On 9 July 2015, the European Court of Justice ("ECJ") handed down its judgment upholding the € 288 million fine imposed on Taiwanese electronics manufacturer Innolux for its participation in a cartel on the market for liquid crystal display ("LCD") panels. The ECJ's judgment contrasts with the Opinion of Advocate General Wathelet of 30 April 2015, in which he recommended that the ECJ uphold Innolux's appeal and reduce the fine imposed on Innolux to € 173 million.
On 8 December 2010, the EU Commission imposed fines of over € 648 million on six Korean and Taiwanese producers of LCD panels used in televisions and computer monitors for operating a price-fixing cartel (See VBB on Competition Law, Volume 2010, No. 12, available at www.vbb.com). The largest fine - € 300 million - was imposed on Innolux. In calculating the fine imposed on Innolux, bedsides Innolux's direct sales of LCD panels to third-party customers located in the EEA, the Commission also took into account the value of LCD panels incorporated into so-called "transformed products" (e.g., computer monitors) sold by Innolux in the EEA. In February 2014, the General Court ("GC") largely upheld the Commission's decision, but nevertheless reduced the fines imposed on Innolux to € 288 million (See VBB on Competition Law, Volume 2014, No. 2, available at www.vbb.com).
On appeal before the ECJ, Innolux challenged the Commission's reliance on the concept of "direct EEA sales through transformed products" in the calculation of the fine. In April 2015, Advocate General Wathelet issued his Opinion on the appeal brought by Innolux, in which he agreed with Innolux's arguments that internal sales of the product concerned by the infringement should be excluded when calculating the fine if they are made outside the EEA, as taking non-EEA sales into account was inconsistent with the 2006 Fining Guidelines and would unduly extend the territorial scope of EU competition law (See VBB on Competition Law, Volume 2015, No. 5, available at www.vbb.com). As a result, the Advocate General recommended that the ECJ reduce the fine imposed on Innolux from € 288 million to € 173 million.
In its judgment, the ECJ acknowledged that the internal sales of LCD panels at issue had indeed taken place on a different market and outside of the EEA, but held that the effects of the cartelised price of the incorporated LCD panels were nevertheless liable to affect competition in the EEA. According to the ECJ, excluding these sales from the calculation of the fine would therefore artificially minimise the economic significance of the infringement committed and lead to the imposition of a fine that bears no resemblance to the actual impact of the conduct.
The ECJ also rejected Innolux's argument that the Commission does not have the territorial jurisdiction to fine it on the basis of sales taking place outside the EEA, on the basis that the cartel was worldwide in its scope and the participants to the cartel made direct sales of LCD panels to third-party undertakings in the EEA.
The Court's finding is significant as it appears to confirm the power of the Commission to fine undertakings in relation to cartelised sales taking place outside of the territory of the EEA as long as a downstream product incorporating the cartelised product is put on the market in the EEA.
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