On 12 and 19 July 2012, the European Court of Justice ("ECJ") handed down its judgments dismissing in their entirety appeals brought by Compañía Española de Tabaco en Rama ("Cetarsa"), Alliance One International Inc. ("AOI"), and Standard Commercial Tobacco Co. Inc. ("SCTC") against the General Court's ("GC") rulings in the Spanish raw tobacco cartel case, as well as a counter-appeal brought by the European Commission in connection to the two latter appeals.
In its decision of 20 October 2004, the Commission imposed fines totalling over € 20 million on five companies active in the Spanish raw tobacco processing market for their involvement in a price-fixing and market-sharing cartel between 1996 and 2001. The Commission also imposed symbolic fines on a number of associations of Spanish tobacco producers for their participation in a separate infringement relating to price-fixing.
When assessing whether or not to attribute liability to the parent companies of the entities involved in the cartel, the Commission adopted a so-called "dual basis" method. This involved not relying exclusively on the legal presumption that a parent company exercises decisive influence over its wholly-owned subsidiary, but holding the parents liable only where there was evidence to support that presumption. Following this approach, the Commission held AOI, SCTC and Trans-Continental Leaf Tobacco ("TCLT") jointly and severally liable for payment of the fine imposed on their subsidiary World Wide Tobacco España ("WWTE"). At the same time, a number of parent companies of other entities involved in the cartel were not found jointly and severally liable. On appeal, WWTE's three parent companies challenged the Commission's finding of joint and several liability.
In a judgment of 27 October 2010 following the appeal brought by WWTE's parent companies, the GC noted that none of the materials relied on by the Commission in its decision supported the conclusion that TCLT had exercised decisive influence over the conduct of WWTE, in spite of the fact that WWTE was wholly-owned by TCLT (see VBB on Competition Law, Volume 2010, No. 10, available at www.vbb.com). The GC pointed out that, in choosing to apply the "dual basis" method, the Commission had imposed upon itself a more onerous standard of proof of the actual exercise of decisive influence than would have been considered as sufficient according to the case-law. Furthermore, the Commission had to apply the same method and criteria for all the undertakings concerned by the decision. Thus, by holding TCLT jointly and severally liable for WWTE's conduct merely based on the fact that TCLT held all the shares of WWTE, the Commission's decision discriminated against TCLT compared to other wholly-owning parent companies. The GC therefore annulled the Commission's decision in relation to TCLT.
AOI and SCTC appealed against the GC's judgment before the ECJ, invoking arguments relating to the GC's finding that the two parent companies had been in a position to exercise decisive influence over WWTE, and claiming that the judgment was in breach of certain fundamental rights such as the right to the presumption of innocence and the principles of legality and individual liability for criminal offences. In a counter-appeal, the Commission challenged the GC's decision to overturn the decision's finding of joint and several liability on the part of TCLT citing, e.g., an incorrect application of the principle of equal treatment and an error in law in the GC's determination of the legal test for holding parent companies liable.
In its judgment of 19 July 2012, the ECJ upheld the GC's findings and noted, with regard to the arguments invoked by the Commission, that the Commission had been justified in choosing which method to adopt in order to determine the liability of the parent companies concerned and that, in doing so, the Commission had imposed on itself a higher standard of proof. The ECJ also rejected all the arguments put forward by AOI and noted that the GC had been correct in its assessment of parental liability.
In a separate appeal before the GC, Cetarsa invoked arguments relating, e.g., to the Commission's application of the 1996 Leniency Notice. In its judgment of 3 February 2011 on this appeal, the GC had largely upheld the decision of the Commission (see VBB on Competition Law, Volume 2010, No. 10 and Volume 2011, No. 2, available at www.vbb.com). However, the GC found that the Commission had not given Cetarsa sufficient credit under the 1996 Leniency Notice for its cooperation and contribution to establishing the existence of an infringement, and also that the Commission had made a manifest error in concluding that Cetarsa had contested certain facts in the Commission's Statement of Objections. As a result, the GC reduced the fine imposed on Cetarsa from € 3.6 million to € 3.1 million.
On appeal against the GC's ruling to the ECJ, Cetarsa argued that the GC had erred in its assessment of the national legal framework on the legality of the cartel conduct. However, in its judgment of 12 July 2012, the ECJ dismissed in its entirety Cetersa's appeal, concluding that the GC had not committed any errors in its assessment.
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