In this article, we give a factual overview of a significant case development at EU level in the month of September 2018, and then provide a more detailed analysis of the development addressed.
- Summary of Significant Case Developments
Court of Justice partly upholds Infineon appeal against General Court judgment in Smart card chip cartel case, but dismisses Philips appeal
On 26 September 2018, the Court of Justice of the European Union ("ECJ") delivered two judgments on the appeals brought by Infineon and Philips against the General Court ("GC")'s earlier judgments relating to the European Commission's decision in Smart card chips cartel case.
By way of background, in 2014, the Commission issued a decision imposing fines totalling €138 million in connection with a cartel on the market for smart card chips used in mobile SIM cards, bank cards, and other applications. According to the Commission, four competing suppliers of smart card chips – Infineon, Samsung, Renesas and Philips – discussed and exchanged sensitive commercial information on pricing, customers and contract negotiations and coordinated their responses to customer demands for lower prices. On 15 December 2016, the GC upheld the fines imposed by the Commission (see VBB on Competition Law, Volume 2016, No. 12, available at www.vbb.com). Philips and Infineon appealed against the GC's judgments.
In its judgments on appeal, the ECJ upheld the findings of the GC in relation to, inter alia, the existence of a restriction of competition by object, the concept of a single and continuous infringement and the rules of evidence (see section 1.2 below). With respect to the appeal brought by Infineon, however, the ECJ referred the case back to the GC because the GC had not examined whether the amount of the fine imposed was commensurate with Infineon's level of involvement in the infringement. According to the ECJ, this examination was necessary in order to determine whether the small number of contacts established between Infineon and its competitors (eleven contacts) warranted a higher reduction of the fine than the 20% granted by the Commission on account of mitigating circumstances (Case C-98/17P, Philips and Philips France; Case C-99/17P, Infineon Technologies).
- Analysis of Important Substantive and Procedural Developments
Smart card cartel case – Calculation of the fine: effective judicial review and unlimited jurisdiction
Under EU case law, the fact that an undertaking did not take part in all aspects of an anti-competitive scheme or that it played only a minor role in the aspects in which it did participate is not material to the establishment of the existence of an infringement on its part. Those factors, however, must be taken into consideration when the gravity of the infringement is assessed when it comes to determining the fine.
On appeal, Infineon criticised the reduction rate of 20% which was granted by the Commission and upheld by the General Court ("GC") on account of mitigating circumstances due to its limited involvement in the infringement. In particular, Infineon took issue with the fact that the GC reviewed only five of the eleven bilateral contacts relied upon by the Commission to hold Infineon liable for participating in the single and continuous infringement, despite having challenged all eleven contacts. According to Infineon, the assessment of all eleven contacts was necessary to ascertain whether the amount of the fine was proportional to the infringement it had committed.
The Court of Justice ("ECJ") sided with Infineon and ruled that, when conducting a review in the exercise of its unlimited jurisdiction, the EU judicature is bound to examine all complaints based on issues of fact and law which seek to show that the amount of the fine is not commensurate with the gravity of the infringement. Further, in order to determine the amount of a fine, the ECJ noted that it is necessary to take into account all the factors capable of affecting the assessment of its gravity, such as the number and intensity of the contacts.
Accordingly, the ECJ ruled that the GC was not entitled, without misconstruing the extent of its unlimited jurisdiction, to refrain from responding to the argument raised by Infineon, according to which the Commission had infringed the principle of proportionality by setting the amount of the fine imposed without taking into account the small number of contacts in which Infineon had participated. The ECJ added that this conclusion was all the more compelling, given that, in the present case, the GC had confined itself to confirming only five of the eleven contacts established, while not responding to the question of whether the Commission had duly established the existence of the six other contacts set out in the decision.
The ECJ consequently concluded that an examination of the eleven contacts was necessary in order to assess whether the small number of contacts warranted a reduction in the amount of the fine that exceeded the 20% reduction granted on account of mitigating circumstances. On that basis, the ECJ set aside the judgment under appeal and referred the case back to the GC.
Smart card cartel case – Burden of proof and authenticity of evidence
Under EU case law, in order to contest the credibility of a piece of evidence relied on by the Commission, it is for the undertaking concerned to prove to the requisite legal standard, first, the existence of circumstances which might affect the probative value of that evidence and, second, that such circumstances call into question the probative value of that evidence.
In its appeal, Infineon argued that the General Court ("GC") had incorrectly placed the burden of proof on it to show that a piece of evidence (an email) presented by Samsung in the context of its leniency application, and which had been used by the Commission in its decision, was not authentic. In support of its position, Infineon argued that it had provided the Commission with an expert report which concluded that the authenticity of the email could not be confirmed. Infineon took issue with the fact that, without having recourse to an independent forensic expert report, the Commission dismissed Infineon's doubts on the basis of its own forensic assessment regarding the authenticity of that email. In its judgment, the GC, in light of the latitude the Commission has in deciding on additional steps to be taken, rejected the argument that the Commission should have had recourse to an independent expert report and found that Infineon had failed to establish that such a request was necessary.
On appeal, the Court of Justice ("ECJ") recalled its case law that, when the Commission relies on evidence which is in principle sufficient to demonstrate the existence of an infringement, it is for the undertaking concerned to prove to the requisite legal standard: (i) the existence of circumstances capable of affecting the probative value of that evidence; and that (ii) such circumstances actually call into question the probative value of the evidence relied on by the Commission. The ECJ further clarified that, although this case law related to the contestability of the credibility of a piece of evidence, it is also applicable in relation to the contestability of the authenticity of an item of evidence.
On this basis, the ECJ concluded that the GC had not unjustifiably reversed the burden of proof since: (i) the Commission responded in detail to the concerns raised by Infineon with respect to the authenticity of the contested piece of evidence; (ii) Infineon did not show before the GC that the Commission had made errors through an inadequate investigation; and (iii) the piece of evidence did not establish that the Commission's explanations were incorrect.
Accordingly, as the burden was on Infineon to demonstrate that the piece of evidence was not authentic, the ECJ concluded that the GC was also entitled to reject Infineon's argument that the Commission should have requested an independent forensic expert report to establish the authenticity of the relevant email.
Smart card chip cartel case – partial liability for single continuous infringement
In its judgment in Infineon, the Court of Justice ("ECJ") provided further clarification regarding the distinction between: (i) the finding of the existence of a single and continuous infringement; and (ii) the question of whether or not a specific undertaking should be held liable for the entirety of that infringement.
The concept of a single and continuous infringement was developed by the Commission to impute liability to undertakings which had not been involved in every single cartel contact or had not engaged in every aspect of the infringing conduct. This concept entitles the Commission to treat a series of infringements by a number of undertakings as constituting one infringement. According to EU case law, there are several criteria that must be satisfied in order to establish an undertaking's participation in a single continuous infringement. Specifically: (i) there must be an overall plan pursuing a common objective; and (ii) the undertaking must have been aware (actually or presumably) that they were contributing to that overall plan.
In its appeal to the ECJ, Infineon argued that the General Court ("GC") had erred in its application of the concept of single and continuous infringement. Infineon contended that there was a contradiction in the reasoning of the GC, as it had attributed liability to Infineon for the overall infringement, whilst also simultaneously finding that Infineon had not participated in the single and continuous infringement as a whole. In this respect, Infineon asserted that it had not been established that it was aware of the collusive conduct of the other parties.
The ECJ rejected this ground of appeal in its entirety. According to the ECJ, the finding of the existence of a single and continuous infringement is separate from the question of whether liability for that infringement as a whole is imputable to an undertaking. More particularly, the ECJ referred to case law supporting the principle that an undertaking can be held liable for only part of a single and continuous infringement. In the present case, the ECJ concluded that the Commission had only attributed liability to Infineon for part of the single and continuous infringement and, accordingly, that there was no contradiction in the reasoning of the GC.
Furthermore, as Infineon was only held liable for part of the infringement, the ECJ stated that it was not necessary to establish that Infineon was aware of all the collusive conduct of the other parties.
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