Home News & Events COMPETITION LAW NEWS: € 138 Million fine imposed by EU for Cartel on Smart Card Chips companies

COMPETITION LAW NEWS: € 138 Million fine imposed by EU for Cartel on Smart Card Chips companies

Monday, 08 September 2014 14:01

On 3rd September, the EU Commission has imposed a € 138 Million fine on Infineon, Philips and Samsung after having found that they colluded through bilateral contacts that took place in the period between September 2003 and September 2005, thus operating a cartel in the smart card chips’ market in breach of EU competition law and policies.

The companies involved in the cartel were found to have colluded through a network of bilateral contacts in order to determine their respective responses to customers' requests to lower prices. They discussed and exchanged sensitive commercial information on pricing, customers, contract negotiations, production capacity or capacity utilisation and their future market conduct. Collusion of this type is deemed to breach Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the Agreement on the European Economic Area (EEA), which prohibit cartels and restrictive business practices.

Smart card chips are utilised in mobile telephone SIM cards, credit cards, passports, pay TV cards as well as identity cards. In the mobile telephone SIM cards, the smart card chips provide adequate memory to store telephone numbers whilst in identity cards and passports, the smart card chips ensure secured data confidentiality.

Renesas Technology, a joint venture between Hitachi Ltd and Mitsubishi Electric, that was acquired by Renesas Electronics Corp., was not fined € 51 Million, benefitting from full immunity under the Commission's 2006 Leniency Notice and this having revealed to the Commission the existence of the smart card chips’cartel.

In a statement issued on the same day by Joaquín Almunia, Commission Vice President in charge of EU competition policy, commented : "In this digital era smart card chips are used by almost everybody, whether in their mobile phones, bank cards or passports. It is crucial that the companies producing them focus their efforts on how to outperform their competitors by innovating and providing the best products at the most attractive prices. If instead companies choose to collude, at the expense of both customers and end consumers, they should expect sanctions".

The Commission had initially explored the possibility of settling this case with some of the companies involved under the Commission's 2008 Settlement Notice. However, in 2012 the Commission decided to discontinue the settlement discussions and to revert to the normal procedure because of the clear lack of progress of these discussions.

he fines were set on the basis of the Commission's 2006 Guidelines on fines (see IP/06/857 and MEMO/06/256) taking into account the serious nature of the infringement, its geographic scope (i.e. the entire EEA) and the duration of each company's participation in the infringement.

Samsung received a reduction of 30% of its fine for cooperating with the investigation, with a € 35.12 Million fine.

Philips has divested its smart card chips business after the infringement, but remains liable for what happened during the period of the infringement, receiving a fine of € 20.15 Million.

The highest penalty was that imposed on German chipmaker Infineon, being € 82.8 Million.

Infineon and Philips have announced that they will be challenging the EU Commission’s decision.

Advocates, Tanti-Dougall & Associates assist corporate clients in competition related issues both before the Administrative Tribunal in Malta and at EU level.