Earlier this week, the European General Court published an important judgment in relation to cartelists who enter into settlement with the European Commission. The case concerned Timab who participated in an animal feed cartel. They were unhappy with the range of fine proposed by the Commission under its settlement procedure and subsequently exited settlement discussions. The Commission then instigated a standard procedure against Timab and a fast-track settlement procedure with the remaining animal feed cartelists.
By way of brief refresher, the Commission established the settlement procedure in 2008 in order to give companies who were being investigated the possibility of a 10% reduction in their fine, if they admitted their involvement in various competition law breaches and waived certain procedural rights (like their right to be heard at an oral hearing and to review all the incriminating evidence). The less visible benefits for the company also include the possibility of lower fining multipliers used when the Commission calculates its fine as well as the prospect of a narrower infringement scope (in terms of the products in question, the duration of the cartel and the territories involved) when it comes to follow-on damages actions in the national courts. The benefit to the Commission is a quicker, simpler and more streamlined investigation where fewer Commission resources are required to take an investigation forward to an infringement decision.
The problem arises, however, when companies who are initially keen on settlement decide against settling with the Commission. A number of the benefits of a streamlined investigation and procedural phase are lost as a result of such hybrid cases. In the current Timab appeal, the company rejected settlement once the Commission communicated that its indicative fine would be around €41-44m. After the Commission had finalised its standard procedure with Timab, their ultimate fine was actually significantly higher (€59.8m). The company complained that it had been punished for exiting settlement talks with a larger fine and had been subject to an unfair process.
The General Court disagreed, explaining that the same calculation methodology had been used to fine all cartelists, the Commission had applied reductions that it was not required to apply as part of the standard procedure and that the standard procedure had uncovered new information which led to the fine being readjusted upwards.
Although the General Court and the Commission will stress that Timab has not been punished for exiting settlement, legal advisors will certainly take note that the Commission does not appear bound by the fine range indicated as part of its settlement procedure. Although this judgment is appealable to the Court of Justice, those entering into settlement discussions with the Commission will be alive to the possibility of increased fines which may well incentivise settlement and lead to less 'last-minute' hybrid cases.
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