The European Commission on Wednesday (June 28) agreed new measures that pave the way for heavier fines for companies found guilty of operating price-fixing cartels or breaking other parts of EU compet
The European Commission on Wednesday (June 28) agreed new measures that pave the way for heavier fines for companies found guilty of operating price-fixing cartels or breaking other parts of EU competition law.
The move comes after a series of Commission investigations -- including Sony Music's 2004 merger with BMG's recorded music division and an ongoing row with Microsoft over market abuse -- that have thrown the media into the EU antitrust spotlight.
EU competition commissioner Neelie Kroes said the heftier financial sanctions should act as a deterrent against abuses of market power. "Don't break the antitrust rules. If you do, stop it as quickly as possible, and once you've stopped, don't do it again," she said. "If companies do not pay attention to these signals, they will pay a very high price."
The Commission will set a basic fine of up to 30% of a company's sales of the product in the market where the abuse had taken place. The fine will also be multiplied by the number of years during which a company participates in the infringement.
Repeat offenders would also be fined more than in the past. Until now, the Commission's practice has been to increase a fine by 50% where the company has been found to have been previously involved in one or more similar infringements. Under the new rules, the commission could increase the fine up to 100%.
In addition, the Commission has introduced another fine to discourage cartels in particular and which would be calculated as a sum equal to 15-25% of a company's annual sales, whatever the duration of the infringement. However, the overall ceiling for fines remains 10% of global annual turnover.
The fines doled out by the Commission in recent years have been increasingly large as both Kroes and her predecessor Mario Monti sought to stamp their authority on wayward companies.
Microsoft holds the current record with a €497 million ($625 million) penalty for abusing market power imposed in 2004, but it could face further fines of as much as €2 million ($2.5 million) a day if the Commission rules that it has not complied fully with the earlier ruling.
Elsewhere, media companies have been in the forefront of the Commission's recent investigations: Sony's merger with Bertelsmann in 2004 was only cleared after an in-depth probe into whether the combined music giant would have an unfair dominant position, and whether the music majors already operated an effective cartel. Plans to merge EMI and Warner would also have to face Commission scrutiny.