from less than a year to over four years.

The cartel contacts took place outside of the EEA, but were implemented on a global basis. The Commission stated that the companies tried to conceal their contacts and evade detection, knowing that their behaviour was illegal. This strategy included avoiding the use of competitor names in internal correspondence and meeting face to face in inconspicuous places, such as parking lots or cinemas.

The total fines were set taking into account the serious nature of the infringement, its geographic scope and the duration of each company's participation in the infringement. As Philips/Lite-on were the first to reveal the existence of the cartel, these companies received full immunity from fines under the Commission’s cartel leniency programme. These companies therefore avoided an aggregate fine of €63.5m.

Hitachi-LG Data Storage received a 50% reduction on its fine of €74.2m. This reduction was given to reflect the company’s cooperation with the Commission’s investigation and partial immunity granted for enabling the Commission to establish a longer duration of the cartel. Toshiba Samsung Storage Technology received a fine of €41.3m, while Sony and Sony Optiarc received lesser fines of €21m and €9.7m respectively (partly due to the latter two companies’ participation being limited to tenders by Dell). Quanta Storage received the smallest fine of €7.1m.

Comment

EU Competition Commissioner Margrethe Vestager stated on 21 October 2015 that the Commission’s decision “demonstrates once again that cartelists cannot escape fines just by holding their meetings in cinemas and car parks outside Europe, while selling their products in Europe.” In a different statement, the EU Commissioner stated that “the message to cartelists is clear - we will investigate and fine anticompetitive practices anywhere in the world, that harm consumers on EU markets”. This decision reinforces the Commission’s tough stance on cartel activity (in line with previous Commissions) and its commitment to punishing companies engaged in anticompetitive practices that have an impact in the EU. The decision also comes at a time when the Commission is ramping up its enforcement efforts in the TMT sector with its sector inquiry into ecommerce and ongoing investigations against Sky, Google and Qualcomm. While the fine is arguably not as significant as other cartel fines, the risk of follow on damages claims being brought by aggrieved parties raises the spectre of significant further costs for those involved, including the whistleblowers. So far, Sony and its subsidiary Sony Optiarc have reportedly indicated that they will appeal against the decision, which is likely to delay litigation against them until the decision becomes final.

More generally, it is of note that this investigation started with information requests in June 2009 (presumably some time after the Commission received the initial immunity request). The statement of objections followed three years later in July 2012, but the Commission then took a further three years to reach a decision. The Commission’s press release is silent on why there was such a long delay after the publication of the SO. Perhaps the full decision will provide more explanation, although it may take several more years before that is published, to the frustration of potential damages claimants. 

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