Firms face tougher fines for misleading the Commission

Date: 06/01/2000

By Peter Chapman

COMPETITION Commissioner Mario Monti is to ask EU governments for the power to impose tougher fines on companies which lie to his officials or try to mislead them in merger and anti-trust investigations.

Senior officials say the move has been prompted by concern that the existing regulations, some of which were introduced nearly 40 years ago, are out of date and the maximum fines which the European Commission can levy on offenders no longer reflect the seriousness of such transgressions.

"Some of the regulations go back to 1962 and they have not been touched since," said Commission spokesman Jonathan Faull, who confirmed that the current rules were now under review. He insisted however that, in the meantime, the current penalties did have a shaming effect on errant firms. "The fines are fairly symbolic - which is why they have to be increased - but there is a lot of stigma on companies," he said.

The review follows last month's decision by the Commission to levy fines totalling €140,000 on German mail operator Deutsche Post and Dutch airline KLM Royal Dutch Airlines for giving officials "misleading" information about proposed deals. The EU executive also agreed smaller fines of €3,000 apiece on US brewer Anheuser-Busch and UK brewer Scottish and Newcastle for similar offences relating to a beer distribution deal.

The Commission said the level of fines imposed on Deutsche Post and KLM for two cases involving the German company and one relating to the Dutch airline - which were close to the €50,000 maximum

permitted under current EU rules - reflected the institution's "view of their seriousness".

It also pointed out that the maximum penalty for breaches of anti-trust rules such as those committed by Anheuser-Busch and Scottish and Newcastle was "only" €5,000.

Monti's initiative is seen as part of a general tightening up of the EU's approach to mergers and cartels. "It is a message to firms trying to pull the wool over the Commission's eyes," said Michael Berendt, competition policy advisor with consultancy firm GPC. The Commission has yet to decide what new ceilings on fines to propose, but Berendt predicted that they could run into millions of euro.

Monti's plans will have to be approved by the full Commission and then by EU governments, but diplomats say member states are unlikely to oppose the move.

"I think it would be welcomed," said one national competition expert. "If you want to get approval for a merger by giving false information, then you are asking for trouble."

But European employers' federation UNICE warned that the Commission must be careful not to punish firms which did not intend to break the rules. "You have to be careful. If a company is lying, then of course we would never approve of that, but sometimes it is difficult to give exact data," said a spokesman.

In last month's decision, the Commission imposed two fines of €50,000 each on Deutsche Post for "deliberately misleading" officials twice over its acquisition of parcels company trans-o-flex GmbH. Officials said the company had withheld details of the 1997 deal under which it acquired control of trans-o-flex, and compounded its crime this year by covering up information about the deal when it notified the Commission of plans to take sole control of the firm.

KLM was penalised for misleading the Commission about the extent to which its planned acquisition of Dutch charter airline Martinair would have strengthened its grip on the country's travel market.

US brewer Anheuser-Busch and British brewer Scottish and Newcastle incurred the Commission's wrath after failing to inform it of the details of agreements to distribute the US firm's Budweiser beer in the UK.

Competition Commissioner Mario Monti is to ask EU governments for the power to impose tougher fines on companies which lie to his officials or try to mislead them in merger and anti-trust investigations.