TV Cartels Fixed Display Pricing For A Decade: EU

Written by Tony Ibrahim     05/12/2012 | 23:41 | Category: LCD

Meeting on Golf courses in Asia and Europe, and attending 'glass room' meetings in Paris and Hong Kong, executives from 7 display companies formed sophisticated cartels responsible for keeping the prices of cathode-ray tubes high for more than a decade.

TV Cartels Fixed Display Pricing For A Decade: EU

Following a three year investigation, the enforcement arm of the EU, the European Commission, fined the parties a total of €1.47 billion ($US1.92 billion).

The executives were from Samsung SDI Co, LG Electronics Inc, Philips Electronics, Panasonic Corp, Toshiba, Technicolor SA and Chunghwa Picture Tubes Ltd.

European Union regulators claim the uncovered cartel is among the most organised they have investigated and their fine reflects it. At €1.47 billion, it is the highest fine issued by the EU.

"These cartels for cathode-ray tubes are 'textbook cartels,'" said the EU's antitrust chief, Joaquín Almunia. "They feature all the worst kinds of anticompetitive behaviour that are strictly forbidden to companies doing business in Europe."

During their 'green meetings' for rounds of golf in Asia and Europe, the executives would cut deals. The finer details of these meetings would be ironed out in "glass meetings" located in Hong Kong and Paris. The glass meetings were described by Almunia as the "engine room of the cartel."

Inside the Engine Room

The cartels were formed a decade ago in an effort to keep the price of cathode-ray tubes (CRT) tubes high. At the time, CRT accounted for up to 70% of a rear projection TV's price.

An uncovered document during the investigation reveals the glass meetings yielded good business.

"Because of the success of the glass meeting, everybody has been enjoying business this year," it said in the document.

Another document urged privy parties to "keep it a secret, as it would be serious damage if it is open to customers and European Commission."

When demand for CRT television slowed down with the introduction of Plasma and LCD televisions, the cartel tried to manage the decline. According to Alumnia, the cartel's actions could have "artificially slowed" the transition to flat panel televisions.

Low on Chips

The European Commission split their sanctions between companies involved in computer and TV cartels.

For their involvement in television and computer tubes, Philips was fined €313 million, in addition to splitting a €392 million fine with its joint-venture partner LG electronics Inc. LG was ordered to pay €296 million for its involvement. Samsung SDI was ordered to pay €151 million.

Philips Chief Executive Frans van Houten said he regretted "any association" with such behaviour. "Our ethical standards are very clear and must be strictly adhered to." Houten described the fine as "disproportionate and unjustified" considering Philips was sold in 2001.

The fines for Philips and Samsung were reduced as they cooperated with the investigation.

Toshiba, Panasonic Corp, its MTPD subsidiary and Technicolor SA were fined for their roles in the cartel for TV tubes. Fines of €157 million and €28 million were handed down to Panasonic and Toshiba respectively, in addition to a shared €95 million fine with MTPD.

Panasonic told the WSJ the commission's decision was "factually and legally erroneous" and is reviewing options for an appeal.

For revealing the cartel's existence, Chunghwa Picture Tubes received full immunity from a €17 million fine. For their cooperation, the fines received by Samsung and Philips were reduced.
 
When calculating each company's fine, the commission took sales, geographic scope and their role into consideration.