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Former FLS company under investigation for participation in illegal cartel

The FLS Group is surprised to be notified by the European Commission that a procedure in accordance with Article 81 of the EU Treaty has been initiated against a number of European plastic producers who are under suspicion for having participated from early 1982 to 2001 in an alleged illegal cartel. This includes the former FLS-owned company, Silvallac S.A., which the FLS Group sold in 1999.

It is important to emphasise that the European Commission in no way mentions or directly implies that FLS Plast A/S and/or FLS Industries A/S have in any way been directly involved in the alleged illegal cartel activities. The claims are exclusively related to the liability deriving from the ownership of Silvallac during the period concerned. The FLS Group does not expect any impact on its financial results.

Silvallac, a French company based in Wittenheim in Alsace, makes plastic film products and sacks for industrial packaging. In 1990, the FLS Group took over Silvallac via the Group company Nyborg Plast International A/S which was since renamed FLS Plast A/S. The acquisition took place by Nyborg Plast International A/S acquiring 60% of the capital of Silvallac S.A. at the end of 1990 and the remaining 40% in 1991. The company remained a wholly-owned subsidiary in the FLS Plast Group until 21 January 1999 when it was sold to Trioplanex France S.A., a wholly-owned subsidiary of the Swedish company, Trioplast Industrier AB.

In 2002, the European Commission searched a number of European producers of industrial packaging, including Silvallac (now Trioplast Wittenheim), which has given the Commission reason to believe that illegal cartel activities began in January 1982. It also appears from the message received from the European Commission that Silvallac is supposed to have been among the founders of a trade association named "Valveplast" within which the cartel is said to have met.

Being one hundred percent parents of Silvallac during the period end 1990 to January 1999, FLS Plast A/S and FLS Industries A/S are being involved as parties to the investigation by the Commission, because it considers a one hundred percent parent company liable for a subsidiary's breach of European competition rules.

However, the general practice of the Commission and the European Court of Justice in this type of case is to hold a parent company partly liable for violation of the competition rules only if it is proved that the subsidiary in question "did not freely control its market behaviour, but essentially followed instructions from the parent company".

In this context it should be added that during the period in question FLS Plast A/S was merely represented in Silvallac through the Chairman of its Board of Directors, whilst the rest of the Board and the entire Management consisted of local French managers. Former Group Executive Vice President, Mr Ole Trolle, refuses any knowledge of the alleged cartel on the part of FLS Plast A/S's Board of Directors or FLS Industries A/S's Management or Board of Directors of the alleged cartel.

Once all the parties to the case have been heard, the Commission will consider whether there are grounds for claiming a penalty against FLS Plast and FLS Industries. If, contrary to expectations, a penalty is imposed, the FLS Group will have the option of referring the Commission's decision to the European Court.

FLS Industries A/S
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