The Court of First Instance (CFI) has annulled the European Commission's decision to accept commitments proposed by De Beers to stop all purchases of rough diamonds from Alrosa.
Background to the case
In March 2002, De Beers and Alrosa notified to the Commission an agreement under which De Beers agreed to purchase rough diamonds from the Russian state-owned company Alrosa. The Commission reviewed the arrangement under Article 81 EC and also initiated an investigation into De Beers under Article 82 EC.
The Commission considered that the agreement restricted competition on the rough diamonds market by removing Alrosa as a competitor and constituted an abuse of De Beers' dominant position in the worldwide supply of rough diamonds.
De Beers and Alrosa offered joint commitments that would progressively reduce the quantities of diamonds to be purchased from Alrosa. However, in February 2006, the Commission accepted binding commitments offered solely by De Beers that require the company to phase out and then cease altogether its purchases of rough diamonds from Alrosa with effect from 2009. Alrosa lodged an appeal of the Commission's decision the following June.
The CFI's annulment decision
On 11 July 2007, the CFI annulled the Commission's decision. Although the Commission has a margin of discretion as to whether and how commitments proposed by undertakings are to be made binding, it is still under an obligation to comply with the principle of proportionality, irrespective of the voluntary nature of those commitments.
The CFI concluded that in this case the indefinite complete prohibition of all commercial relations between De Beers and Alrosa is manifestly disproportionate. It considers that the termination of the contractual freedom of the companies would only be justified in exceptional circumstances, such as the existence of a possible collective dominant position.
In addition, the CFI has criticised the Commission for failing to look at alternative less onerous solutions to the commitments offered by De Beers that might have better taken account of the companies' contractual freedom.
On a procedural point, the CFI held that the Commission also failed to give Alrosa the opportunity to exercise its right to be heard on De Beers' commitments proposed.
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