CADE condemns companies and individuals for involvement in marine hoses’ cartel

The Administrative Council for Economic Defense – CADE condemned last Wednesday (25/02) the companies Flexomarine S/A, Flexomarine Empreendimentos e Participações Ltda., Pagé Indústria de Artefatos de Borracha Ltda and an individual for participating in and international cartel in the marine hoses’ market, with effects in Brazil. The marine hoses are used to transport oil and its derivatives to the interior of oil tankers or high seas and coastal facilities. All together, the fines imposed are of R$13.5 million (Administrative Procedure 08012.010932/2007). 

The collusion had worldwide coverage and involved price fixing and allocation of markets, customers and volumes of marine hoses, including a formal coordination of specialized consultancy, PW Consulting. The cartel practices were held, at least, between 1985 and 2007. 

During the investigation, it was found that the participants met regularly and communicated with the cartel coordinator on a regular basis by fax, e-mail and phone. PW Consulting distributed spreadsheets with current allocation of projects in order to enable the collusion members to screen their allocation in the market. Besides that, it was responsible to decide who was going to win public procurements and to stipulate prices charged. The participants paid a annual value of US$50 thousand to PW Consulting for the coordination services through a consultancy contract. 

According to the reporting Commissioner, Márcio de Oliveira Júnior, the cartel activities brought huge damages to the Brazilian market. He explained that marine hoses costumers paid much higher prices than expected market prices. 

“The existence of a paid cartel coordinator facilitated the implementation of the conduct, the maintenance of fixed market participations, the sharing of sensible information and the resulting anticompetitive effects in companies of many countries”, said Oliveira Júnior. 

The Commissioner highlighted that the estimated damage resulting from the cartel activities for public and private companies that consume marine hoses is, at least, of R$40 million – considering the percentage of 20%for the calculations of overcharged cartelized products, as recommended by the Organization for Economic Cooperation and Development – OECD. 

The Tribunal also decided to file the case in relation to Goodyear do Brasil Produtos de Borracha Ltda. and four individuals related to the company due to insuffiency of evidences of violation to the economic order. The charges against Sumitomo Rubber Industries Ltda., Hewitt Robbins and an individual were also filed due to statute of limitation. 

Leniency – The investigation of the international cartel of marine hoses began in 2007 by the signing of a leniency agreement between Cade and The Yokohama Rubber Company Limited and six individuals, who denounced the illegal conduct. The leniency agreement allows the reduction of the penalty or its termination to the cartel participant that reports the practice and presents evidence for the investigation process. 

Still in 2007, a down raid was held in the headquarters of the investigated companies. The evidences obtained through the leniency agreements and the down raids confirmed the existence of the cartel. 

At the judgment session, the Council extinguished the punishment of the beneficiaries of the leniency agreement, which must maintain cooperation with the antitrust agency in the investigations that are still ongoing regarding the participation of foreign individuals in the international marine hoses’ cartel.