In December the European Commission (EC) fined 5 envelope makers from Sweden, France, Germany and Spain a total of almost €20m for participating in a cartel. Between 2003 and 2008 these firms had coordinated responses to tenders, fixed prices and exchanged information. This increased the prices paid by their buyers who were stationary distributors and large companies.
Commenting on this case the European Competition Commissioner Margrethe Vestager stated:
On this case we have closed the envelope, sealed it and returned it to the sender with a clear message: don’t cheat your customers, don’t cartelise.
The EC initiated an investigation and undertook dawn-raids on the companies involved following a tip-off from a whistleblower. The Commissioner also had this message for other firms considering taking part in a cartel:
I do hope that you realise that just a simple tip-off from a whistle-blower, from within the company or from a customer is all it takes for your cartel to come up on our enforcement radar.
A previous post on this site highlighted the fact that the game of golf has played a prominent role in a number of previous cartels and that in these code names for their activities were sometimes adopted. The envelope cartel seems to have gone one step further by combining the two and referring to their cartel meetings as ‘golf’ or ‘minigolf’ appointments.
All firms involved in the cartel settled their case with the EC, resulting in reduced fines. The EC encourages such resolution of cases because it frees up resources and allows them to pursue a larger number of cases. In addition, the fines imposed on two of the companies were reduced due to their inability to pay.
Finally, it is also interesting to note that, following the collapse of the cartel, one of the companies involved went into liquidation and subsequently merged with one of its former cartel co-conspirators. This coincides with broader evidence of merger activity following the breakdown of cartels. One explanation for this is that merger activity is a response to competition breaking out in the post cartel environment.
Antitrust: Commission fines five envelope producers over €19.4 million in cartel settlement European Commission – Press release (11/12/14)
EU regulators bust envelope cartel in time for holiday cards The Guardian (11/12/14)
European Commission fines envelope cartel €19.5m PrintWeek, Simon Nias (06/01/15)
Kipper Williams on the envelope cartel The Guardian, Kipper Williams (12/12/14)
- What are the key features of the market for envelopes?
- Do the features of this market make it particularly prone to collusive behaviour?
- What are the trade-offs involved in reducing the fines for firms that are willing to settle?
- Is it right that cartel fines are reduced if firms are unable to pay?