In this article, we give a factual overview of significant case developments at EU level in December 2016, and then provide a more detailed analysis of some important substantive or procedural developments addressed in these cases.
Summary of Significant Case Developments
European Commission imposes fines totalling €485 million in euro interest rate derivatives cartel case
On 7 December 2016, the European Commission fined Crédit Agricole, HSBC and JPMorgan Chase a total of €485 million for their participation in the euro interest rate derivatives cartel. The Commission found that these banks had colluded on euro interest rate derivative pricing elements and had exchanged commercially sensitive information over varying periods of time between September 2005 and May 2008.
This decision follows the Commission's 2013 settlement decision against four other banks, namely Barclays, Deutsche Bank, RBS and Société Générale, in relation to their involvement in the same cartel (see VBB on Competition Law, Volume 2013, No.11, available at www.vbb.com). As Crédit Agricole, HSBC and JPMorgan Chase chose not to settle with the Commission, the decision was issued under the Commission's standard (non-settlement) cartel procedure.
European Commission fines rechargeable battery producers €166 million in cartel settlement decision
On 12 December 2016, the European Commission fined rechargeable battery producers Panasonic, Sanyo and Sony a total of €166 million for coordinating prices and exchanging sensitive business information in relation to the supply of rechargeable lithium-ion batteries between February 2004 and November 2007. These batteries are used in portable electronic and electrical devices, such as laptops and mobile phones.
The existence of the cartel was first revealed to the Commission by Samsung SDI, which was therefore exempted from fines in accordance with the Commission's Leniency Notice. All the companies concerned agreed to settle, thereby admitting their involvement in the cartel and their liability in this respect. In return, the Commission applied a reduction of 10% to the fines. Further fine reductions were given to Sony (50%), Panasonic (20%) and Sanyo (20%) for their cooperation under the Leniency Notice.
Court of Justice provides guidance to Spanish court regarding compatibility of national law restricting tariff review with EU competition law
On 8 December 2016, the European Court of Justice ("ECJ") handed down a judgment on requests for preliminary ruling from the Spanish courts regarding the compatibility with EU competition law of provisions of Spanish national law which make the fees of procuradores (specialised legal representatives) subject to a tariff, the review of which by the courts is limited (Cases C‑532/15 and C‑538/15, Eurosaneamientos and Others).
Specifically, the ECJ considered that EU competition law does not preclude a Member State from enacting legal provisions that set the scale of tariffs for the legal services provided by procuradores, which may only be increased or decreased by 12%, in respect of which a national court merely checks its strict application without being in a position, save exceptional circumstances, to derogate from the price limits set by that tariff.
Advocate General Wahl recommends upholding appeals against General Court's judgments in Italian concrete reinforcing bar cartel case
On 8 December 2016, Advocate General ("AG") Wahl issued his opinion on six appeals lodged against the General Court's ("GC") judgments in connection with the Commission re-adoption of the Italian concrete reinforcing bar cartel decision. The Commission issued a new decision in 2009 after the GC annulled an earlier 2002 decision on the grounds that it had been adopted on the wrong legal basis (see VBB on Competition Law, Volume 2009, No. 10, available at www.vbb.com). The GC subsequently upheld the re-adopted decision in 2014 (see VBB on Competition Law, Volume 2014, No. 12, available at www.vbb.com).
In his opinion, AG Wahl took the view that the 2014 GC judgments and the 2009 Commission decision should be annulled because the parties' rights of defence were breached, insofar as they were not provided with the opportunity to present their arguments at an oral hearing following the re-adoption of the Commission's decision. AG Wahl also considered that the parties' rights were breached because the Commission did not expressly refer to aggravating circumstances in its Statement of Objections. However, the AG recommended that the ECJ dismiss the parties' claims in relation to public distancing and repeated infringement (Cases C-85/15 to C-89/15, Feralpi and Others).
General Court annuls Commission's decision in envelopes cartel case for failure to sufficiently state reasons
On 13 December 2016, the General Court ("GC") annulled the Commission's decision in the envelopes cartel case in so far as it concerns Tompla, an envelope producer. In its judgment, the GC ruled that, due to an inadequate statement of reasons given by the Commission, Tompla was not in a position to adequately understand or dispute the fining methodology followed by the Commission in its settlement decision in light of the principle of equal treatment, and that the GC was not fully able to exercise its powers of judicial review with regard to the Commission's compliance with that principle (Case T-95/15, Printeos, Tompla and Others).
European Commission will not renew Insurance Block Exemption Regulation
On 13 December 2016, the European Commission announced that the Insurance Block Exemption Regulation ("IBER"), which is due to expire on 31 March 2017, will not be renewed. The IBER provides for an exemption from Article 101(1) TFEU for agreements between insurers relating to joint compilations, tables and studies, as well as co-(re)insurance pools, subject to market share thresholds and other specified conditions.
In March 2016, the Commission published a preliminary report in which it indicated that the insurance industry no longer appeared to require an exceptional instrument such as a block exemption to assess the compatibility of common contractual arrangements with EU competition law (see VBB on Competition Law, Volume 2016, No. 3, available at www.vbb.com). The Commission has now confirmed that, in its view, the IBER is no longer warranted because the Horizontal Guidelines already provide guidance on how to assess the conformity of joint compilations, tables and studies with the EU competition rules. At the same time, the Commission underscored that these forms of co-operation agreements are not automatically unlawful under Article 101 TFEU. Rather, insurers will need to assess their co-operation agreements on a case-by-case basis to determine whether they are in line with EU competition rules.
General Court dismisses appeals in smart card chips cartel case
On 15 December 2016, the General Court ("GC") upheld the Commission's decision in the smart card chips cartel case, confirming that Infineon and Philips had, with others, coordinated their market behaviour in the EEA through bilateral contacts that took place in the period between September 2003 and September 2005 (see VBB on Competition Law, Volume 2014, No. 9, available at www.vbb.com).
The GC confirmed the Commission's findings that Infineon, Philips and others had restricted competition by object by exchanging information on the pricing of smart card chips and that their rights of defence had not been breached, in particular in connection with their right to have an oral hearing and the authenticity of certain leniency documents relied on by the Commission (Cases T-758/14, Infineon Technologies and T-762/14, Philips).
Analysis of Important Substantive and Procedural Developments
Italian concrete reinforcing bar cartel case – concept of 'public distancing'
In EU competition law, public distancing by an undertaking from otherwise collusive meetings or other contacts with other undertakings is necessary for it to prove that its participation was without any anti-competitive intention. For that purpose, the undertaking involved must demonstrate that it had indicated to its competitors that it was participating in such meetings or contacts in a spirit that was different from theirs.
In their appeals to the Court of Justice of the European Union ("ECJ") in the Italian concrete reinforcing bar cartel case, the cartelists argued that the GC had wrongly applied the concept of 'public distancing' by confirming the cartelists' participation in some parts of the infringements despite the fact that they had ultimately published prices different from those agreed with their competitors.
In his opinion on their appeals, Advocate General ("AG") Wahl recalled that the absence of public distancing may constitute evidence that an undertaking participated in an infringement in breach of Article 101(1) TFEU. He further indicated that, when reviewing the evidence submitted with respect to an alleged public distancing by an undertaking, the concept of 'public distancing' cannot be so narrow and rigid that it becomes virtually impossible for an undertaking to make out.
According to AG Wahl, the analysis of what constitutes an adequate act of public distancing requires a factual assessment on a case-by-case basis, through an overall examination of all the relevant evidence and indicia, and therefore is not an error of law subject to review on appeal before the ECJ. In any event, AG Wahl concluded that, on the facts, the conduct of the cartelists (i.e., their communication of prices that differed from those agreed with the other cartelists) did not constitute 'public distancing' in a situation where the Commission had adequately proven the cartelists' participation in the infringement on the basis of a number of other indicia (including their attendance at one or more anticompetitive meetings). Moreover, AG Wahl stated there was no error of law because there was no distortion of evidence, no breach of any general principle of law or rule of procedure and no contradiction in the GC's reasoning.
Accordingly, AG Wahl recommended the ECJ to dismiss the appellants' claim in connection with the concept of public distancing.
Italian concrete reinforcing bar cartel case - rights of defence and proper conduct of administrative procedure
Under Article 12 of Regulation 773/2004 relating to the conduct of proceedings by the Commission pursuant to Articles 101 and 102 TFEU, the Commission must give the parties to whom it has addressed a Statement of Objections ("SO") the opportunity to present their arguments at an oral hearing, if they have so requested. The holding of an oral hearing is a significant procedural step within the scheme laid down by the EU legislator for the enforcement of EU competition rules.
In his Opinion in connection with the Italian concrete reinforcing bar cartel case, Advocate General ("AG") Wahl considered that the procedure followed by the European Commission in its re-adoption of the contested decision did not comply with the provisions set out in Regulations 1/2003 (implementing the rules in Articles 101 and 102 TFEU) and 773/2004, and thus breached the appellants' rights of defence.
In 2002, the Commission fined several companies for participating in a cartel on the Italian market for concrete reinforcing bars, in breach of the Treaty establishing the European Coal and Steel Community (the "ECSC Treaty"). In 2007, the General Court ("GC") annulled the Commission's decision, stating that it was adopted on a legal basis which was no longer in force, i.e., the ECSC Treaty (see VBB on Competition Law, Volume 2007, No. 11, available at www.vbb.com). The Commission subsequently informed the companies that it intended to re-adopt the decision using a different legal basis (i.e., Regulation 1/2003), but did so without issuing a new SO and, as a result, deprived the parties of the opportunity to present their views during an oral hearing. A number of companies appealed against the Commission's new decision before the GC, which partly dismissed their claims in 2014 (see VBB on Competition Law, Volume 2014, No. 12, available at www.vbb.com).
On appeal before the ECJ, the companies alleged that the GC had breached their rights of defence by failing to recognise the Commission's error in refusing to issue a new SO and to grant them the opportunity to develop their arguments at an oral hearing. AG Wahl agreed with the appellant companies, stating that by not issuing a new SO, the Commission had denied the companies the right to request an oral hearing in which representatives of Member States' competition authorities would also participate.
The AG also emphasised the constitutional significance of the choice of correct legal basis for an act of the EU institutions. AG Wahl disagreed with the Commission's arguments that it did not need to follow the procedure under Regulation 1/2003 and Regulation 773/2004 since it had taken similar steps in the adoption of its 2002 decision under the ECSC Treaty. The AG noted that the Commission's 2002 decision was based on different legal provisions, which may have belonged to similar, but nonetheless completely distinct, sets of legal rules.
Accordingly, the AG has recommended that the GC judgments be set aside and the Commission's decision be annulled.
Italian concrete reinforcing bar cartel case - rights of defence and calculation of fine where there are aggravating circumstances
Under the 1998 Fining Guidelines, the basic amount of the fine is increased where there are aggravating circumstances, such as repeated infringements of the same type by the same undertaking.
In his Opinion in the Italian concrete reinforcing bar cartel case, Advocate General ("AG") Wahl has stated that the General Court ("GC") erred in law when it did not find that the Commission had wrongly increased the amount of the fines imposed on Ferriere Nord on grounds of recidivism.
In the judgment under appeal, the GC found that the Commission had not made a direct reference in its Statement of Objections ("SO") to its intention to take into account the existence of a repeated infringement as an aggravating factor for the purposes of setting the fine imposed on Ferriere Nord under the 1998 Fining Guidelines. The Commission had only made a general statement that it would take into account all mitigating and aggravating circumstances when setting the fines, in light of the conduct of each undertaking.
AG Wahl stated that the Commission is not necessarily required to refer explicitly in the SO to all the aggravating circumstances it may apply to an undertaking under investigation. The reference to aggravated circumstances by the Commission may be considered sufficient if, in the light of the particular case and the information provided in the SO, the undertaking was nonetheless able to anticipate the likely application of a given aggravating circumstance and the underlying reasons.
In this specific case, the AG concluded that, as a minimum, the Commission should have indicated the reasons for which it took the view that a previous infringement constituted an infringement of the same type for the purposes of the 1998 Fining Guidelines. The absence of any indication on this point prevented Ferriere Nord from properly exercising its rights of defence, and as a result, the AG considered that the increase in fines was wrong.
The AG consequently recommended that, should the Court of Justice not annul the decision in its entirety on account of violations of the appellants' rights of defence (see above), it set aside the relevant part of the GC's judgment and order the Commission to recalculate Ferriere Nord's fines without taking the aggravating circumstance of recidivism into account.
Envelopes cartel case – settlement procedure and principle of equal treatment
Under the Commission's cartel settlement procedure, an undertaking admitting liability to a cartel infringement and waiving certain procedural rights is rewarded with a 10% reduction in the fine.
In the envelopes cartel case, the Commission fined five producers €19.4 million under the settlement procedure for coordinating prices, allocating customers and exchanging commercially sensitive information on the European market for certain types of paper envelopes.
In setting the fines, the Commission noted that, under the general methodology of the 1998 Fining Guidelines, all the potential fines that could be imposed on the undertakings involved could reach the maximum of 10% of their total turnover since the sales of most of these undertakings were generated on a single market. The Commission therefore proposed, in view of the very specific circumstances of the case, to depart from the general methodology of the Fining Guidelines and substantially reduce the basic amount of the fines. As a result of the Commission's adjustments, the fines imposed ranged between 4.5% of the total turnover of one settling undertaking to 9.7% in the case of Tompla. The Commission did not explain in its decision why it applied different individual reduction rates to the undertakings concerned.
Tompla challenged the Commission's decision before the General Court ("GC") because it considered that the Commission had failed to explain why it had departed from the general methodology of the Fining Guidelines. In its recent judgment, the GC agreed with Tompla that the latter was not in a position to effectively dispute the merits of the Commission's approach in light of the principle of equal treatment. In addition, the GC considered it was not fully able to exercise its power of judicial review with regard to the Commission's compliance with that principle.
The GC did not accept the Commission's argument that Tompla received sufficient information during the settlement procedure on the fining methodology used. In addition, the GC ruled that the Commission's failure to state reasons could not be remedied in the course of the judicial proceeding. The GC also rejected the Commission's claim that it was under a less onerous duty to state reasons in a settlement case, because the parties were more familiar with the case against them as they were engaged in bilateral discussions with the Commission.
This judgment is noteworthy because it is the first time the GC has annulled a cartel settlement decision on appeal. While appeals on the substance of a settlement decision are unlikely considering that the settling parties admit to their involvement in a cartel, the Tompla case shows that settling parties can still appeal against a settlement decision, and be successful, on procedural grounds, such as in relation to the principle of equal treatment in setting the fines.
Smart card chips cartel case – rights of defence and leniency statements
Article 27(2) of Regulation 1/2003 provides that the parties' rights of defence are to be fully respected in proceedings by the European Commission pursuant to Articles 101 and 102 TFEU. Article 12 of Regulation 773/2004 states that the Commission must give the parties to whom it has addressed a Statement of Objections ("SO") the opportunity to be heard.
On 3 September 2014, the Commission imposed fines totalling approximately €138 million on four companies for coordinating their conduct on the smart card chips market in the EEA from 2003 to 2005. The Commission sent each company an SO in April 2013, which was followed by a letter of facts in October 2013, to which Infineon and Philips replied during a hearing in November 2013. In July 2014, a second letter of facts was issued, in which the Commission informed the companies of the existence of two documents submitted by Samsung supporting the authenticity of evidence it had provided earlier in the proceedings. In September 2014, the Commission adopted the contested decision. Infineon and Philips brought actions before the General Court of the European Union ("GC") seeking the annulment of the Commission's decision.
With respect to the appeal lodged by Infineon, Infineon claimed that the Commission breached its rights of defence by failing to issue a second SO and to organise a hearing, instead sending the parties a second letter of facts, particularly as Infineon considered that the Commission had materially altered its case after issuing the second letter of facts. The Commission rejected Infineon's argument, stating that Infineon had had the opportunity to comment and had provided its comments on the second letter of facts on time and had not asked for an extension. In its judgment, the GC confirmed that, in any case, the Commission's second letter of facts did not accuse Infineon of a new infringement and did not give rise to objections different from those in its original SO, so a new SO would not have been necessary. Moreover, the GC considered that the period of five days to respond to the second letter of facts, while extremely short, could not be considered in itself to be an infringement of Infineon's rights of defence because Infineon had in fact responded within the period set and had not asked for any extension, although it was entitled to do so.
Infineon also claimed that the Commission conducted a "fast track" procedure in its case, which constituted a breach of the principle of sound administration and of its rights of defence. The GC dismissed this claim and noted that the Commission is not required to carry out further investigations at a party's request or to hear witnesses put forward by the party concerned where it considers that its investigation of the case has been sufficient.
With respect to the appeal lodged by Philips, Philips claimed that the Commission had not treated it fairly and impartially during the administrative procedure, in breach of Article 41 of the Charter of Fundamental Rights, the principle of sound administration and its general duty of care. In this respect, both Infineon and Philips disputed the authenticity of certain documents provided by Samsung as part of its cooperation with the Commission under the Leniency Notice. The GC noted that, although some caution has to be exercised in relation to the evidence provided by undertakings applying for leniency, the Leniency Notice does not necessarily create an incentive for the leniency applicant to submit distorted evidence, nor does it make such evidence less probative than information otherwise provided by an undertaking.
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