competing fairly 5

Competing Fairly
An Antitrust Primer for Shell staff

"Antitrust laws are the Magna Carta of free
enterprise. They are as important to the preservation
of economic freedom and our free-enterprise
system as the Bill of Rights is to the
protection of our fundamental
personal freedoms."
The Supreme Court, United States 1972
"Cartels are cancers on the
open market economy,
which forms the very basis of our society".
Mario Monti
European Commissioner for Competition
September 2000

Competing Fairly
An Antitrust Primer
for Shell staff
Competing Fairly
An Antitrust Primer for Shell staff
Contents
Section 1 The aims of antitrust law page 5
Section 2 Defining the problem page 10
Section 3 Dealing with dilemmas page 18
Section 4 Maintaining business integrity page 20
Appendices
1 Cracking down on international cartels page 23
2 Some commonly asked questions page 31

Competing Fairly
An Antitrust Primer
for Shell staff
Section 1
The aims of antitrust law
The purpose of antitrust laws is to promote and safeguard competition and
to punish anti-competitive behaviour.
Competition between companies promotes innovation and ensures goods
and services are produced as efficiently as possible, with efficiencies
benefiting consumers in the form of lower prices or improvements in quality,
choice or services. Without competition, the driving forces behind economic
growth and employment would be lost. Competition provides businesses the
opportunity to compete on price and quality, in an open market and on a
level playing field, unhampered by anti-competitive restraints.
The problem in perspective
Collusion2 has been around for as long as people have been in business.
That does not make it acceptable, nor is it a waste of time to try to do
anything about it.
Adam Smith said in his seminal text "The Wealth of Nations" back in 1776
"people of the same trade seldom meet, even for merriment and diversion,
without it ending in a conspiracy to raise prices".
This tendency is of course driven by the possibility of increased profits
following from collusion rather than competition. Shareholders, investors
and analysts put businesses under considerable – and sometimes severe –
pressure to perform and to maximise profits in order to survive in the long
run.
In truly competitive markets, competitors vie with one another to find the
most efficient and least expensive way to respond to the demands of their
customers.
However, sometimes in situations of intense competition ("price wars"),
profits can be low and deviation away from any form of profit maximisation
may quickly lead to losses.
2 The term "collusion" means unlawful cooperation between competitors to reduce or eliminate competition,
such as price fixing and market sharing. Not all forms of cooperation between competitors are illegal and
many forms of cooperation – such as joint ventures – are legal but may require approval by antitrust or other
appropriate regulatory authorities. You should always seek legal advice if you are in any doubt.
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There may be perceived economic incentives for companies to reduce
the intensity of competition by cooperating with competitors to
increase price in order to return to - or to secure - profitability or even
to restore an "easy life". In addition, in some markets there can be a
history of "close cooperation" between competitors, and there may be
some (misplaced) concerns that in departing from the "club" we may
be letting "our friends" in the industry down. However, collusion
which distorts competition is not acceptable and, although it may be
difficult to eliminate completely, much can and should be done to
eliminate it.
Collusion between competitors is enormously damaging in a variety of
ways. Such behaviour distorts markets, damages economies and harms
customers. Some studies suggest that collusion cost the world
economies several billions of US dollars a year. 3
Some Excuses
Despite the serious economic damage that cartels, collusion and other
anti-competitive practices cause, it is not uncommon to hear business
people making excuses for it.
For instance "it is part of their culture. We must not try to impose our
standards on other countries".
Collusion and anti-competitive practices may be more common in
some parts of the world than others, and may be more common in
some business areas than others, but we must not confuse bad practice
with culture. If collusion and cartels were really an accepted - and
lawful - part of a 'national culture', publication would also be normal
and accepted, but most cartels and anti-competitive arrangements are
conducted in secret, frequently with elaborate steps taken to hide the
evidence.
Collusion and anti-competitive practices may be more common in
some parts of the world than others, but we must not confuse bad
practice with culture.
3 OECD Report on Hard Core Cartels, June 2000. The OECD defines a "Hard Core Cartel" as
"an anti-competitive agreement, anti-competitive concerted practice or anti-competitive arrangement
by competitors to fix prices, make rigged bids (collusive tendering), establish output restrictions or
quotas, or share or divide markets by allocating customers, suppliers, territories or lines of commerce".

Competing Fairly
An Antitrust Primer
for Shell staff
Or perhaps another excuse may be: "Others do it. If we do not, we will
not be able to win any business against our competitors".
It is, of course true that a refusal to engage in a cartel or other anticompetitive
practice will sometimes lead to a loss of business, but there
are also many customers who would prefer to deal with a company
which has a strong "no collusion" and fair competition policy.
International action against cartels
In recent years antitrust authorities in several jurisdictions have
toughened their stance against international cartels, and have
committed enormous resources and efforts into "cartel busting". Some
examples of cartels that have been broken up and prosecuted are given
in Appendix 1. A common feature of these proceedings is the
commitment of the authorities to seek out and stamp out antitrust
violations, wherever they occur, irrespective of where the participants
may be located.
"It does not matter whether executives who engage in anti-competitive
practices are citizens or foreign nationals … it is the Bureau’s policy to
pursue the most senior executives involved in price fixing or market
allocation cartels if their anti-competitive activity affects the market.
We will go after them to the full extent of the law"
Konrad von Finkenstein QC, Canadian Commissioner of Competition,
commenting on the Vitamins cartel.
There are now over 100 countries throughout the world with
developed antitrust laws. A number of these make antitrust violation a
criminal activity, with imprisonment of individuals and heavy
financial penalties for the companies involved.
Some financial penalties can be quite draconian: for example, a breach
of European antitrust law can result in a fine of up to 10% of
worldwide Group turnover.
Antitrust laws apply where the economic effects of the agreement are
felt, and not where the companies or employees are located, or where
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the agreement happens to be made. So for example, if competing
companies based in Malaysia fixed the price of LNG going into the USA
and Europe, it would be the antitrust laws of the US and Europe which
would be relevant, despite the fact that the agreement was made in a
country which does not have developed antitrust laws. It is therefore
essential that Shell employees – wherever they are located – understand
and observe the generally applicable principles of antitrust law.
"These prosecutions should signal to business executives both in the
USA and abroad that we will vigorously pursue companies and
individuals involved in international cartels wherever they are. They
had better take a hard look at their own behaviour, because they will
pay a high price for their illegal actions."
Joel Klein, Assistant Attorney General, US Department of Justice,
commenting on the Lysine cartel.
In addition, the OECD (Organisation for Economic Cooperation and
Development) is coordinating an international drive between its
member governments to crack down on international cartels. 4 The
OECD condemns 'hard core' cartels such as price fixing, bid rigging
(collusive tendering) and market sharing between competitors as the
most serious violations of antitrust law, as they raise prices and restrict
supply, thus making goods or services completely unavailable to some
purchasers, and unnecessarily expensive for others.
Proving the existence of a cartel depends largely on the antitrust
authorities proving the existence of an agreement or meeting of minds
(often called a "gentlemen’s agreement") between competitors. An
explicit agreement can be demonstrated through direct evidence - a
document that contains or refers to an agreement, minutes of a
meeting that record an agreement among the attendees, or testimony
by a person with knowledge of an agreement. But in some
jurisdictions, an agreement also can be demonstrated by inference - a
combination of circumstantial evidence, including the fact that
competitors had a meeting before they implemented certain practices,
records of telephone calls, and signalling behaviour - when one
4 OECD Recommendation Concerning Hard Core Cartels [C(98)35/FINAL]

Competing Fairly
An Antitrust Primer
for Shell staff
company tells another that it intends to raise prices by a certain
amount. This evidence must show that a company’s conduct was
more likely the result of an agreement than a unilateral action.
Most antitrust authorities around the world have extensive powers to
enter premises to search for evidence to prove that antitrust
violations have occurred.
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Competing Fairly
An Antitrust Primer
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Section 2
Defining the problem
Antitrust laws apply to every level of business in the vast majority of
countries in which Shell companies do business. These laws not only
apply to Shell companies, but also to our competitors, suppliers and to
our business customers. It is important to know about the laws - not
only to avoid an infringement, but also to ensure that our suppliers or
trade customers are not engaging in anti-competitive activities that
could damage our business.
The antitrust laws prohibit a variety of practices that restrain trade or
restrict free and fair competition, such as price-fixing conspiracies and
predatory acts designed to achieve or maintain monopoly power.
Antitrust authorities throughout the world pursue violations of the
antitrust laws vigorously. In many countries, infringements of antitrust
laws can result in criminal prosecutions that can lead to imprisonment
of individuals and large fines for both employees and the companies
concerned.
Rather than attempt to define every kind of anti-competitive practice
to which Shell companies might be exposed, this Primer focuses on
the most serious and clear-cut violations of antitrust law that
undermine the competitive process and threaten Shell’s business.
These are:
■ price fixing between competitors
■ market sharing between competitors
■ agreements between competitors to restrict output
■ collective boycotts
■ abuses of market power by a monopolist or dominant firm
Other potentially anti-competitive practices such as resale price
maintenance are also briefly described. Of course laws relating to anticompetitive
practices do differ from country to country, and
employees are urged to seek legal advice on the antitrust laws relevant
to the countries in which they do business.

Competing Fairly
An Antitrust Primer
for Shell staff
Some cases involving antitrust violations are easier to identify than
others are. Certain practices, such as price fixing between competitors,
are so inherently harmful to customers that a detailed examination is
not necessary to determine whether they are reasonable. In many
countries, antitrust laws presume that price fixing and market sharing
cartels are violations and condemn them almost automatically.
Other practices demand closer scrutiny based on principles that the
courts and antitrust agencies have developed to assess their impact on
competition. A business practice within this latter category is illegal if
it restricts competition in some significant way and has no overriding
objective business justification or efficiency enhancing benefits.
In some cases, a single company (or a small number of competing
companies) can acquire enough market power by organic growth to
dominate a market. A dominant company has a special responsibility
not to misuse its market power in a way that distorts fair competition.
What business practices are unlawful?
Agreements among competitors often raise antitrust suspicions. Not
all relationships between competitors are necessarily illegal. The
purpose of this Primer is not to deter employees from competing
fairly or from engaging in activities that do not restrict competition.
However, certain activities do restrict competition and are
generally illegal and we want to alert employees to the practices
that commonly will infringe antitrust law.
Examples of recent cartels and anti-competitive practices that
have been prosecuted by antitrust authorities throughout the
world are given in Appendix 1. These cartels not only resulted
in very significant fines for the companies involved, but in
several cases in the criminal prosecution of executives, resulting
in personal fines and even imprisonment.
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Agreements with competitors
Price fixing agreements
Agreements between competitors about the prices they will charge to
customers or pay to suppliers for goods or services are generally
amongst the most serious infringements of applicable antitrust rules.
Understandings between competitors which have the effect of
stabilising or raising prices or profit margins, agreements on price
initiatives or price targets, price ranges or price recommendations, and
agreements between competitors of "floor" or minimum prices are
generally illegal under applicable antitrust laws. That is because price
often is the principal way that firms compete. "Hard core" - clear or
blatant - price-fixing between competitors is illegal and is subject to
criminal prosecution in many countries. The antitrust prohibition on
fixing prices also extends to agreements between competitors on pricerelated
matters such as discounts, rebates, commissions and credit terms.
Are similarity of prices, simultaneous price changes or high price
indications of price-fixing? Not always. These conditions can result
from price-fixing, but to prove the charge, antitrust authorities would
need evidence of an agreement between competitors to fix prices.
Systematic exchanges of pricing information between competitors can
be used in many countries as evidence of a collusive agreement, and
for that reason, great care needs to be exercised in relation to the
exchange by competitors of competitively sensitive information. 5
Price similarities - or the appearance of simultaneous changes in price -
also can result from normal economic conditions and from a rational
unilateral response by companies to those conditions. For example,
vigorous competition can drive prices down to a common level. As for
the appearance of uniformly "high" prices, collusion may not be the
only basis for the situation. Prices may increase if consumer demand
for a product is particularly high and the supply is limited. A general
increase in wholesale gasoline costs due to production shortages can
cause gasoline stations to increase retail prices around the same time.
Provided the actions of the competitors are determined separately and
5 Certain types of information exchange or information gathering are common and may indeed
contribute to the competitive process provided they are undertaken with care and in compliance
with the applicable antitrust laws. Guidelines on common forms of information exchange can
be obtained from the Group’s specialist competition lawyers. See page 36 for details.

Competing Fairly
An Antitrust Primer
for Shell staff
without collusion (and in the absence of a position of market
dominance), there will be no infringement of applicable antitrust
laws. But if prices are similar as a result of exchanges of information
or pricing agreements between competitors, that is likely to be illegal
under applicable antitrust laws.
Red Flags You should be alerted to the danger of potential anticompetitive
activity if anybody uses the following phrases in meetings
or conversations:
■ "No one will ever know"
■ "That’s the way things are done round here"
■ "It doesn’t matter how it is done, so long as it gets done"
■ "We must all act together to restore an orderly market "
■ "Everybody does it"
■ "We didn’t have this conversation"
■ "Don’t write this down"
■ "No notes leave the room"
Market division / Market sharing
Agreements between competitors to divide sales territories or allocate
customers - essentially, agreements not to compete - are generally
illegal under most antitrust laws. Market sharing arrangements may
take the form of agreements between competitors not to compete for
certain customers or certain accounts, or not to compete in certain
geographic areas. Clearly such non-compete agreements distort fair
competition.
For example, under applicable antitrust laws it would be illegal if
competitors agreed that one of them would concentrate its sales
activities in the Americas and another would concentrate its activities
in Asia, and would not "poach" business from each other.
Similarly, it would generally be illegal under applicable antitrust laws
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for competitors to operate in "demarcated" territories, where the
competitors agree not to challenge each other in their "home" market,
or to "rig" contracts or tenders to ensure that they did not come into
"head-to-head" competition.
However, it is generally not illegal if a company comes to a unilateral
decision not to pursue its business in certain locations or with certain
types of customer. 6
Agreements between competitors
to restrict output
An agreement between competitors to restrict production or output or
to close production facilities is generally illegal under applicable
antitrust laws because reducing the supply of a product or service
inevitably drives up its price. So for example, it would generally be
illegal under applicable antitrust laws for competitors to agree to
rationalise their production facilities, to mothball units or to produce
limited quotas of product.
However, it is generally not illegal for a company to arrive at a
unilateral decision to close production units or to reduce production
output.
Similarly it is generally not illegal for a company to agree to supply
product to a competitor following the competitor’s decision to close a
production facility. However, in this case, great care has to be taken to
ensure that the competitor’s decision to close a facility was unilateral.
So for example, the supplier should not make supplies of product
conditional on the closure of the plant by the buyer.
Collective Boycotts
A collective boycott - an agreement between competitors not to deal
with another person or business - generally violates antitrust law.
Collective boycotts are agreements between competitors that they will
not buy products or obtain services from a certain supplier, or
agreements that they will not supply products or services to certain
6 Antitrust laws often impose restrictions upon a dominant company’s ability to refuse to supply
product even where such a decision is taken unilaterally.

Competing Fairly
An Antitrust Primer
for Shell staff
customers. Such agreements are generally illegal under applicable
antitrust laws. Clearly such agreements distort the competitive process
by foreclosing the competitive opportunities of suppliers or by
denying customer choice. Collective action amongst competitors to
prevent a company from entering a market or to disadvantage a
competitor also are generally illegal under applicable antitrust laws.
Agreements with customers
In some circumstances, certain customer restrictions may be anticompetitive,
because for example, they may foreclose the competitive
opportunity of competing suppliers, or restrict the competitive ability
of the customer.
The antitrust laws governing restrictive customer agreements do differ
from country to country, and you should seek legal advice in advance
on the acceptable parameters of your conduct. Examples of customer
restrictions most commonly prohibited by antitrust laws are given
below.
Tie-in sales
The sale of one product to a customer on condition that the customer
purchases a second product, which it may not want or can buy
elsewhere at a lower price, is known as a "tie-in". Requirements like
these may be illegal under applicable antitrust laws if they harm
competition (for example by significantly foreclosing the competitive
opportunity of competing suppliers), so the competitive effects - and
thus the legality - of such agreements have to be assessed carefully.
Resale price maintenance agreements
An agreement between a manufacturer (or supplier) and a dealer (or
reseller) that fixes the minimum resale price of a product (i.e. the
minimum price at which the product may be resold) is an
infringement of antitrust law in many countries.
Some antitrust laws, however, give manufacturers some latitude to
adopt a policy regarding a recommended level of maximum resale
prices. Agreements on maximum resale prices may not be
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automatically illegal under applicable antitrust laws, in which case they
need to be evaluated to assess their actual impact on competition.
Indeed, a restriction on maximum resale prices may be beneficial to
consumers in some situations, since they may prevent dealers from
charging a non-competitively high price.
Other anticompetitive agreements
The examples highlighted above are not intended to give an exhaustive
list of all types of potentially anti-competitive agreement, but simply
to indicate the sorts of arrangement which are most commonly
prohibited or controlled by applicable antitrust laws. You will clearly
need to seek advice in your own jurisdiction on the locally applicable
laws where any activity has an adverse impact on the normal
competitive process.
Abusing market power / dominance
"Dominance" refers to a position of considerable economic power in a
market held over a period of time.
In relation to suppliers, "dominance" means that the relevant company
has sufficient market power to restrict output and raise price above the
level that would prevail in a competitive market, without existing
rivals or new entrants taking away its customers. Buyers in a particular
market may also have a position of considerable economic power, and
are also subject to the prohibitions in antitrust law over abuse of
market power.
Dominance is not simply a question of a company having a large
market share. Several factors have to be taken into account as well as
market share, such as barriers to entry and the fragmentation of
competitors’ market shares. 'Dominance' can only exist in relation to a
particular product and geographic market. Market definition can often
be a complex task. It involves an assessment of both law and
economics, and should not be undertaken lightly.
While it is generally not illegal to gain a position of market power
(monopoly / dominance) in a market through organic growth, the
antitrust laws generally make it unlawful to maintain or to abuse a
monopoly through tactics that either unreasonably exclude firms from

Competing Fairly
An Antitrust Primer
for Shell staff
the market or significantly impair the ability of others to compete.
Because of its market power, a dominant company has a special
responsibility not to act in a way that deliberately or unfairly
diminishes competition. Non-dominant companies are not subject to
the antitrust prohibitions on unilateral abusive conduct but are of
course subject to applicable antitrust laws controlling anticompetitive
arrangements and agreements.
A single dominant firm may commit a violation through its unilateral
actions, or a violation may result if a group of firms together
monopolise a market (collective dominance).
Examples of conduct by dominant companies that may violate
applicable antitrust laws include refusals to supply for non-objective
reasons; unfair discrimination between equivalent transactions; nonobjective
refusals to grant access to essential facilities; unfair or
predatory pricing; engaging in practices to raise rivals’ costs or
foreclose competitor entry, unfair rebating practices and customer ties.
The types of conduct prohibited as "abuses" by dominant companies
may differ from country to country, and if you believe that your
business may be "dominant" or may be in a position of market power,
you should seek legal advice in advance on the acceptable parameters
of your conduct.
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Section 3
Dealing with dilemmas
Anti-competitive behaviour is unacceptable. Whilst cartels between
competitors that involve outright price fixing or market sharing are
easy to identify and condemn, other anti-competitive practices may be
less clear-cut.
That is why trying to establish a set of rules that can be applied in
every situation is difficult, if not impossible. Furthermore, it may be
inadvisable, as it may encourage some people to look for loopholes and
exceptions, which will not normally be available anyway.
A better approach is to formulate a number of question as a starting
points to analyse "grey areas". These questions aim to help employees
distinguish between those activities which are acceptable and those
which are not. Appendix 2 contains some commonly asked questions
- based on situations encountered by Shell staff – together with some
answers which are intended to stimulate thoughts about how certain problems
may be approached and what principles should be taken into account.
The application of antitrust laws is complicated by the fact that (with
the exception of “hard core” cartel behaviour) many business practices
can have an objectively reasonable business justification even if they
limit competition in some way. 7
Consider an agreement among competing manufacturers to adopt
specifications / standards that require fire-resistant materials for certain
products. The agreement to adopt the standard is restrictive: the
manufacturers have limited their own ability to use other materials,
and they have limited consumer choice. But the agreement to adopt
the standard may benefit consumers in that it provides assurances of
safety. What if manufacturers did not use a uniform standard for
electrical outlets and plugs? The likely result would be
incompatibilities between parts produced by different manufacturers.
But because of the standard, parts manufactured by different
companies become interchangeable, competition for the parts
increases, and prices go down.
7 In some jurisdictions, agreements which may restrict competition but which have countervailing
efficiency (or other public benefits) may require notification to and approval by the relevant
antitrust authorities. You should always seek legal advice if you are in doubt.

Competing Fairly
An Antitrust Primer
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Non-price agreements between a manufacturer and a customer or
dealer may also potentially restrict competition, but may be motivated
by a desire to improve efficiency and reduce costs. Thus
manufacturer-imposed limitations 8 on how or where a dealer may sell
a product, e.g., service obligations or territorial limitations, have to be
assessed for their effects on competition. These agreements may result
in greater sales efforts and better service in the dealer’s assigned area,
and more competition with other brands. On the other hand, some
non-price restraints may be anticompetitive. For example, an exclusive
dealing arrangement may prevent other manufacturers from obtaining
enough access to sales outlets to be truly competitive. Or it might be
a way for manufacturers to stop competing so hard against each other.
The above examples demonstrate that it is by no means easy to
condemn all potential "restrictions" as anti-competitive. This is why
this Primer focuses on the types of arrangements between competitors
that will almost certainly violate applicable antitrust laws, such as
price fixing, market sharing and production limitation agreements.
What should I do if I think a competitor is urging Shell to
engage in unlawful activity?
If you believe that a competitor is suggesting that a Shell company
should fix prices, share markets or engage in any of the other
unlawful business activities described above, you should disassociate
Shell (and yourself) from the activity by leaving the meeting or
terminating the conversation. You should then immediately make a
note of your action and report the situation straight away to your line
manager and to Legal Services.
If you are in any doubt at all as to whether contact with a competitor
would violate applicable antitrust law, you should seek Legal advice
promptly before continuing with such contact.
It is your responsibility to ensure that you have taken appropriate
Legal advice and have taken the appropriate steps to disassociate Shell
from any activities that would contravene applicable antitrust laws.
8 Export bans which prevent or restrict exports or parallel imports of products from one Member
State of the European Union to another within the EU are automatically illegal under European
antitrust law.
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Section 4
Maintaining business integrity
in Shell companies
The Group's policy on business integrity is enshrined in the SGBP,
which have been adopted by each company within the Group.
The Group's stance on anti-competitive practices is unequivocal:
"Shell companies support free enterprise. They seek to compete fairly
and ethically and within the framework of applicable competition
laws; they will not prevent others from competing freely with them"
(SGBP 8).
Senior management commitment and involvement
‘Tone at the top’ is crucial. Senior management should make a visible
and active commitment to the SGBP and any local policies and
procedures linked to them. They should make it clear to staff that any
malpractice will be investigated and acted upon.
Employees who voluntarily come to discuss antitrust concerns should
not be criticised. They should feel free to discuss and resolve antitrust
problems openly with Management and with Legal Services. 9
Employees who comply with antitrust law should not feel that they
have compromised their organisation if it turns out that the best legal
solution involves extra cost or potential loss of business opportunities.
The only concerns are where employees take steps to hide participation
in an illegal cartel or anti-competitive practice. In this case, employees
should know that disciplinary action will be taken against them.
Antitrust Compliance Programme
Group Legal Services has prepared and distributed a "Group" antitrust
compliance package to operating company legal advisers. 10 Shell
companies should develop their own Antitrust Compliance Programme
9 In some countries in-house Legal Professional Privilege in respect of written documentation
evidencing antitrust problems may be an issue. Employees should therefore be encouraged to discuss
the issue orally with Management and Legal Services in the first instance.
10 Copies of the Group Competition Compliance Package, which contains advice and
recommendations on establishing an Antitrust Compliance Programme, can be obtained from the
Competition Law Practice Group in Shell International Legal Services. See page 36 for details.

Competing Fairly
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and strategies based on the Group package adapted to local
requirements. An antitrust compliance strategy and training
programme should embrace clear workable policies and procedures on
the one hand, and a set of desired behaviours on the other. Both
aspects are important. Good policies and procedures must be
underpinned by the creation of an antitrust compliance culture
within Shell companies – and extending where possible to joint
venture companies.
Training and awareness raising
Training of staff who may potentially be exposed to antitrust risk (in
particular those staff who have regular contact with competitors as
part of their business activities) is a vital part of the Antitrust
Compliance Programme. Procedures must be put in place to ensure
that relevant employees receive regular training, and that appropriate
training records are maintained.
Assurance and auditing
The Group Antitrust Compliance Programme contemplates that
operating companies / units will send Letters of Assurance through
appropriate channels in the Group Business organisations to verify
what antitrust training has been conducted in the country / operating
unit concerned. The operation of the compliance programme will be
verified from time to time by “audits” conducted by members of Legal
Services.
Underpinning the overall strategy is the principle of
transparency
Where there is transparency, concerns can be reported and
recorded, discussed, and improvements can be suggested. Without
transparency, poor practices continue and may only come to light
when a problem develops. Employees must be encouraged to raise
concerns they have in relation to antitrust issues with their
management and with internal legal advisers without fear. 11 Employees
must, however, be warned that a failure to report involvement in
cartels or other anti-competitive practices, and deliberate continuation
of such practices by employees despite training will be viewed very
seriously, and will result in disciplinary action up to and including
dismissal.
11 Employees should first raise the issue with internal legal advisers orally, in case in-house Legal
Professional Privilege is a problem in the country concerned.
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22
Communications channels 12
Mechanisms should be in place for staff to report any concerns they
may have in relation to dealings with competitors, whether this
involves their own activity, activities of others within the
company or approaches by third parties. These may include reports to
line managers and Legal Service or auditors, depending on the nature
of the activity. A number of Businesses (for example Oil Products and
Chemicals) have appointed one or more "Compliance Focal Points"
who can act as a confidential "hotline" as a means of raising concerns.
Guarantees should be given to staff that they will not suffer if they
report a violation of antitrust law (provided they have reported it
immediately and have not taken steps to conceal it), nor if business is
lost as a result of adhering to the provisions of the SGBP.
Accountability
Systems must be put in place to ensure that employees and, where
appropriate, joint venture companies are held accountable for
complying with the spirit and letter of the business integrity provisions
of the SGBP. These may include making adherence to the SGBP
business integrity provisions part of staff performance assessments,
establishing processes for identifying and resolving antitrust issues, and
establishing disciplinary procedures for when deliberate violations
occur.
12 Some countries have introduced legislation on "Whistle-blowing". The UK’s Public Interest
Disclosure Act, for instance, is designed to protect whistle-blowers from victimisation by employers
should they wish to raise concerns in good faith. That Act directs an employee, in most cases, to raise
concerns with the employer in the first place, and where the employer has an internal whistleblowing
procedure, to use that.

Competing Fairly
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Appendix 1
Cracking down on international cartels
The International Vitamins Cartel
Seven companies in the global vitamins business carved up the world
vitamins markets between themselves, increased, fixed and maintained
world prices of different vitamins, allocated sales quotas and exchanged
customer and market share data. The cartel was so long standing – lasting
almost a decade from 1989 to 1999 – and entrenched that conspirators
themselves referred to it as "Vitamins Inc". Proceedings were taken against
the cartel members in the USA, Europe, Canada and Australia.
The price of collusion
Hoffmann-La-Roche of Switzerland
- The company was fined US$500 million, €462 million,
Can$48 million, and Aus$15 million;
- 3 senior executives (including the President of HLR’s
Vitamins and Fine Chemicals division) were sentenced to
jail in the USA for terms up to 5 months and personally
fined a total of US$ 600,000.
- 2 of these senior executives were also personally fined a
total of Can$ 425,000
BASF of Germany
- The company was fined €296.2 million; US$225 million,
Can$ 19 million and Aus$ 7.5 million;
- 3 senior executives (including the President of BASF’s Fine
Chemicals division) were imprisoned for terms up to 4
months in the USA.
Others
- In addition other US, Swiss, Japanese and Canadian
companies were fined a total of € 97.1 million in Europe,
US$ 150,000 in the USA, and Can $ 27.32 million
- The Vice President of Chinook of Toronto was sentenced
under Canadian law to serve a 9 month prison sentence
and 50 hours of Community service for participating in
the cartel relating to vitamin B4 (choline chloride)
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Commentary on the Vitamins cartel
"The Antitrust Division has now prosecuted firms on three
Continents, demonstrating again our resolve to punish illegal cartel
conspiracies regardless of the location of the conspirators".
US DOJ Antitrust Division’s Deputy Attorney General Gary Spratling,
May 1999
"This is the most damaging cartel the EU Commission has ever
investigated. The companies’ collusive behaviour enabled them to charge
higher prices than if the full forces of competition had been at play,
damaging consumers and allowing the companies to pocket illicit profits".
Mario Monti, EU Commissioner for Competition November 2001.
The International Lysine Cartel
Lysine is an essential amino acid used in animal feed. In mid 1991,
Archer Daniel Midland (ADM) entered into the Lysine market.
ADM’s production doubled the global Lysine production capacity, but
ADM signalled to the competition that it would prefer to achieve a
global market position by market coordination rather than a price war.
Regular meetings took place from mid 1992 through to 1995 in Asia,
the Americas and Europe, at which global Lysine prices were fixed and
market share quotas agreed, using a trade association as a "cover" for
their illegal activities. A mechanism to "police" the cartel was also
agreed, with a compensation mechanism for cheating on the cartel.
ADM told the others that they had to be very careful, and should take
precautions to disguise the fact that they were meeting.
However, unknown to the other cartel members (including ADM),
one of the executives of ADM had been cooperating with the US
Federal Bureau of Investigation from as early as November 1992, and
the FBI had been undertaking a covert surveillance operation. The
FBI operation included the secret filming of some of the cartel
meetings, as well as the monitoring of telephone calls. In 1995, the
FBI raided the offices of the American based companies, and shortly
afterwards, Ajinomoto (a Japanese conspirator) "blew the whistle" on
the cartel by reporting it to the EU Commission. Antitrust actions
were subsequently brought against the cartel members in the USA,
Canada and Europe.

Competing Fairly
An Antitrust Primer
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The price of collusion
ADM of the USA:
- Fined US $70 million, € 47.3 million and
Can$ 14 million;
- Three ADM senior executives were indicted and sent to jail
in the USA and had personal fines imposed upon them of
US$ 350,000 each;
- ADM settled consolidated US civil class law suits and has
paid additional damages (of a significant but unspecified
amount);
- ADM also had to settle shareholder actions brought
against it as a direct result of the antitrust suits.
Others (Ajinomoto and Kyowa of Japan; Sewon
and Cheil of Korea):
- Fined a total of € 53.7 million, US$30.2 million,
and Can$ 4.2 million.
- Personal fines were imposed on the Japanese and Korean
executives totalling US$200,000.
- The Managing Director of Ajinomoto was indicted in the
USA, but failed to appear at his trial and is still a fugitive.
Commentary on the Lysine cartel
"These prosecutions should signal to business executives both in the
USA and abroad that we will vigorously pursue companies and
individuals involved in international cartels wherever they are. They
had better take a hard look at their own behaviour, because they
will pay a high price for their illegal actions."
Joel Klein, Assistant Attorney General, US Department of Justice
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The Graphite Electrodes Cartel
Graphite electrodes are used in steel milling. The cartel lasted for
around 7 years. The competitors met in the US, Far East and Europe,
and increased, maintained and fixed prices and eliminated discounts.
They allocated sales volumes and divided the world market between
themselves on a region-by-region basis. They also agreed to reduce
production capacity and exchange sensitive sales and customer
information. The companies held regular meetings, including at CEO
level (dubbed the "Top Guy" meetings).
They knew they were infringing antitrust law, and took great pains to
conceal meetings. Hotel and travel expenses were paid in cash with
no explicit references to the producer meetings, and in all documents,
code names were used for the cartel members.
The worldwide investigation into this cartel was prompted by a
"whistle-blowing" conspirator taking advantage of antitrust amnesty
programmes in the US and EU. The cartel was investigated by
authorities in the US, EU, Canada and Japan.
The price of collusion
SGL of Germany:
- Fined US$135 million; € 80.2 million; and Can$12.5 million;
- A German senior executive was fined US$10 million
(the largest personal fine on an individual in US
antitrust history)
UCAR of the USA:
- Fined US$110 million; € 50.4 million; and Can$11million
- Two senior executives were committed to prison in the USA
with jail terms of up to 17 months, and were also personally
fined more than US $1 million each.
Others (Showa Denko and Tokai Carbon both of Japan)
- Fined a total of US$38.5 million, € 88.2 million; and
Can$ 2.25 million

Competing Fairly
An Antitrust Primer
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Commentary on The Graphite Electrodes Cartel
"This Decision is a further signal that the EU Commission will
apply the full force of the law to hard core cartels. At the same time,
granting a very substantial reduction in Showa Denko’s fine
(reduced by 70%) shows that the Commission takes proper account
of a company’s cooperation in uncovering illicit cartels"
Mario Monti, EU Commissioner for Competition November 2001
"This case should send a strong message to other executives that
participation in cartels will not be tolerated and will result in severe
penalties. Those currently engaged in or contemplating similar
conduct should take note of the high cost of getting caught."
Joel Klein, Assistant Attorney General, US Department of Justice
The Citric Acid Cartel
This cartel was uncovered during investigations into the Lysine cartel.
The conspirators had regular meetings where they agreed to fix prices
and allocate sales volumes worldwide. They also agreed a sophisticated
system to monitor and enforce the cartel. High level executives would
meet in secret where they agreed the broad terms of the cartel
(dubbed by the conspirators the "Masters’ meetings") and lower
ranking employees (so-called "Sherpa meetings") were left to work out
the details and implement the agreements
The price of collusion
Hoffman-La-Roche of Switzerland
- The company was fined € 63.5 million; US$14 million;
and Can$2.9 million
- A senior HLR executive was personally fined Can$75,000
for his part in the cartel.
ADM of the USA
- Fined € 39.7 million, US$30 million; and Can$2 million.
Bayer of Germany
- Fined US$50 million, and € 14.22 million;
- Senior German executive personally fined US$150,000.
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Others (Jungbunzlauer of Switzerland and Cerestar of The
Netherlands)
- Fined a total of US$24.4 million; and € 17.8 million
- 3 executives (2 Swiss and 1 Italian) personally fined a total
of US$340,000.
Commentary on the Citric Acid cartel
"As with the Vitamins cartel, the behaviour of Hoffmann-La-Roche,
ADM and the others shows a disregard for their customers and,
ultimately, the consumers who paid more for the products than if the
companies had engaged in healthy price competition.
I am confident that the message is now being clearly received.
Companies must by now be fully aware of the risks they are taking
should they be tempted to collude".
Mario Monti, EU Commissioner for Competition December 2001.
The Oil Rig Transportation Cartel
The members of the cartel agreed to allocate customers and contracts
and fix prices for heavy-lift derrick barges and other transport
equipment used in the oil and gas industry. They originally targeted
oil and gas construction contracts in the UK and Norwegian North
Sea, but extended their anti-competitive agreement to the Gulf of
Mexico and the Far East. The case was prosecuted in the USA. As at
March 2002, there was no reported Decision from the EU on the case.
The price of collusion
Heeremac of the Netherlands:
- Fined US$49 million; Dutch executive personally
fined US$100,000
Dockwise of Belgium
- Fines of US$16 million were imposed on Dockwise
- Personal fines totalling US$ 225,000 were imposed on
Dutch employees of Dockwise.

Competing Fairly
An Antitrust Primer
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The Sodium Gluconate Cartel
Sodium Gluconate is an industrial cleaning chemical. The cartel lasted
8 years until 1995. The competitors in the industry held regular
meetings in four Continents, where they agreed on sales quotas, fixed
"minimum" and "target" prices and shared out customers. Adherence
to the cartel was carefully monitored, and the parties observed a rule
whereby if one of them sold over their quota in one year, its sales quota
for the following year was reduced accordingly.
The price of collusion
Akzo Nobel (Dutch company)
- Fined a total of US$10 million; and € 12.6 million;
Can$700,000
- Two Dutch executives of Akzo Nobel were personally
fined US$100,000 each.
Fujisawa (Japanese company)
- Fined US$20 million; € 3.6 million (their EU fine was
reduced from € 18 million for "blowing the whistle" under
the EU leniency programme); and Can$360,000;
- A Japanese executive of Fujisawa was personally fined
US $ 200,000
Roquette (French company)
- Fined € 10.8 million; US$ 2.5 million and Can$ 700,000
- French executive of Roquette was personally fined
US $ 50,000
Archer Daniel Midland (US company)
- Fined € 10.2 million
Jungbunzlauer (Swiss company)
- Fined € 20.4 million
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Commentary on the Sodium Gluconate Cartel
"This Decision is again proof that the EU Commission is determined
to uncover and punish hard-core cartels, which are the worst kind of
violation of the competition rules."
Mario Monti, EU Commissioner for Competition October 2001
"These cases strongly demonstrate the US DOJ’s priority to prosecute
international white-collar and corporate crimes and to protect
American consumers from paying the price of collusion"
Joel Klein, Assistant Attorney General, US Department of Justice

Competing Fairly
An Antitrust Primer
for Shell staff
Appendix 2
Some commonly asked questions
Question 1 Does the prohibition on price fixing and other agreements
that distort competition mean that Shell companies cannot exchange
information or agree market strategy with another Shell company?
Answer 1 No. Antitrust laws generally only apply to
arrangements between economically independent entities, so that
agreements or exchanges of information between companies that are
wholly owned, or solely controlled, within the Royal Dutch / Shell
Group generally will not be prohibited by antitrust law.
Question 2 Do antitrust laws apply to arrangements between Shell
companies and joint ventures in which Shell has a shareholding?
Answer 2 As a general rule, companies in which Shell has a
shareholding, but which are not solely controlled by Shell (for
example, because other shareholders have important veto rights), are
not part of the "Shell single economic entity" for antitrust purposes.
Thus antitrust law could in principle apply to anti-competitive
arrangements between Shell companies and Shell joint ventures.
Question 3 Does this mean that the Shell shareholder is restricted in the
sort of information it can obtain from the joint venture?
Answer 3 As a general rule, it is legitimate for a shareholder
to obtain any information from its joint ventures in order to protect
its investment and to manage its portfolio. However, the shareholder
is generally restricted by applicable antitrust laws from acting as a
"conduit" for the exchange of competitively sensitive information to
competing Shell companies and/or joint ventures. The application
of the antitrust rules to joint venture relationships can be complex,
and you are urged to seek legal advice if this is relevant to you.
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Question 4 Does the Shell shareholder in a joint venture have liability if the
joint venture violates antitrust law?
Answer 4 The general rule in most jurisdictions is that the
shareholder would only incur liability for the acts of a joint venture /
company in which it has a minority interest if the shareholder
representative was aware of the violation, and supported it or
knowingly ignored it. However, the laws on liability for antitrust
violations do differ from country to country, and thus you are advised
to seek local legal advice on this issue.
Question 5 Are there circumstances where I could be personally liable for
antitrust violations by the company?
Answer 5 Yes. Many countries make antitrust violation a
criminal offence, and impose prison sentences and personal fines on
employees taking part in the infringement.
Question 6 I understand that the antitrust authorities can investigate
company premises for evidence of antitrust violations – are there any
circumstances where they could investigate the homes of individuals?
Answer 6 Yes. Many antitrust authorities have the right to
conduct investigations at private premises if they have reasonable
grounds to believe that evidence of antitrust violations may be kept or
concealed there. You should seek legal advice locally on this issue.

Competing Fairly
An Antitrust Primer
for Shell staff
Question 7 OPEC (The Organisation of Petroleum Exporting Countries)
is often called a "cartel" – isn’t OPEC illegal in that case?
Answer 7 Antitrust laws generally only apply to entities engaged in
trade (e.g. private and public companies, sole traders, partnerships and
even to state owned companies). The antitrust laws generally do not apply
to the actions of Governments acting in their Sovereign capacity. Since
OPEC is an organisation of Governments, it is unlikely to contravene
applicable antitrust laws. However, if the activities carried out by OPEC
(e.g. production limitation agreements) were carried out by companies
rather than Governments, such activities would infringe
antitrust law.
Question 8 The country in which I operate has not yet adopted any
antitrust laws. Does this mean that I can ignore all this?
Answer 8 No. Antitrust laws apply where any commercial activities
have their economic effect. Thus, if you were selling product or providing
services into a country or jurisdiction that does have antitrust laws, you
would have to comply with the antitrust laws of that country. More and
more countries are adopting antitrust laws, so awareness of the principles
of antitrust laws is important.
Not only that, but you should bear in mind that the SGBP states that
Shell companies will seek to compete fairly and ethically in their
businesses. This does not necessarily mean that the full vigour of general
antitrust principles applying in countries with antitrust laws will have to
be observed in countries with no antitrust laws. However, activities such
as price fixing and collective boycotts are inconsistent with the SGBP
which states that Shell companies will compete fairly and ethically.
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Question 9 I understand that exchanges of competitively sensitive
information may lead to an antitrust infringement, and in some
jurisdictions may even constitute an infringement of itself. Does this mean
that I cannot engage in benchmarking or in collecting competitive
intelligence?
Answer 9 No, it does not mean that. In fact, collecting competitive
intelligence ("CI") can be part of a normal competitive market, and not
anti-competitive at all. However, you will have to take certain
precautionary measures to ensure that the benchmarking or CI exercise
does not infringe competition law. For example, with benchmarking, the
information exchanged should be aggregated and historic, and should not
include any pricing information. It may be advisable to hire an
independent third party (such as a consultant) to aggregate data and to
ensure that no competitively sensitive data is exchanged.
With CI gathering, clearly if this is from public sources and independents
such as consultants, there should generally be little or no antitrust risk.
This is generally also true of information obtained from customers. Great
care has to be taken, however, with any information obtained from
competitors, and any systematic exchange of information with
competitors – whether it is part of CI gathering or otherwise – should
receive a legal "health check".
Question 10 If an exchange of market sensitive information between
competitors is an antitrust problem, can I get round this by using an
intermediary such as a consultant, trade publication or trade association
to "signal" to my competitors?
Answer 10 The general answer is that where competitors knowingly
use a third party intermediary as an "information broker" for the
exchange of competitively sensitive information (e.g. the next quarterly
pricing increase), that will not avoid the application of the antitrust rules.
Using third parties to "signal" market intentions to competitors is a
dangerous practice from the antitrust point of view, and you should seek
legal advice promptly.

Competing Fairly
An Antitrust Primer
for Shell staff
Question 11 If Shell enters into corporate negotiations (for example, to establish
a joint venture or acquire a business), we will need to exchange or receive
confidential market information in order to conduct a valuation and due
diligence. Does antitrust law restrict or prohibit this?
Answer 11 Antitrust law considerations are relevant to such
exchanges of information, because until the moment the deal has
received any necessary antitrust approvals and has been completed, the
parties should remain as competitors in the market. The Competition
Law Practice Group in Shell International Legal Services has produced
standard "Rules of Engagement" which should be used in such
circumstances to minimise antitrust exposure. See page 36 for details.
Question 12 My competitors can often be my customers (for example, in
supply deals, trading, product swaps etc.) so I have to discuss price in
order to do the deal. How does antitrust law apply to that situation?
Answer 12 Antitrust law is primarily aimed at preventing collusive
behaviour between competitors. Clearly there will be situations where
your competitor may be a customer and you should generally be able to
conclude business deals in such circumstances without infringing
applicable antitrust law. It is important in such circumstances to limit
any information exchange strictly to the transaction under consideration,
and not to use such deals as a "cover" for further cooperation /
agreements which may have the effect of restricting competition. Any
systematic contacts with competitors can be sensitive from the antitrust
point of view, and you should seek legal advice if you are concerned
about this.
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An Antitrust Primer
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Further Information
Legal Advice on antitrust issues in your country should be
sought in the first instance from your local Shell lawyers.
Further information about issues raised in this Primer may also
be obtained from the Group’s specialist antitrust lawyers in the
Competition Law Practice Group.
The members of this Group are:
Anne Riley (Anne.A.Riley@SI.Shell.com)
Chuck Corddry (CWCorddry@Shell.com)
Joanne Taylor (Joanne.J.Taylor@SI.Shell.com)
Gerrit Vriezen (Gerrit.G.Vriezen@SI.Shell.com)
The companies in which Royal Dutch Petroleum Company and The "Shell" Transport and Trading Company, p.l.c.
directly or indirectly own investments are separate and distinct entities. In this publication, the expressions "Royal
Dutch/Shell Group" and "Group" are used to refer to the companies in the Royal/Dutch/Shell Group as a whole. The
word "Shell" may be used in some places to refer to the Group and in others to refer to an individual Shell company or
companies.
© Shell International Limited (SI) 2002. Permission should be sought from SI before any part of this publication is
reproduced. This document is for the use and guidance of employees of companies within the Royal Dutch/Shell Group
only. Designed and produced by SI Legal Services, London.

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