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Bloomberg: Cartlel fined EU519 Million: Royal Dutch Shell Plc fined 160.9 million euros as a repeat offender

 

By Matthew Newman

Nov. 29 (Bloomberg) — Dow Chemical Co., the largest U.S. chemical maker, Eni SpA and three other chemical makers were fined 519 million euros ($682 million) by the European Union for fixing the prices of ingredients in rubber used in tires and shoes.

Eni received the biggest penalty at 272.2 million euros, followed by Royal Dutch Shell Plc at 160.9 million euros and Dow at 64.6 million euros, the European Commission, the EU’s Brussels- based antitrust authority, said in a statement today.

“The commission has imposed high fines in this case, but if companies continue to indulge in cartel activities, then they can expect their fines to be even higher in the future,” Competition Commissioner Neelie Kroes said in the statement.

The penalties make 2006 the biggest ever for antitrust fines, reaching a total of 1.84 billion euros and breaking 2001’s previous record. Kroes has made busting cartels her top priority and can fine offenders as much as 10 percent of annual sales.

The EU also fined Poland’s Trade-Stomil Sp z o.o. and Unipetrol AS, the Czech Republic’s biggest oil company. Unipetrol is controlled by Polish oil company PKN Orlen SA.

The total penalty is the second-highest imposed by the commission for a cartel, following a record 790.5 million euros for fixing vitamin prices in 2001.

The companies have a right to appeal the decision to the European Court of First Instance in Luxembourg.

Bayer Immunity

The EU said the cartel operated from at least 1996 to 2002. Bayer applied for immunity in December 2002. EU inspectors raided Dow’s offices in March 2003.

The commission raised fines against Eni and Shell because they were repeat offenders. Bayer AG, which tipped off EU investigators about the cartel, received immunity from fines.

An Eni spokeswoman needed more time to review the decision before commenting. Shell said it will study the ruling. Bayer spokesman Christian Hartel couldn’t immediately be reached for comment.

Dow spokeswoman Alexandra von Holzing said the company has been cooperating with the EU since 2003 and expected to be fined. Dow was told of the decision on Nov. 28 and hasn’t received official written notification, she said in an e-mailed statement.

“Once we have been officially served the decision, we will carefully review and analyze it and thereafter determine whether we will accept or appeal it,” von Holzing said.

Surprise

Trade-Stomil Deputy CEO Piotr Mlodawski said the company was “surprised with the decision.”

“We will not comment until we receive the EU statement and detailed information,” Mlodawski said in a phone interview from Lodz, Poland.

Unipetrol’s rubber subsidiary, Kaucuk AS, has received the EU’s penalty letter, spokesman Rene Keller said today. The company will now analyze what legal steps can be taken.

“We do not feel part of any cartel agreement,” Keller said. “We believe that we had adhered to all rules and business standards valid in the EU.”

Synthetic rubber was first developed more than a hundred years ago and perfected during the 1930s in Germany. The U.S. began large-scale production of synthetic rubber during World War II, when natural rubber exports from East Asia were cut off.

The majority of the world’s rubber production is now synthetic, according to the Houston-based International Institute of Synthetic Rubber Producers Inc., which has 50 members including Dow and DuPont Co.’s DuPont Performance Elastomers unit.

Rubber Production

Today’s decision, the sixth this year, focuses on two synthetic rubber products: styrene butadiene and emulsion styrene butadiene. These rubbers are used in a wide variety of applications, including the production of tires, footwear, conveyor belts, hoses, flooring and adhesives.

The EU’s synthetic rubber production fell in 2005 to 2.7 million metric tons from 2.8 million metric tons in 2004, according to the International Rubber Study Group, a London-based organization made up of 19 countries and the EU.

In June 2005, the commission sent Dow, Bayer and other companies an official charge sheet, known as a “statement of objections,” in the synthetic rubber investigation, Dow and Leverkusen, Germany-based Bayer said in statements.

Dow bought a European synthetic rubber business from Royal Dutch/Shell Group in 1998 to expand its rubber operations, which began in 1996.

To contact the reporter on this story: Matthew Newman in Brussels at [email protected] .

Last Updated: November 29, 2006 08:30 EST

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