EU fines three ethylene buyers over collusion

The European Commission has fined three companies a total of €260mn for breaching EU antitrust rules by co-ordinating their approach to negotiating the price of ethylene purchases.

The three companies are Clariant, which purchases ethylene for the production of ethylene oxide in its home country of Germany; US-based Celanese, which produces vinyl acetate monomer (VAM) and acetaldehyde from ethylene; and Mexico's Orbia, parent company of German PVC producer Vestolit. All three acknowledged their involvement and agreed to settle the case.

The individual fines were calculated in relation to the size of the companies' ethylene purchases and the duration of the infringement, with various reductions related to co-operation with the investigation, for example. Clariant was fined €155.8mn, Celanese €82.3mn, and Orbia €22.4mn. A fourth company, US-based Westlake, parent of German-based PVC manufacturer Vinnolit, avoided a potential €190mn fine as it blew the whistle on the cartel arrangement. The companies involved represent a significant volume of ethylene purchases across Belgium, France, the Netherlands and Germany.

"Unlike in most cartels where companies conspire to increase their sales prices, the four companies colluded to lower the value of ethylene, to the detriment of ethylene sellers," the commission said.

Contracts between European ethylene producers and consumers typically reference a single monthly contract price (MCP). The MCP is set when a consensus emerges from individual, bilateral discussions between counterparties and is communicated to and published by price reporting agencies, including Argus. The commission said that from December 2011 to March 2017 the four purchasers "co-ordinated their price negotiation strategy to influence the MCP to their advantage."

The MCP process continues to function and is used by many ethylene buyers and sellers. The use of a single MCP for the European ethylene industry gives companies confidence that they are working from a common basis in the context of a market where the choice of alternative suppliers and/or customers can be limited by location and logistics. Ethylene is difficult and expensive to move, often limiting the options for many producers and consumers to work with alternate counterparties. The actual prices paid for ethylene remain private and confidential, dependent on the terms of individual contracts, including individually negotiated discounts.

By Alex Sands