Israel Electric a Victim of Global Cartel, Antitrust Chief Rules

Israel Electric Corporation was a victim of an international cartel selling industrial equipment at fixed prices, Israel Antitrust Authority director David Gilo ruled on Tuesday.

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The cartel, which existed between 1988 and 2004, divided up the global market among eight manufacturers, none of them Israeli companies, for gas-insulated switchgears at fixed prices. During that time, IEC, the only company in Israel that uses such equipment, issued dozens of tenders worth considerable money for the devices, which are used to regulate the transmission of high voltage energy through the electrical system and protect it from sharp changes in voltage.

No criminal charges are being filed as a result of the authority’s investigation because no Israeli parties were found to have taken part in the cartel. However, under Israel’s antitrust law, IEC can use the antitrust ruling as the basis for filing a suit for damages caused by the cartel.

Shortly after Gilo’s ruling on Tuesday, the utility said that is what it intends to do. “Israel Electric Corporation intends to take legal action to access its rights against the cartel companies,” the IEC said in a statement.

The companies that belonged to the cartel were Germany’s Siemens, French companies Alstom and Schneider Electric, Switzerland’s ABB and Japanese companies Hitachi Japan AE Power Systems, Toshiba, Fuji Electric and Mitsubishi Electric Corporation. The IEC's principal supplier of switchgears was Siemens. The Japanese cartel members were not included in Gilo’s announcement because they were not found to have been involved in the Israeli market.

The existence of the cartel was first exposed by ABB to European antitrust authorities more than a decade ago as part of an immunity program for whistle-blowers.

In January 2007, the European Commission, the European Union's executive body, levied a combined 750-million-euro fine on the companies after an investigation, exempting ABB for its role in exposing the collusion. The EU's General Court approved the commission's decision, although it reduced the size of the fine.

During the antitrust authority’s probe into the cartel's activities, it was discovered that between November 1988 and June 1999 more than 50 Israeli development projects were discussed during cartel meetings. Among the ones for which the IEC issued tenders, all except one were won by European cartel companies, most of them by Siemens.

The cartel was reportedly formed in April 1988 following a meeting in a Vienna hotel of executives of the companies involved. Siemens served as “cartel secretary” for the European companies from April 1988 until September 1999.