European Union: Court Of Justice Invalidates European Commission Request For Information In Cartel Investigation Due To Vague And Generic Statement Of Reasons: Judgments Of 10 March 2016 In Heidelbergcement; Italmobiliare; Buzzi Unicem; Schwenk Zement

Court of Justice invalidates European Commission request for information in cartel investigation due to vague and generic statement of reasons: judgments of 10 March 2016 in HeidelbergCement; Italmobiliare; Buzzi Unicem; Schwenk Zement

In four judgments rendered on 10 March 2016, the Court of Justice (the Court) annulled a European Commission decision requesting information from parties to a cartel investigation. The judgments serve as a strong reminder to the European Commission of its fundamental obligation to adequately reason decisions requesting information, and to do so with sufficient precision and clarity. The judgments are also an important addition to the existing case-law on the limits of the investigative powers of the Commission and the critical role played by Union courts as guardian of due process over Commission legal acts. The annulment of the Commission decision will have no immediate impact on the outcome of the investigation to which it related because the Commission had already closed the investigation in July 2015...interestingly, for lack of sufficiently conclusive evidence following several requests for information sent to cement manufacturers, including an extensive 94-page questionnaire which was the focus of this review by the Court. Nevertheless, these judgments are likely to have wide-ranging application beyond this case, both as a result of what the Court did say and what the Court didn't say. Here's why.

The facts

The Commission carried out inspections at the premises of cement manufacturers in 2008 and 2009. This was followed by several requests for information sent by the Commission to selected cement manufacturers pursuant to its powers under Article 18 of Regulation 1/2003. The Commission then adopted in December 2010 a decision to initiate proceedings against eight cement manufacturers for suspected infringements of Article 101 TFEU with respect to market sharing, price coordination and related anti-competitive practices. A few months later in March 2010, the Commission adopted the decision at issue under Article 18(3) of Regulation 1/2003 to request further information from cement manufacturers. The questionnaire contained numerous and lengthy questions, requesting extensive information to be provided in a specific format and comprising 94 pages and 11 sets of questions.

Most cement manufacturers to whom the Commission's decision was addressed appealed to the General Court to have the decision invalidated. On 14 March 2014, the General Court rendered its judgments upholding the legality of the Commission's decision to request information. The General Court agreed with the applicants that some of the questions in the request for information were "relatively vague" but this was not considered sufficient to invalidate the overall decision as the statement of reasons had the "minimum degree of clarity". Four applicants appealed the General Court's judgments to the Court, namely HeidelbergCement, Italmobiliare; Buzzi Unicem; Schwenk Cement.

Several grounds of appeal were raised to challenge the General Court's findings. In each judgment, the Court focused on only one ground of appeal - namely that the Commission decision contained an inadequate statement of reasons. This ground of appeal was sufficient to set aside the General Court's judgments and annul the Commission's decision. As a result, the Court did not consider the other grounds of appeal. Important issues regarding the Commission's powers which could have wider application in shaping the permissible reach and content of future Commission decisions to request information remain therefore unaddressed by the Court, although Advocate General Wahl offers its opinion on some of these issues (see below under 'What the Court didn't say').

Findings of the Court (What the Court did say)

The Court was asked to review whether the General Court made a mistake in its legal analysis by upholding the Commission's decision requesting information. Whilst several arguments were put forward, the Court focused on whether the Commission's decision was sufficiently reasoned. The General Court had found that the Commission's statement of reasons lacked precision and detail in some respects but ultimately concluded that on the whole it provided the minimum degree of clarity necessary.

The obligation for the Commission to state reasons is further defined in Article 18(3) of Regulation 1/2003 which requires the Commission to "state the legal basis and the purpose of the request, specify what information is required and fix the time-limit within which it is to be provided". The statement of reasons must therefore indicate the suspicions which the Commission is seeking to verify. According to the Court, these suspicions were not indicated "clearly and unequivocally", either in the decision to request information or in the decision to initiate proceedings. In addition, the Court found that the Commission failed to state with sufficient clarity the products being investigated – the cement products listed are mentioned by way of example - and that the geographic scope was defined ambiguously. As a result this also prevented the applicants and the Union courts from assessing whether the information requested was necessary, as required under Article 18(1) of Regulation 1/2003. Overall, the Court concluded therefore that the statement of reasons was "excessively succinct, vague and generic", thereby resulting in the General Court judgment being set aside and the Commission decision being annulled.

A few interesting points to note from the Court's brief judgment:

• The level of detail and precision to be provided by the Commission to justify a decision to request information is partly a function of the stage of the procedure at which the decision was adopted. In the case at hand, the Commission adopted its decision to request information almost three years after the first inspections, after several prior requests for information had been sent and after a decision to open proceedings had been opened. In the Court's view, the Commission could not argue in this instance - as the Court has accepted in previous case-law relating to decisions adopted at the beginning of an investigation - that it was not in possession of precise and more detailed information. This means that the amount of detail to be provided on the essential elements of the alleged infringements will depend on the evidence available to the Commission at the time of the decision.
• There is also a fundamental reason underlying the need for the Commission to provide a sufficiently precise and detailed statement of reasons. This is because the statement of reasons forms the basis for assessing under Article 18(1) of Regulation 1/2003 whether the information request is "necessary". Indeed the Commission's power to request information is limited to "necessary" information. The Court makes clear in its judgment that the level of detail provided by the Commission to justify its decision should be sufficient to allow the parties to assess whether the information requested is "necessary" and for the Union courts to adequately exercise its powers of review. As pointed out by Advocate General Wahl at paragraph 53 of its opinion, a vague and imprecise statement of reasons cannot "have the unintended consequence of enlarging the types of information which could be deemed 'necessary' for the purposes of Article 18".
• The Court noted that several elements of the Commission's statement of reasons were inadequate. First, the alleged infringement was expressed in too vague and generic terms. Second, the Court remarks that the Commission listed, in both the decision to open proceedings and the decision at issue, a wide range of cement products affected by the investigation by way of example (and therefore not exhaustively). Finally the geographic scope of the investigation referred to in the decision to open proceedings and in the decision at issue was found to be ambiguous.

Issues unaddressed (What the Court didn't say)

As the statement of reasons did not satisfy the requirements of Article 18(3) of Regulation 1/2003 and was in itself sufficient to invalidate the Commission's decision, the Court did not consider the other grounds of appeal which might also on their own have sufficed to invalidate the Commission's decision. This is unfortunate as the Commission's decision was arguably plagued with a number of other irregularities. Interestingly Advocate General Wahl does consider these other grounds of appeal in his opinions¹ and finds some of them to be well-founded.

It is worth highlighting the following issues which were not addressed by the Court:

• On whether the information requested was "necessary": the General Court concluded that the Commission has a broad discretion to determine if the information requested is necessary and that the information requested had a sufficient connection to the alleged infringement. The Court did not consider this point in substance but did allude to the need for the Commission's statement of reasons to be sufficiently precise as it forms the basis for determining whether the information requested was "necessary". Advocate General Wahl suggests in his opinion that "necessity" requires considering whether the "information could reasonably be expected to be helpful to the Commission"; that the General Court misapplied the legal test of "necessity"; and that some of the information requested by the Commission might not have been necessary, for instance information which had already been provided even though in a different format or information which was in the public domain.
• On the Commission's right to request information in a specific format: The Commission was heavily criticised by both the General Court and Advocate General Wahl for requesting the addressees to provide a "consolidated version of information previously provided". This involved performing formatting tasks which should have been carried out by the Commission. Such requests can arguably run counter to the principle of proportionality which the Commission is bound to respect. In this instance, the General Court conceded that some of the information imposed a "particularly significant workload" but overall the questionnaire was not viewed as breaching the principle of proportionality. Advocate General Wahl disagreed and opines that the concept of "information" under Article 18(1) of Regulation 1/2003 does not give the Commission the right to request information "in all circumstances" in a specific format. This is a far-reaching proposition which, if validated in the future by the Court, could impose further practical constraints on the Commission's ability to request information of a certain type.
• On the right to avoid self-incrimination: it is unfortunate that the Court did not address this issue. Advocate General Wahl concluded in his opinion that the General Court misapplied the legal test of the right against self-incrimination. The General Court was of the view that the respondents to the questionnaire did not risk incriminating themselves by responding to factual questions. According to Advocate General Wahl, the issue is whether the answer to be given might imply an admission of guilt, regardless whether the question posed is a factual one or a subjective one. The General Court's judgment on this issue is also unsatisfactory in that it appears to concede that one of the questions did require appellants to make an assessment and therefore might have infringed their rights of defence. However the General Court dismissed the argument on the ground that the defence could be raised at a later stage upon appeal of the final decision.
• On the principle of legal certainty: some of the appellants argued that the vagueness of certain questions infringed the principle of legal certainty. Advocate General Wahl agreed with this plea and concluded that each question found sufficiently vague to infringe the principle of legal certainty should be annulled. The General Court had concluded that, whilst some questions were 'relatively vague", this did not suffice to invalidate the whole decision for breach of the principle of legal certainty.

Analysis and comments

The Court's judgment brings a welcome correction to the General Court's judgment. Whilst the General Court had been critical of the Commission's decision, it was clearly reluctant to curtail the broad investigative powers of the Commission and moreover to invalidate a decision adopted during the course of an investigation which it considered could be addressed upon appeal of the final decision. Unfortunately, this had the effect of limiting the express rights afforded to parties to challenge an Article 18(3) decision and failed to sanction important procedural irregularities.

The Court's judgment is to be added to the line of recent judgments reviewing the Commission's investigative acts in which rights of defence were found to have been infringed, principally Nexans², Prysmian and Deutsche Bahn. These recent cases concerned the Commission's power of inspection under Article 20 of Regulation 1/2003 whereas the judgments at issue concern the Commission's power to request information under Article 18 of Regulation 1/2003. As the purpose and text of both articles are similar, it is implicit from the Court's judgments that the case-law under Article 20 can and should be relied upon for the judicial review of Article 18 decisions (and vice-versa).

Going forward, are the Court's judgments of 10 March likely to change the Commission's drafting of decisions to request information? Arguably the judgments have no immediate impact on the Commission as the related investigation was closed in 2015. Nevertheless, the Court's judgments (extrapolating also on issues unaddressed by the Court) will require the Commission to reflect on its current decisional practice under Articles 18 and 20 of Regulation 1/2003. For instance, the Commission's drafting of future decisions could take into account the following considerations:

1. The purpose of the request for information should be provided with sufficient precision. A statements of reasons formulated in very general terms and excessively brief risks invalidating a decision to request information. The level of detail will depend on the information available to the Commission at the time the decision is adopted and therefore the stage of the investigation at which the decision is adopted. The further advanced the investigation, the greater the obligation on the Commission regarding the level of detail. A sufficient amount of information will be required to enable the parties to identify the alleged infringements and the product and geographic markets under investigation. Referring to a list of affected products by way of example should not suffice.
2. None of the questions asked should require an answer which is 'equivalent' to an admission of infringement.
3. The information requested should not be vague or ambiguous, as the questionnaire (or parts thereof) could be challenged for breach of the principle of legal certainty.
4. The information requested should be 'necessary' and therefore there should be ''concrete indicia constituting reasonable grounds for suspicion". The Commission's powers are limited by the need to avoid 'fishing expeditions' and arbitrary requests for information. In addition it is arguable that information which has already been requested previously and which is in possession of the Commission or which is in the public domain might not be "necessary" and therefore could be invalidated. The devil is often in the detail as to whether the information requested is truly 'new' or different from the previous information. Nevertheless, based on Advocate General Wahl's opinion, requesting the same information in a different format could go beyond the powers of the Commission under Article 18 of Regulation 1/2003 and possibly even breach the principle of proportionality. Given the criticism made by the Union courts and the Advocate General in this case regarding the content of the questionnaire at issue, it is also likely that going forward such extensive requests for information aimed at consolidating previously provided information will be subject to close scrutiny and challenge before the Union courts.

Footnotes

1. Advocate General Wahl's opinions of 15 October 2015 in HeidelbergCement, Italmobiliare, Buzzi Unicem and Schwenk Zement.

2. See also the Court judgment in Nexans: http://curia.europa.eu/juris/document/document.jsf...

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