On 30 April 2015, Advocate General Wathelet issued his Opinion on an appeal brought by Innolux Corporation ("Innolux") against a General Court ("GC") judgment that partially upheld the Commission's decision in the LCD panel cartel case. In his Opinion, the Advocate General recommends that the Court of Justice of the European Union ("ECJ") reduce the fine imposed on Innolux from € 288 million to € 173 million because, when calculating the fine, the Commission wrongly took into account the value of internal sales of LCD panels sold by Innolux outside the EEA but incorporated into so-called "transformed products" (IT monitors and TVs) sold by Innolux in the EEA.
On 8 December 2010, the Commission adopted a decision fining six manufacturers of LCD panels a total of over € 648 million for operating a price-fixing cartel. Innolux was fined € 300 million (see VBB on Competition Law, Volume 2010, No. 12, available at www.vbb.com). In calculating the fine imposed on Innolux, the Commission took into account not only Innolux's direct sales of LCD panels to customers in the EEA, but also the value of LCD panels incorporated into so-called "transformed products" sold by Innolux in the EEA. The Commission took the view that taking into account such "direct EEA sales through transformed products" was compatible with the 2006 Fining Guidelines primarily on the ground that, to do otherwise, would give a vertically-integrated undertaking such as Innolux an unfair advantage. The GC largely upheld the Commission's decision, but nevertheless reduced the amount of the fine by € 12 million on account of an error in the value of sales taken into account to calculate the fine (see VBB on Competition Law, Volume 2014, No. 2, available at www.vbb.com). Innolux appealed against the GC's judgment, challenging the Commission's reliance on the concept of "direct EEA sales through transformed products" in the calculation of the fine.
In his Opinion, the Advocate General considers that the appeal raises an important point of competition law, namely the issue of the extra-territorial application of EU competition law rules. The Advocate General recommends that internal sales of the product concerned by the infringement within the EEA should be counted when calculating the value of sales for setting the fine, but must be excluded if they are made outside of the EEA. In the present case, Innolux's internal sales of the product subject to the infringement – LCD panels – did not take place in the EEA and the transformed products incorporating the cartelised LCD panels that were sold in the EEA were not the subject of the infringement. Therefore, according to the Advocate General, "direct EEA sales through transformed products" could not be considered as implementing the cartel in the EEA within the meaning of Woodpulp.
Furthermore, the Advocate General considers that taking non-EEA sales into account would unduly extend the territorial scope of EU competition law, which would create the risk of jurisdictional conflicts with foreign competition authorities as well as double penalties for undertakings. Therefore, the Advocate General finds that, unless the Commission can adduce evidence that a cartel creates qualified effects in the EEA, it should not sanction cartels relating to products manufactured and sold outside the EEA for the sole reason that these products are subsequently transformed or incorporated into other products which arrive in the EEA.
In this regard, the Advocate General considers that, in Innolux's case, there was insufficient evidence of even "qualified effects" on competition in the EEA. He points out that the Commission merely observed that "it could be reasonably assumed that an implemented cartel had effects on direct sales through transformed products", but that no evidence was adduced that an infringement relating to the fixing of LCD panel prices sold outside the EEA would necessarily have an effect on the prices of the finished products in the EEA.
Finally, the Advocate General considers that, in the context of the question of territorial jurisdiction, the Commission should interpret the 2006 Fining Guidelines restrictively, especially considering that the fines fall within the "criminal head" of Article 6 ECHR.
Based on this analysis, the Advocate General concludes that the Court should partially annul the Commission's decision and reduce the fine imposed on Innolux to remove the part attributable to "direct EEA sales through transformed products".
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