Nucleotides cartel punished

Related tags European union

The European Commission continues to crack down on unfair
competition and punish the illegal activities with the news this
week that is has fined three companies involved in a food flavour
enhancers (nucleotides) cartel.

The European Commission continues to crack down on unfair competition and punish the illegal activities with the news this week that is has fined three companies involved in a food flavour enhancers (nucleotides) cartel.

Japanese company Ajinomoto and South Korean companies Cheil Jedang and Daesang were respectively fined €15.54 million, €2.74 million and €2.28 million each for participating in a price-fixing cartel in nucleotides, a substance used to enhance the flavour in foods. Nucleotide or nucleic acid is made from glucose and is used in the food industry to add flavour to foods.

Takeda Chemical Industries, another Japanese firm, was also found to be part of the cartel, but it was granted full immunity from fines - under the Commission's 1996 leniency policy - for revealing the existence of the illegal agreement to the Commission.

The investigation started in 1999, when the Commission was approached by representatives of Takeda who revealed the cartel and provided information about its operation. According to the Commission, Ajinomoto, Takeda, Cheil and Daesang operated a cartel for nine years, until 1998, during which time they agreed to fix "target" prices, implement concerted price increases, allocate customers, as well as exchange information on sales figures.

According to a Commission statement this week, "documents found leave no doubt about the intent to rig the market".​ A meeting's report submitted by Daesang states, for example, in relation to the cartel operations in 1995 that:"everyone was thanked for their co-operation during 1995 which resulted in the effective implementation of nucleotide price increases and everyone was asked to continue their co-operation in 1996 so as to further increase the nucleotide prices [...] All participants showed their agreement by nodding or saying words to that effect".

Because they co-operated in the investigation, Daesang, Ajinomoto and Cheil also qualified for a reduction in the fines. Daesang was granted a bigger reduction (50 per cent) because, while it was not the first to approach the Commission, it did so on its own initiative, before receiving any information request.

The Commission states that Ajinomoto​, the world's biggest producer of nucleotides and was nearly twice as big as its competitors in terms of 1997 market share figures, received a higher fine to ensure a deterrence effect.

The Commission added that the relatively small size of the fines is explained by the equally modest revenues procured by nucleotide of around €8 million a year in the 'European Economic Area' of the 15 EU member states plus Norway, Iceland and Liechtenstein during the infringement period. The four companies, however, accounted for the quasi totality of worldwide sales.

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