In this article, we give a factual overview of significant case developments at EU level in the past month, and then provide a more detailed analysis of important substantive or procedural developments addressed in these cases.
Summary of Significant Case Developments
Advocate General Wahl recommends upholding appeal against General Court's judgment in Heat Stabilisers cartel case
On 21 December 2016, Advocate General ("AG") Wahl recommended upholding an appeal lodged by Akzo Nobel against a judgment of the General Court ("GC") in relation to the Commission's Heat Stabilisers decision.
In his opinion, AG Wahl considered that the GC was wrong not to annul the fine imposed on Akzo Nobel as a parent company for the involvement of two of its subsidiaries, Akzo GmbH and Akzo BV, in the Heat Stabilisers cartel. Specifically, the AG found that the GC was wrong to confirm the Commission's finding that, while the Commission could no longer impose a fine on Akzo Nobel's two subsidiaries for their participation in the heat stabilisers cartel because the limitation period of five years had expired, the Commission was not prevented from finding Akzo Nobel liable for the infringement as their parent company (see VBB on Competition Law, Volume 2015, No. 7, available at www.vbb.com). As a result, the AG recommended that the Court of Justice annul the fine imposed on Akzo Nobel on account of its derivative liability for its subsidiaries' conduct (see Section 1.2) (Case C-516/15, Akzo Nobel and Others).
Court of Justice dismisses appeal in Animal Feed Phosphates cartel case
On 12 January 2017, the Court of Justice of the European Union ("ECJ") dismissed an appeal lodged by Timab against a judgment of the General Court ("GC") upholding the fine of nearly € 60 million imposed on Timab for its participation in the animal feed phosphates cartel. The case arose from the Commission's first "hybrid" cartel settlement decision, in which it imposed fines on several producers of animal feed phosphates under the cartel settlement procedure, while imposing a fine on Timab under the standard Article 101 infringement procedure, after Timab had withdrawn from settlement discussions.
In its judgment, the ECJ ruled that the GC had correctly and systematically examined the analysis carried out by the Commission during the standard infringement procedure, as well as the factors used by the Commission to calculate the fine imposed on Timab. In particular, the ECJ considered that the Commission was not bound by the range of the fine it had indicated to Timab during the settlement procedure, and could therefore adjust its amount on the basis of objective factors under the standard infringement procedure (see Section 1.2) (Case C-411/15, Timab Industries).
Court of Justice upholds General Court's judgment in TV and Computer Monitor Tubes cartel case
On 18 January 2017, the Court of Justice of the European Union ("ECJ") dismissed an appeal lodged by Toshiba against a judgment of the General Court ("GC") in connection with the TV and Computer Monitor Tubes cartel decision. In its appeal, Toshiba argued that the General Court had erred in holding that it was jointly liable, with Panasonic, for the conduct of its joint venture company.
In its judgment, the ECJ ruled that the GC had been correct to find that, where it follows from statutory provisions or contractual stipulations that the commercial policy of a joint subsidiary is determined jointly by two parent companies (in this case, Toshiba and Panasonic), it may reasonably be concluded that that policy was indeed determined jointly. This implies that, in the absence of evidence to the contrary, the parent companies must be regarded as having exercised decisive influence over their joint venture and can therefore be held liable for its conduct (Case C-623/15, Toshiba).
Court of Justice confirms General Court's judgment in Methacrylates cartel case
On 19 January 2017, the Court of Justice of the European Union ("ECJ") dismissed an appeal brought by the Commission against a judgment of the General Court in the context of the Methacrylates cartel decision. In its judgment, the ECJ ruled that the Commission was not entitled to send to parent companies (in this case, Total and Elf Aquitaine) letters that demanded payment of interest accrued on a cartel fine, for which they were held jointly and severally liable, where the fine imposed had been entirely paid by their subsidiary and where their liability was purely derivative of the conduct of that subsidiary (in this case, Arkema) (see Section 1.2) (Case C-351/15, Commission v Total and Elf Aquitaine).
Analysis of Important Substantive and Procedural Developments
Heat Stabilisers cartel case – derivative liability of parent company may not exceed that of its subsidiary
Under settled EU case law, a parent company may be held liable for the anticompetitive behaviour of its subsidiary even if the former has not directly participated in the infringement, provided the parent company is in a position to exercise decisive influence over its subsidiary and, in fact, has exercised such influence. The underlying logic of attributing liability to the parent company is based on the fact that, under EU competition law, the concept of single undertaking is not limited to a legal person, but covers an entity engaged in an economic activity. Where the liability of the parent company is engaged on the basis of the conduct of its subsidiary, some ambiguity still exists as to whether its liability is based on its personal involvement or on derivative involvement. The practical significance of this distinction can be illustrated by the question of whether a parent company should be absolved of liability if it is found that the Commission is time-barred from imposing a penalty in respect of its subsidiary.
In Akzo Nobel, the GC found that, while the Commission could no longer impose fines on two subsidiaries of Akzo Nobel for their participation in the heat stabilisers cartel because the limitation period of five years had expired, this did not prevent the Commission from finding Akzo Nobel liable for the infringement as their parent company (see VBB on Competition Law, Volume 2015, No. 7, available at www.vbb.com). Akzo Nobel and the two subsidiaries concerned (Akzo GmbH and Akzo BV) appealed against this finding before the ECJ. They argued that the annulment of the fines imposed on the two subsidiaries as a result of the expiration of the limitation period should have led to the annulment of the fine on Akzo Nobel since that fine was imposed on it solely because of its subsidiaries' direct participation in the infringements. Akzo Nobel's liability was argued to be purely derivative, secondary and dependent on that of its subsidiaries.
In his recent opinion, AG Wahl has agreed with the appellants' arguments and recommended that the ECJ uphold their appeal. The AG explained that differing terminology used and inferences drawn in the case law had given rise to competing views on the nature of parental liability (i.e., whether it is personal or derivative in nature) in cases where the parent company has not directly participated in the infringement at issue. In the AG's view, parental liability must be said to be derivative in nature whenever the Commission adopts a decision imposing a fine on a parent company in which the Commission does not establish the parent company's actual and direct involvement in the infringement concerned. AG Wahl said that the logical consequence for the Commission is that any errors vitiating its finding in relation to a subsidiary's liability for the infringement should be extended to the benefit of the parent company. The AG contrasted this to a situation where the Commission finds that the parent company has also been directly involved in the infringement, in which case its liability would no longer be of a merely derivative nature.
In the case at hand, Akzo Nobel's liability was derived from that of its subsidiaries, as the Commission had not established that Akzo Nobel had been directly involved in the cartel during the infringement period at issue. AG Wahl therefore concluded that the GC's judgment should be set aside in so far as the GC did not align the respective fines imposed on Akzo Nobel and on its subsidiaries relating to that period as a result of the expiration of the limitation period.
The opinion of the AG is in line with the ECJ's recent judgment of 17 September 2015 in Case 597/13 Total v Commission (see VBB on Competition Law, Volume 2015, No. 9, available at www.vbb.com). In this case, the ECJ held that the liability of a parent company could not exceed that of its subsidiary where the former's liability is derived solely from the latter.
Methacrylates cartel case – derivative liability of parent company may not exceed that of its subsidiary
As noted above, under settled EU case law, a parent company may be held liable for the anticompetitive behaviour of its subsidiary, even if the former has not directly participated in the infringement, provided the parent company is in a position to exercise decisive influence over its subsidiary and has, in fact exercised such influence. However, where the liability of the parent company is purely derived from that of its subsidiary, the liability of the parent company may not exceed that of its subsidiary.
The factual and procedural situation underlying the case is relatively complex and unusual. In 2006, the Commission imposed a fine of over € 219 million on Arkema for its involvement in the methacrylates cartel. Of that amount, its parent companies Elf Aquitaine and Total were held jointly and severally liable for € 181 million and € 140 million respectively (see VBB on Competition Law, Volume 2006, No. 5, available at www.vbb.com). After the decision issued, Arkema paid the amount of the fine in full. On appeal, the GC reduced the fine imposed on Arkema to € 113 million (see VBB on Competition Law, Volume 2011, No. 6, available at www.vbb.com) but dismissed appeals lodged by Total and Elf Aquitaine and upheld their joint and several liability for a fine imposed in relation to the anti-competitive activities of their subsidiary company, Arkema (see VBB on Competition Law, Volume 2011, No. 7, available at www.vbb.com). The Commission informed Total and Elf Aquitaine that, should they appeal before the ECJ, it would request the payment of the amount for which they were jointly and severally liable with Arkema (i.e., a total of € 137 million), together with default interest. Before their appeal to the ECJ, Total and Elf Aquitaine paid the Commission the sum demanded. Following the dismissal by the ECJ of their appeal, the Commission issued a letter in which it demanded payment from Total and Aquitaine of outstanding interest because it took the view that Arkema had not paid the original fine back in 2006 on their behalf. Total and Elf Aquitaine then challenged this letter from the Commission.
In its recent judgment, the ECJ first rejected the Commission's claim that the contested letters merely enforced the Methacrylates decision and that they therefore in themselves did not produce binding legal effects susceptible to appeal. In this regard, the ECJ ruled that the contested letters demanded from Total and Elf Aquitaine default interest in spite of the payment in full of the original amount of the fine, and that constituted a modification of the pecuniary obligation for which they were liable. As a result, Total and Elf Aquitaine could validly challenge these letters before an EU court.
The ECJ then recalled that under settled EU case law, where the liability of the parent company is purely derivative of that of its subsidiary, the liability of the parent company may not exceed that of its subsidiary. In the present case, the ECJ found that the joint and several liability of Total and Elf Aquitaine was purely derived from that of their subsidiary, Arkema. The ECJ also underlined the uncontested fact that Arkema had paid the original fine in full in 2006.
The ECJ accordingly ruled that the Commission was no longer entitled to claim payment from Total and Elf Aquitaine, including for any resulting default interest in respect of the fine imposed in the Methacrylates cartel decision.
Animal Feed Phosphates - likely range of fines under settlement procedure creates no legitimate expectations for undertaking outside settlement
Under the EU settlement procedure, a party admitting liability to a cartel infringement and waiving certain procedural rights is rewarded by a 10% reduction in the fine. Under this framework, the Commission informs the companies wishing to engage in settlement discussions of the essential elements it intends to take into account, including the facts alleged, the classification of those facts, the gravity and duration of the alleged cartel, the attribution of liability and an estimation of the range of likely fines. This is intended to enable the parties to provide their views on the potential objections against them and allow them to make an informed decision on whether or not to settle.
In the Timab case, the ECJ recalled that the principle of the protection of legitimate expectations is one of the fundamental principles of EU law. The ECJ also added that under settled case law, during the procedural stage preceding the adoption of the final decision, the Commission cannot give any precise guarantee as to any fine reduction or immunity from fines and that the participants in the cartel cannot therefore entertain any legitimate expectation in that regard. However, the ECJ noted that one notable exception to this principle is the settlement procedure. The ECJ underscored that this alternative administrative procedure has special features, such as the right of settling parties to be informed of the likely range of the fines the Commission intends to impose on them.
As a result, if an undertaking decides to opt out of a settlement procedure and to revert to the standard infringement procedure, that undertaking will lose the benefits of the settlement procedure, including the indication of the range of the fines likely to be imposed on it. This is because, under the standard infringement procedure, the Commission is only bound by the Statement of Objections, which does not set a range of fines.
The ECJ also indicated that, when adopting its decision under the standard infringement procedure, the Commission must take into consideration any new information brought to its attention during the context of that procedure. Given that Timab had put forward new evidence as to the duration of its involvement in the infringement (i.e., 1993-2004), the ECJ held that it could no longer rely on any legitimate expectations that the range of the likely fine mentioned during the settlement procedure, which was premised on a different duration (i.e., 1978-2004), would be maintained.
The requalification of Timab's conduct and the recalculation of its duration turned out to have dramatic negative effects on the final amount of the fine. Under the settlement procedure, the Commission qualified Timab's conduct as single and continuous, which enabled the Commission to impose a fine for an infringement of 25 years (i.e.,1979 to 2004). On the basis of Timab's statements made during the investigative phase, the Commission had been minded to grant Timab a fine reduction of 17% under the Leniency Notice and of 35% for its cooperation outside the scope of the Leniency Notice for having enabled the Commission to extend the duration of Timab's own participation in the cartel. However, under the standard infringement procedure, Timab argued that the conduct amounted to multiple distinct practices, which were time-barred for the purpose of imposing a fine with the exception of one infringement from 1993 to 2004. In the absence of Timab's declaration supporting a 25-year single and continuous infringement, the Commission had to review the file anew and to reduce the duration of Timab's conduct to 10 years. The Commission then adjusted the fine accordingly: while Timab benefited from a shorter infringement period, it lost most of the fine reduction for its cooperation mentioned by the Commission during the settlement discussions (which was reduced to 5%). This is because the Commission had been minded to grant these reductions in fines as a reward for Timab providing self-incriminating evidence relating to the earlier period (i.e.,1979 to 1993).
It follows from this judgment that non-settling parties should be mindful that they might find themselves in a worse situation after pulling out of a settlement procedure, given that the amount of the fine may be increased as a result of the non-application of the Settlement and Leniency Notices.
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