ABB in hot water over alleged pipes cartel

Date: 01/10/1998

By Chris Johnstone

SWISS-Swedish multinational Asea Brown Boveri (ABB) is facing punitive fines as European Commission competition officials wind up a long-running investigation into an alleged cartel operated by specialised heating pipe manufacturers.

Commission officials are expected to submit recommendations by the end of this month for imposing fines running into millions of ecu on the Zurich-based engineering giant.

The level of the proposed fines will be calculated in accordance with new EU rules which ignore the turnover of the companies concerned and concentrate instead on the length and seriousness of the cartel.

“These fines will make the recent ones on shipping companies look small,” said one of the firms involved in the case, referring to the financial penalties totalling 273 million ecu imposed last month on 15 shipping companies which agreed prices and capacities for cargoes across the North Atlantic.

“We are talking big money,” said a Commission official, although he added that the institution would seek the views of national competition experts on how severe the punishment should be before making a final decision. Industry experts say the level of the fines could be reduced as a result of this consultation exercise.

ABB, whose insulated steel pipe business is based in Copenhagen, is being targeted as the alleged ringleader of a cartel, along with three other Danish companies, Logstor, Tarco and Starpipe, and two German firms Panisovit and Isoplus.

ABB has refused to make any comment ahead of a final Commission ruling. It is the biggest of the five firms involved, with sales in the pipe sector totalling 230 million ecu in 1997.

Together, the companies are accused of setting prices and sharing out the market between 1980 and 1989.

Swedish company Powerpipe alerted the Commission to the suspect practices when it found that it was having to compete with pipes sold at prices below the cost of production whenever it tried to enter new markets in Germany, the Netherlands, Austria, Sweden and Denmark.

There are also allegations that Powerpipe's customers were threatened with boycotts to force them to break their links with the Gothenburg-based company.

Insulated steel pipes are a fundamental part of district heating systems, where warmth from the production of electricity is circulated either as steam or hot water to heat nearby houses or companies.

The Commission's Directorates-General for energy (DGXVII) and environmental policy (DGXI) are in favour of the technology, regarding it as less wasteful than alternative forms of heating.

Historically, Europe is a world leader in district heating, although such systems have largely been based in Scandinavian countries, Germany, and parts of eastern Europe, with Danish manufacturers taking a significant share of the market.

Western companies have been trying to sell their up-to-date technology to central and eastern Europe, although the market has not expanded as fast as they expected.

The Copenhagen-based industry body, the European Association of Heating Pipe Manufacturers, says there are no significant producers of insulated steel pipes for district heating outside Europe.

It adds that around 30 medium-sized and large pipe manufacturers sell on the European market. “I do not see any possibility of a cartel operating in the past or now,” said a spokesman for the association.