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Bayer, Chemtura to Be Fined by EU Regulators for Price-Fixing, People Say

Dec 16, 2005  Bloomberg
Dec. 17 (Bloomberg) -- European Union regulators plan to fine Bayer AG and Chemtura Corp. next week for fixing the price of rubber chemicals, people familiar with the investigation say. The regulator's decision, which follows probes in the U.S. and Europe, will be announced Dec. 21, according to an EU document obtained by Bloomberg News. The EU investigation was prompted by information from Flexsys NV, a joint venture between Solutia Inc. and Akzo Nobel NV, said the people, who declined to be identified. Bayer set aside $50 million in provisions in 2003 for risks related to the EU investigation. The company last year agreed with U.S. authorities to pay $4.7 million for antitrust violations related to rubber chemicals, which are used to make plastic furniture, hoses, tires, belts and footwear. ``The question is how big the fine is,'' Peter Braendle, who helps manage $42 billion at Swissca Portfolio Management in Zurich and owns Bayer shares, said in an interview. ``You'd hope that the provisions were taken at a sufficient level.'' The European Commission, the EU's antitrust enforcer in Brussels, can fine companies accused of violating competition rules as much as 10 percent of their annual sales. It typically opts for 2 percent to 3 percent of sales. The largest EU cartel fine was 462 million euros ($555 million) levied against Roche Holding AG in 2001 for fixing the price of vitamins. Commission spokesman Jonathan Todd declined to comment. U.S. Indictment In August, two former Bayer executives were indicted on charges they participated in a global conspiracy to fix the price of rubber chemicals. About $1 billion worth of rubber chemicals are sold in the U.S. each year to improve the durability, strength and elasticity of products made with rubber, the Justice Department said in an Aug. 10 statement. Bayer, the No. 2 chemical maker in Germany, agreed to pay a $66 million fine in July 2004 for its role in the conspiracy. Two former Bayer executives have pleaded guilty to price-fixing charges. In the U.S. investigation, Chemtura, formerly known as Crompton Corp., and two of its former executives pleaded guilty last year to participating in the conspiracy to fix prices on rubber chemicals. Chemtura, which was formed after Crompton Corp.'s buyout of Great Lakes Chemical Corp., paid a $50 million fine. Chemtura, a maker of rubber and plastic additives based in Middlebury, Connecticut, has previously said it's cooperating with the EU investigation. Spokeswoman Mary Ann Dunnell declined to comment in a telephone interview yesterday. Bayer has said that its headquarters in Leverkusen, Germany were raided by commission officials in September 2002. Flexsys, one of the world's largest makers of rubber chemicals, also said at the time that it had been raided. Ralf Hermann, a Bayer spokesman, said in a telephone interview that the company had no comment. Solutia Solutia, the bankrupt maker of nylon carpet fibers and plastics, said in a Nov. 9 filing at the Securities and Exchange Commission that it's being investigated for ``past commercial practices in the rubber chemicals industry'' by antitrust authorities in the U.S., Europe and Canada. The company ``has been fully cooperating with the authorities and will continue to do so in the ongoing investigation.'' Flexsys will be granted full immunity of the EU charges because it tipped off EU investigators, the people said. Chemtura and Bayer will also be granted leniency, which will lead to fine reductions, because they cooperated, the people said. The regulator may also fine Repsol YPF SA, a Madrid-based oil company, the people said. The EU won't charge two Slovak companies, Duslo AS and Istrochem AS, because it lacked evidence, the people said. Spokespeople at Duslo, Istrochem and Repsol weren't immediately available for comment and didn't return emails.

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