CADE condemns Toshiba and Mitsubishi for international gas-insulated switchgear cartel

The Administrative Council for Economic Defense (CADE in its acronym in Portuguese) condemned the companies Toshiba Corporation and Mitsubishi Electric Corporation (Melco) for involvement in an international cartel of gas-insulated switchgear (GIS). CADE applied fines of approximately BRL 4, 9 million for both companies.

The GIS system is the main element of a power station. It is used to control the energy flow in electricity distribution grids. Among the main clients are the electricity distribution companies and private companies that acquire the product to build their own power stations.

The investigations initiated in 2006, after the signature of a Leniency Agreement between the Secretariat of Economic Law (which was merged with CADE) of the Ministry of Justice and the companies of the ABB group, which presented evidence on the anticompetitive practice.

From 1988 to 2004, the cartel members coordinated the concession of GIS projects on an international basis, following accorded rules and principles, respecting estimated market shares, fixing prices level and dividing geographic markets. The alleged deal would have affected all the consumer countries, except the United States and Canada, and, in a second moment, China and Russia.

The coordination occurred through meetings of various levels, known as Working Groups, Steering Committee, and Job Meetings. There was also the exchange of information through secret fax, emails and phone calls, with codenames to avoid detection by the authorities.

According to the Reporting Commissioner Polyanna Vilanova, the evidence included in the proceeding shows that the cartel was established with an impressive level of professionalism. "The founding members took three years to prepare the operations. During the preparation phase, the basic principles for the operation of the agreement between the competitors were discussed and agreed, resulting in a written agreement", highlighted the commissioner.

Effects in Brazil

The investigations pointed out that the cartel impacted the Brazilian electric system and companies which had acquired high tension GIS sold separately, as well as medium and high tension equipment for the composition of substations (turnkey projects).

Among those there are power distribution companies such as Companhia de Transmissão de Energia Elétrica Paulista, Companhia Energética de Minas Gerais, Companhia de Eletricidade do Estado da Bahia, Companhia de Energia Elétrica do Paraná, LIGHT – Serviços de Eletricidade S/A, Eletropaulo, Eletrosul, and others.

Vilanova’s vote concluded that there would be evidences that the cartel generated anticompetitive effects in the Brazilian territory, and that Melco and Toshiba had participated in the anticompetitive discussions and arrangements.

The proceeding returned to the court last Wednesday's (08/08) by vote-by-hearing presented by commissioner Mauricio Oscar Bandeira Maia. The Council, by majority vote, followed the commissioner's understanding.

TCCs

Within the scope of CADE's Tribunal, three Cease and Desist Agreements (TCCs, in its acronym in Portuguese) were signed with Japan AE Power Systems, Alstom, Siemens and VA Tech. By means of these agreements, the companies admitted the anticompetitive practices investigated in the Brazilian territory, committed to cease the conduct and pay pecuniary contributions in a total of BRL 26 million. The process regarding the signing parties was filed, given the fulfillment of the obligations established by the TCCs.

In turn, due to the signature of a leniency agreement, the companies and individuals belonging to the ABB group had their penalties dismissed.