Water-tank cartel ruling 'lacking in common sense,' Balmoral tells UK court

26 July 2017 11:10am
Water with Sun

17 July 2017. By Simon Zekaria.

The UK's antitrust regulator erred in judgment by fining ​Balmoral Tanks for being involved in a water-tank cartel, the company told a specialist competition court in London today.

Balmoral, a British supplier of cylindrical, galvanized steel tanks, is appealing the Competition and Markets Authority's decision to fine the company last year.

Lawyers for the company kicked off a multiday trial at the Competition Appeal Tribunal today with pleadings in front of Judge Vivien Rose.

The CMA's case was "completely and utterly lacking in common sense," Robert O'Donoghue told Rose. "This appeal is a point of principle to Balmoral," he added.

Last December, the CMA fined Franklin Hodge Industries, Galglass and their parent companies, as well as KW Supplies, more than 2.6 million pounds ($3.4 million) for operating a cartel for water storage tanks in large buildings between 2005 and 2012.

CST Industries was granted immunity from fines because it was the first to report the collusion.

The regulator said the companies fixed prices, rigged bids and allocated customers in the domestic market.

Balmoral wasn't a member of that cartel, but the CMA found that it had exchanged sensitive pricing information with its rivals at a meeting on July 11, 2012, and fined the company 130,000 pounds.

Balmoral was invited to join the cartel during the meeting but refused, according to a secret DVD recording by the CMA. Prior to the trial, Rose had asked the CMA to hand in four non-encrypted versions of the four-hour recording.


Balmoral says the meeting was intended to end unwelcome contact from the cartel operators and denies disclosing or receiving pricing information there. Neither Balmoral's purpose in the meeting nor information disclosed there were to restrict competition, it says.

It also argues that the CMA didn't establish enough harm from its information exchange to conclude that the company had breached competition rules.

The CMA said in its decision that exchanging information with competitors, even at a single meeting, could infringe competition law.

O'Donoghue today said Balmoral "doesn't understand" the reasoning behind the CMA's decision to fine it and that the CMA's analysis of the meeting was wrong.

"The CMA has a serious problem," he said. "The whole meeting was about trying to get Balmoral on board with the cartel," he said, adding the company resisted "significant pressure" to join.

He said the meeting had no "secondary purpose" related to the sharing of market information. "It was the cartel and only the cartel," he said. "There was only ever one strategy."


O'Donogue also laid out correspondence outside the meeting between Balmoral and the cartel operators. Reading a chain of e-mails between different parties, he said "the cartelists were becoming desperate."

The correspondence "brings to an end any suggestion that Balmoral was interested in an improper arrangement of any kind," he argued, and showed the cartelists' sole objective was to "recruit" Balmoral.

Fine assessment

O'Donoghue also said Balmoral was treated unfairly by the CMA's assessment of a market-information infringement. "The only company fined for this secondary infringement was Balmoral," he said.

As well as appealing its fine, Balmoral also argues that the CMA erred in how it calculated the fine, making mistakes in its assessments of the company's revenue, the duration of events and mitigating factors such as Balmoral's cooperation in the criminal investigation.

Criminal Trial

The CAT trial is provisionally scheduled for three and a half days, and Balmoral and the CMA will be allowed to cross-examine witnesses, including those heard during a separate criminal trial against executives involved in the cartel.

A related criminal investigation ended in 2015 after the conviction of Nigel Snee, former managing director of Franklin Hodge Industries, who pleaded guilty. But a London jury acquitted two other executives, Clive Dean of KW Supplies and Nicholas Stringer of Galglass.

Rose said witness cross-examinations could begin tomorrow.

The case number is 1277/1/12/17.

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