EU rethinks fines despite court backing

An EU high court ruling this week backed the European Commission's right to compute cartel fines as it sees fit, but the commission…

An EU high court ruling this week backed the European Commission's right to compute cartel fines as it sees fit, but the commission is rethinking whether the same approach should be used for big and small firms.

Under 1998 guidelines, fines are set according to the gravity of the offence without taking company size into account. However, European Union law limits fines to a maximum of 10 per cent of a company's annual worldwide turnover.

Earlier this week the European Court of Justice threw out an attempt by Swiss engineering group ABB to win a cut in a €65 million fine for conspiring to fix prices on insulated pipes, freezing out a competitor.

Smaller companies in the case also failed to get fines cut, beyond what a lower court had already done for them and ABB.

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The fine against ABB amounted to 0.25 per cent of its annual income, but other small, unlisted companies in the cartel had fines with a far greater percentage of their turnover.

A change in the guidelines could simply mean bigger fines for big companies, and one idea to limit that is to peg fines in each company to turnover for the product involved in the cartel.

Companies have occasionally gone out of business after the fines were levied, but it is unclear whether that was caused by the fines or other problems, some lawyers say.

The commission is still studying the matter.