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Hausfeld Backs Dutch Elevators Cartel Claim

Hausfeld assists claimants with the collection of damages due to the elevator and escalators Cartel

Legal proceedings against Kone & Thyseen Krupp in the Netherlands

Cartel specialist Hausfeld is a backer of the Stichting Elevator Cartel Claim Foundation (“the Foundation”), which has started legal proceedings against the elevator cartelists.

The European Commission issued a decision in which it concluded that certain elevator and escalator manufacturers were guilty of illegal and unlawful price-fixing and market division, as a consequence of which customers overpaid for installation and maintenance for many years. The fine charged by the European Commission was one of the highest ever: EUR 992 million. Since that amount will not be paid to the customers, but will be paid to the European Union (only), the Foundation claims on a no cure no pay basis on behalf of all the aggrieved parties compensation from the elevator companies. This is encouraged by the European Commission and also mentioned this in its decision of February 2007:

“Any person or firm affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages, submitting elements of the published decision as evidence that the behaviour took place and was illegal.”

The list of participants which have placed their claims with the Foundation include household names listed in Fortune Global 500 and Forbes Global 2000 as well as both the Business Week and Interbrand 150 Best Global Brand. And, significant buyers and users of elevators, escalators and travelators in Germany, the Netherlands, Belgium and Luxembourg (the EU Member States affected by the Cartel) continue to join the ECCF claim recovery process.

The Foundation has instructed the well known law firm Boekel de N. and the English law firm Hausfeld & Co LLP.

In late December 2010, the Foundation summoned the cartel on the basis of the participation to the cartel in the period 1995 up to and including 2004, as determined by the EC.

The decision of the EC forms / comprises binding evidence for the fact that unlawful behaviour has taken place. The EC concluded that the elevator manufacturers made a lot of effort to prevent the discovery of the cartel, including the use of pre-paid phones, false names on expenses accounts, the organisation of meetings at unusual places (e.g. cafes and restaurants outside of the cartelists area) and without notes being taken in writing. The worldwide market for elevators and escalators industry amounts to approximately €30 million per year according to the EC.

The majority of such business or governmental organizations have not received any damages from the cartelists, and the elevator and escalator companies continue to refuse to voluntarily repay the amounts they illegally overcharged customers.

Anthony Maton, partner in Hausfeld & Co LLP, comments:

“The Elevators Cartel was a long running and deep seated cartel that caused significant damage to its victims. According to the Commission, this cartel only impacted the Benelux countries and Germany and thus Holland was an attractive and practical litigation forum for this case. Our action here shows we will pursue claims for cartel victims wherever necessary in order to recover their losses. As always, we encourage the cartelists to come forward to acknowledge and resolve their liability in a commercial manner.”

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Background – The Elevators Cartel 

  • The European Commission fined the Otis, KONE, Schindler and ThyssenKrupp groups €992 million for operating cartels for the installation and maintenance of lifts and escalators in Belgium, Germany, Luxembourg and the Netherlands, in clear violation of EC Treaty rules that outlaw restrictive business practices (Article 81).
  • The decision names 17 subsidiaries of the above groups, together with Mitsubishi Elevator Europe B.V. which participated in the Dutch cartel.
  • Lifts and escalators play a major role in modern urban life - Otis alone estimates that the equivalent of the entire world's population travel on their lifts, escalators and moving walkways every 9 days.
  • Between at least 1995 and 2004, these companies rigged bids for procurement contracts, fixed prices and allocated projects to each other, shared markets and exchanged commercially important and confidential information.
  • The European commission stated that the effects of this cartel may continue for twenty to fifty years as maintenance is often done by the companies that installed the equipment in the first place; by cartelising the installation, the companies distorted the markets for years to come. KONE subsidiaries received full immunity from fines under the Commission’s leniency programme in respect of the cartels in Belgium and Luxembourg, as they were first to provide information about these cartels. Similarly, Otis Netherlands received full immunity in respect of the Netherlands cartel. The fines imposed on the ThyssenKrupp companies were increased by 50%, as it is a repeat offender. At the time the overall fine was the largest ever fines imposed by the Commission for cartel violations, and the fine on the ThyssenKrupp group remains the largest fine imposed by the EC on a corporate group.
  • Fines go to EC Community revenue, not to the parties who suffer the financial losses caused by the market manipulation, in particular by the artificial inflation of prices. The EC consistently encourages such parties to take action to recover those damages, not only for themselves but because damages actions act as a powerful deterrent for potential future cartelists.
  • The Commission's started the investigation on its own initiative using information brought to its attention. This led to surprise inspections in January 2004 at the premises of lift and escalator manufacturers throughout Europe. In turn, these inspections triggered many applications from the companies for immunity or reduction of fines under the Commission's 2002 Leniency Notice (see IP/02/247 and MEMO/02/23).
  • The evidence uncovered in the inspections showed that the companies ran illegal cartels in Belgium, Germany, Luxembourg and The Netherlands. This was further confirmed by numerous documents and corporate statements provided by the leniency applicants.
  • The companies allocated tenders and other contracts for the sale, installation, maintenance and modernisation of lifts and escalators with the aim of freezing market shares and fixing prices. Business secrets and confidential information on bidding patterns and prices between the cartel participants were also exchanged. Projects that were rigged included lifts and escalators for hospitals, railway stations, shopping centres and commercial buildings.
  • The allocation of projects was similar in all four Member States. The companies informed each other of calls for tender and co-ordinated their bids according to their pre-agreed cartel quotas. Fake bids, too high to be accepted, were lodged by the companies who were not supposed to win the tender, in order to give the impression of genuine competition. The companies kept and circulated amongst themselves updated project lists for Belgium, Germany and Luxembourg. In Germany and The Netherlands, it was often agreed that the company that had a longstanding or good relationship with a particular customer should secure most of that customer's contracts; referred to by the companies as the "existing customers remain" principle.
  • High-ranking national management (such as managing directors, sales and services directors and heads of customer service departments) participated in regular meetings and discussions. There is evidence that the companies were aware that their behaviour was illegal and they took care to avoid detection; they usually met in bars and restaurants, they travelled to the countryside or even abroad, and they used pre-paid mobile phone cards to avoid tracking.
  • In their responses to the Commission's Statement of Objections, the companies did not contest the facts found by the Commission, and none of them requested an oral hearing.
  • Then EC Competition Commissioner, Neelie Kroes, stated:

It is outrageous that the construction and maintenance costs of buildings, including hospitals, have been artificially bloated by these cartels….The national management of these companies knew … they were doing … wrong [and] … tried to conceal their action ...

  • On June 13, 2008, the Administrative Affairs, Audit and Anti-Fraud Department of the EC announced they were bringing a private action since the EC, as a public institution, suffered direct damages from the elevator cartel. The cases have been filed against the cartelists in Belgium's Tribunal de Commerce. 

NOTES TO EDITORS

Hausfeld

The ECCF is being co-funded and managed by Hausfeld Services LLC, a dedicated provider of funding support services for international disputes.

London based Hausfeld & Co LLP, led by industry doyen Michael Hausfeld, is widely recognised as one of the leading and best-known claimant law firms in the world. It is at the forefront of numerous innovative legal actions that are expanding the quality and availability of legal recourse for aggrieved individuals and businesses around the world.  

The partners of Hausfeld & Co LLP and Hausfeld LLP have obtained numerous landmark judgments and settlements for individuals and businesses, and have been champions for the private enforcement of competition and antitrust laws globally for almost four decades.

 

Practice Areas: Antitrust / Competition