European Union: Admissibility Before The CJEU Of Evidence Communicated By National Authorities During A Tax Investigation

Last Updated: 10 July 2017
Article by Emmanuelle van den Broucke

Admissibility before the CJEU of evidence communicated by national authorities during a tax investigation

In a case of unlawful agreement on the banana market, the Court of Justice of European Union ("CJEU") had the opportunity to rule on the admissibility of certain types of evidence and the characterization of an agreement restricting competition by object.

In this case, the parties involved agreed on their price strategy, and the European Commission sanctioned this unlawful agreement, relying on tax documents provided by the Guardia Di Finanza, the Italian customs and financial police.

The parties first claimed before the CJEU that using evidence provided by the Italian tax administration violated the rights of the defense and the substantial forms laid down in Article 12, paragraph 2, of Regulation 1/2003, according to which admissible evidence must be provided by national competition authorities to establish the alleged infringement.

The CJEU confirmed admissibility of documents transmitted by national authorities other than the competition authorities when they are considered lawful evidence under national law. The CJEU also confirmed that nothing prevents the Commission from using documents which have been obtained by national authorities other than competition authorities for other purposes, as was the case here since the documents had been collected during a tax investigation. To rule otherwise, according to the CJEU, would amount to hindering excessively the Commission's role in its proper application of competition law.

In other words, for the CJEU, "the principle which prevails in Union law is that of the free production of evidence and the only criteria to appreciate the evidence produced resides in its credibility" (§38). This confers broad means of evidence to the Commission in the context of its competition investigations insofar as it is not limited to documents only provided by the national authorities to establish the alleged infringement but can use all the elements collected by any type of national authority, during their own investigations.

Moreover, the parties had argued before the CJEU that it had not been demonstrated validly that the infringement had for purpose or effect of restricting competition. In particular, the parties claimed that the General Court of the European Union should have justified why the infringement included a sufficient degree of harm and not merely referred to similar restrictions in previous case law decisions.

The CJEU ruled this argument unfounded and recalled the characterization criteria of an unlawful agreement restricting competition by object. Certain forms of coordination are sufficiently anticompetitive by their object without it being necessary to analyze their effects. Attention should be focused on the content of the provisions of the agreement, the purposes pursued and the economic and legal context. The Court considers that for price fixing agreements, which constitute particularly serious violations, the analysis can be limited to what is strictly necessary in order to conclude to the existence of a restriction to competition by object.

In other words, the burden of proof which lies on the Commission is reduced for cartels on prices insofar as these practices are by nature sufficiently serious to constitute a restriction to competition by object.

Facebook fined €110 million in connection with the takeover of WhatsApp

The European Commission imposed a fine of €110 million against the US company Facebook on May 18, 2017, following an investigation conducted in connection with Facebook's takeover of WhatsApp in 2014. Facebook is sanctioned for having provided inaccurate information to the Commission declaring that it would not be able to combine the accounts of Facebook and WhatsApp users. The Commission's attention was drawn to the fact that Facebook had announced the combination of the accounts shortly after the operation, and it turned out that Facebook knew when notifying this that it was technically possible. This sanction does not call into question the takeover authorization granted by the Commission but sends a strong signal to companies to dissuade them from providing inaccurate information to the Commission in connection with merger operations.

Coach transport sector: The French Competition Authority rejects the complaint filed by Transdev against SNCF

Transdev filed a complaint before the French Competition Authority against SNCF, which it accused of several exclusionary practices against its competitors in the passenger coach transport market, recently opened to competition by the Macron law of August 2015.

It notably criticized SNCF for abusing its dominant position by (i) subsidizing its coach activity thanks to the resources from its monopoly in railway activity, (ii) practicing predatory pricing, (iii) making Ouibus benefit from SNCF's reputation and brand image, and (iv) coupling its railway offer with its coach offer.

In its decision of June 1, 2017, the French Competition Authority rejected the referral on the merits as well as Transdev's claim for conservatory measures.

The Authority first found that Ouibus is not dominant on this market, where it is still preceded by the market leader, Flexibus. Any abuse of a dominant position committed by Ouibus is therefore excluded. It then searched whether SNCF had committed abuses in this coach market via its monopoly position on the railway market.

By analyzing the contested practices, the Authority considered that they did not constitute a plan aimed at eliminating competition and did not have such effects, whether real or potential. In particular, the remote profitability prospects did not remove all economic rationality. To do so, the Authority considered that a 5-year horizon to generate profits and 10 to 12 years to compensate the initial losses was acceptable, without constituting an exclusionary practice of competitors thanks to the means of the SNCF group from which its subsidiary Ouibus benefits.

It is also not established that the reputation of the SNCF brand confers a sufficient competitive advantage to distort competition, or that the prices practices are predatory. In particular, the Authority recalls that use of the brand image and reputation of an historic operator is not an abuse in itself unless it leads to maintaining the confusion between a public service activity and an activity recently open to competition, so as to amplify an advantage that other market players cannot reproduce. In this case, although the Ouibus brand does reproduce the prefix Oui, already used by SNCF, the applicant was unable to demonstrate that this practice would have mislead consumers on the competitive nature of the Ouibus offer.

Bolloré authorized by the Commission to take de facto sole control of Vivendi

On April 24, 2017, the European Commission authorized the Bolloré's acquisition of de facto sole control over Vivendi. With a minority shareholding of only 26.4% without de jure veto rights on strategic business decisions, the Commission considered that this minority shareholder exercised de facto sole control over Vivendi on the basis of the following body of evidence: (i) it is the only industrial shareholder among financial shareholders, (ii) Mr. Bolloré is the Chairman of the Supervisory Board, which gives him influence on both the Supervisory Board and the Management Board, (iii) most proposals supported by Bolloré during past general meetings requiring simple majority had been approved, and (iv) Vivendi's remaining shareholding structure is very scattered, and nothing indicates that a common interest brings together a blocking minority against Bolloré. This case recalls that even without veto rights, a minority shareholding can sometimes require prior antitrust approval if it confers de facto control.

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