In the following sections, we provide first a factual overview of the significant case developments at EU level, and thereafter a detailed analysis of important substantive or procedural developments addressed in these cases.
1.1 Summary of Significant Case Developments
Court of Justice provides guidance to Latvian Supreme Court on when a company can be held liable for an independent service provider's anticompetitive behaviour
On 21 July 2016, the Court of Justice ("ECJ") handed down its judgment in the VM Remonts case (Case C-542/14, VM Remonts and Others). The case concerned a bid-rigging cartel, in which three food suppliers had been fined by the Latvian Competition Council for colluding on prices offered in tenders for the supply of food to kindergartens. The three companies had made use of the same legal advisers, which had coordinated the prices in the respective offers. All three companies were found guilty of engaging in an illegal concerted practice.
On appeal, the Regional Court annulled the decision against one of the companies, on the ground that this company had not authorised, or been aware of, the conduct of the legal advisers. The Latvian Competition Council then brought an appeal against this judgment before the Latvian Supreme Court, which in turn referred questions to the ECJ. Specifically, the Supreme Court asked the ECJ whether a company must have been aware of, or consented to, the conduct of an external service provider, in order to be found guilty of anti-competitive conduct engaged in by the latter. In its judgment, the ECJ listed cases in which a company can be held liable for the conduct of an external service provider. This is addressed further below under 'Analysis of Important Substantive and Procedural Developments'.
Advocate General recommends rejecting appeal by Timab Industries against General Court's judgment in Animal Feed Phosphates cartel case
On 28 July 2016, Advocate General Henrik Saugmandsgaard issued his opinion in the appeal brought by Timab Industries ("Timab") before the Court of Justice ("ECJ") against the General Court's ("GC") judgment in the Animal Feed Phosphates cartel case (Case C-411/15 P, Timab Industries). The Advocate General recommends that the ECJ reject the appeal which challenges the legality of the underlying Commission decision (this decision was upheld by the General Court; see VBB on Competition Law, Volume 2015, No. 5, available at www.vbb.com). The Advocate General considers that the Commission did not infringe the principles on the protection of legitimate expectations and equal treatment in setting the amount of the fine imposed on Timab higher than the fine the Commission had proposed during the settlement procedure. The Advocate General shares the position of the General Court that the Commission applied the same methodology for the calculation of the range of fines in the settlement procedure as the methodology for the calculation of the fine imposed in the standard procedure.
Court of Justice dismisses appeal in Pre-stressing Steel cartel case
On 7 July 2016, the Court of Justice dismissed in its entirety the appeal lodged by Dutch steelmaker, HIT Groep (Case C-514/15 P, HIT Groep v Commission). The company had challenged the General Court judgment which upheld the Commission decision on price-fixing and marketing-sharing in the Pre-stressing Steel cartel case (see VBB on Competition Law, Volume 2015, No. 7, available at www.vbb.com). In that case, HIT Groep had been fined € 6.93 million for its participation in the cartel.
1.2 Analysis of Important Substantive and Procedural Developments
VM Remonts case: Court of Justice clarifies when an undertaking can be held liable for the anticompetitive behaviour of an independent service provider
In VM Remonts, the Court of Justice first reiterated the established case-law on the liability of an undertaking for the conduct of an independent service provider: an undertaking may be held liable if the service provider acts under the direction or control of the undertaking concerned, and is therefore considered part of the same economic unit of that undertaking. This is, for example, the case when the service provider has little or no autonomy or flexibility in the way he carries out his activities. The direction or control may also be inferred from specific legal or economic links with the undertaking concerned, similar to the relationship between a parent and its subsidiaries. In those situations, the service provider is not considered to be genuinely independent.
The ECJ also clarified the cases in which a company can be held liable for the conduct of a genuinely independent service provider. First, the anticompetitive behaviour of a genuinely independent service provider may be attributed to an undertaking making use of that service provider's services if the undertaking was aware of the anticompetitive objectives pursued by the service provider and the undertaking's competitors and intended to contribute by its own conduct to those objectives. This is, for example, the case when an undertaking intends to disclose commercially sensitive information to its competitors via a service provider with the aim of colluding on tender prices. This is also the case if the company expressly or tacitly consents to the anticompetitive behaviour of the service provider.
Second, the anticompetitive conduct of a genuinely independent service provider may be attributed to the undertaking making use of the services of that service provider if the undertaking could have "reasonably foreseen" the anticompetitive acts of the service provider and of the undertaking's competitors, and was prepared to accept the risks associated with those acts. In other words, it is not required that the undertaking intended to use the service provider to collude with its competitors, or that the undertaking was even aware of those practices. According to the ECJ, reasonable foreseeability of such anti-competitive behaviour is sufficient.
Interestingly, the ECJ did not follow Advocate General Wathelet's opinion. The Advocate General had suggested the introduction of a new form of rebuttable presumption for liability for competition law infringements committed by service providers (see VBB on Competition Law, Volume 2015, No. 12, available at www.vbb.com). With its condition of "reasonable foreseeability", the ECJ did not go so far as introducing a form of presumption of liability. A lot will, however, depend on how courts and competition authorities will interpret "reasonable foreseeability" and a broad interpretation will likely result in a low threshold for liability.
Animal Feed Phosphates cartel case: Advocate General's View on Hybrid Cartel Settlement
Hybrid settlements arise when one or more parties withdraw from a settlement procedure and the Commission decides to continue the case against these parties under the standard procedure. Because of the dual track, hybrid settlements raise questions on impartiality, objectivity, independence, equal treatment and legitimate expectations in the standard procedure.
The issues of equal treatment and legitimate expectations were, amongst others, examined by the General Court ("GC") in the Timab judgment (see VBB on Competition Law, Volume 2015, No. 5, available at www.vbb.com). Timab had argued that it had been punished by the Commission, in violation of Timab's rights of defence, for having discontinued the settlement procedure as the fine imposed on Timab had been substantially higher than the fine range considered by the Commission during the settlement procedure. The GC rejected Timab's application for annulment. The GC ruled that the Commission had correctly applied the 2006 Fining Guidelines and that the large discrepancy in the fine was the result of a change in the duration of the infringement applicable to Timab. This was the first time the GC had to rule on a hybrid cartel case and on the interplay between the standard procedure and the settlement procedure.
Timab appealed the GC's judgment before the ECJ. In its opinion of 28 July 2016, the Advocate General agreed fully with the GC's judgment and recommended rejection of Timab's appeal.
Pre-stressing steel cartel case: Commission refers to business year with normal economic activity
Under Article 23(2) of the Regulation on the Implementation of the Rules on Competition, a fine imposed for competition law infringements should not exceed 10 percent of the undertaking's total turnover in the business year preceding the decision in which the Commission imposes the fine.
In the Pre-stressing Steel case, the Commission issued its decision against HIT Groep in 2010. However, the Commission did not use 2009 as the reference year for applying the 10 percent threshold because HIT Groep had restructured its operational activities in 2004, following which its turnover was limited. The Commission therefore determined the fine imposed on HIT Groep on the basis of its last normal business year in 2003.
On appeal before the Court of Justice ("ECJ"), HIT Groep argued that, by referring to 2003 instead of 2009, the fine had been calculated on the basis of an incorrect business year and thereby had contravened Article 23(2) of Regulation 1/2003. The company also argued that the case-law, which provides for a derogation from this rule in exceptional cases, could not be applied retroactively.
The ECJ upheld the General Court's judgment in its entirety. It held that, for the purpose of calculating the fine, the Commission is entitled to refer to the last business year that corresponds to a full year of normal activity as this reflects the actual economic situation of the undertaking concerned. By choosing a year which reflects normal economic activity, the deterrent effect of the fine is assured.
The ECJ added that the principle of legal certainty had not been infringed by applying case-law retroactively. The Court reasoned that Article 23(2) of Regulation 1/2003 does not impose a binding requirement on the Commission to use the immediately preceding business year.
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