Goldman Sachs owns Metro, JP Morgan owns the warehousing company Henry Bath, commodity trader Trafigura owns NEMS and Glencore owns Pacorini.As part of an investigation into strategically important metals, the Commons Science and Technology committee learned that four large metals traders also ran warehouses, raising fears they could gain an unfair advantage through access to sensitive information about the activities of rival traders. Therefore, The Office of Fair Trading is considering an investigation into whether the market for metals trading is anti-competitive after MPs raised concerns that many of the warehouses used in the industry were owned by big commodities traders. The OFT will apparently respond to the select committee shortly and will consider any complaints received on publication by the report.
Giving evidence at a science and technology hearing last week, Anthony Lipmann, managing director of the Lipmann Walton metals trader and former chairman of the Minor Metals Trade Association, provided that JP Morgan is one of four very large companies that own the very warehouses that people deliver metal into. They own a company called Henry Bath. Lipmann said, “They are, therefore, a ring-dealing member of the exchange and they also own the warehouse. That is restrictive.”
A spokesman for the London Metals Exchange provided, instead, that robust regulations in place concerning this issue, regulations are under constant review by the LME and their regulator the FSA to ensure the market operates “in a fair, transparent and orderly manner.”
In 1996, the situation was equally bad. five UK firms were among 30 companies to have been fined a total of 314.7m euros (£211.5m; $399.4m) for running a copper fittings cartel between 1988 and 2004. The cartel influenced prices for copper fittings used with tubes for plumbing, heating and sanitation. Tomkins was fined £3.6m, Delta £19m, IMI £32.5 and AFC £12.16m. However, the European Commission said at the time that IMI’s penalty In contrast, the Commission increased the fines for AFC, Delta, Aalberts of the Netherlands and France’s Legris for continuing to operate the cartel after its investigation had begun.
The Commission also said that it lifted the fine for AFC by a further 50% as punishment for providing misleading information. One firm, Mueller – which was originally fined £6.9m – eventually received full immunity as it was the first company to come forward with information about the cartel.
How cartels differ from perfect competition continues to interest both economists and commercial lawyers. The OFT publish information as follows:
“In the UK, anti-competitive behaviour is prohibited under Chapters I and II of the Competition Act 1998 and may be prohibited under Articles 81 and 82 of the EC Treaty. These laws prohibit anti-competitive agreements between businesses and the abuse of a dominant position by a business. Businesses that infringe competition law may face substantial financial penalties of up to ten per cent of their worldwide turnover.”
Cartels are a particularly damaging form of anti-competitive activity. Their purpose is to increase prices by removing or reducing competition and as a result they directly affect the purchasers of the goods or services, whether they are public or private businesses or individuals. Cartels also have a damaging effect on the wider economy as they remove the incentive for businesses to operate efficiently and to innovate. Detecting and taking enforcement action against the businesses involved in cartels is therefore one of our main enforcement priorities.”
http://www.oft.gov.uk/shared_oft/business_leaflets/ca98_mini_guides/oft435.pdf
