Preliminary ruling on the right of national competition authorities to participate in appeals against their own decisions
In a judgment of 7 December 2010, the European Court of Justice ("ECJ") adopted a preliminary ruling relating to the right of a national competition authority to participate in appeals before a judicial court against its own decisions.
The preliminary questions were raised by the Brussels Court of Appeal in the VEBIC case in which the Belgian Competition Council had imposed a fine of € 29,121 on VEBIC, the Flemish Bakers' Association, for having fixed prices of bread (see VBB on Competition Law, Volume 2008, No. 2). VEBIC subsequently lodged an appeal against this decision before the Brussels Court of Appeal. In accordance with the Belgian Competition Act, the Competition Council itself was not a party to these appellate proceedings. This led the Brussels Court of Appeal to make a preliminary reference to the ECJ, asking in essence whether a national competition authority is entitled, by virtue of Regulation 1/2003, to participate – as a defendant or respondent – in appellate proceedings against its own decisions (see VBB on Competition Law, Volume 2008, No. 9).
In its recent response to this preliminary reference, the ECJ noted that, according to Article 35(1) of Regulation 1/2003, national competition authorities must ensure that Articles 101 and 102 TFEU are applied effectively in the general interest. The ECJ then held that this pre-supposes that a national competition authority is entitled to participate, as a defendant or respondent, in appellate proceedings before a national court against its own decisions. The ECJ therefore concluded that Regulation 1/2003 should be interpreted as precluding national rules which do not allow a national competition authority to participate, as a defendant or respondent, in judicial proceedings brought against a decision that the authority itself has taken. The ECJ also clarified that it is then for the national competition authority to gauge the extent to which its intervention is necessary and useful, having regard to the effective application of EU competition law. It however added that if the authority were to decide, almost as a matter of course, not to enter an appearance, the effectiveness of Articles 101 and 102 TFEU would be jeopardized.
E.ON's fine for breach of seal during dawn raid upheld on appeal
On 15 December 2010, the General Court upheld a € 38 million fine imposed on German energy company E.ON Energie AG ("E.ON") by the European Commission in a 2008 decision (see VBB on Competition Law, Volume 2008, No. 2). The Commission fined E.ON following the breaking of a tamper-proof seal, affixed to an office door, in order to secure documents during an unannounced inspection carried out at the Munich offices of E.ON in May 2006. The Commission officials were searching for evidence of suspected anti-competitive behaviour on the national electricity market. In accordance with the provisions of Article 20(2)(d) of Regulation 1/2003, Commission officials are empowered to seal any business premises and books or records for the period to the extent necessary for the inspection.
The Commission sent a Statement of Objections to E.ON in late 2006, stating that, intentionally or negligently, the company had broken a Commission seal. When a seal is removed from a surface to which it has been affixed, an irreversible "VOID" sign appears and remains visible on the surface from which the seal was removed, even if the seal is subsequently re-affixed. During the May 2006 inspections, the Commission found, on returning to the sealed room, that the "VOID" signs were clearly visible on the surface of the door, behind one of the seals which had been affixed to that door the evening before, and pieces of glue were found around the seal and on the back of the seal indicating that somebody had removed the seal and tried to re-affix it.
Article 23(1)(e) of Regulation 1/2003 allows the Commission to impose fines of up to 1% of the total turnover in the preceding business year where a seal has been broken (either intentionally or negligently, with no need to prove intent). The Commission imposed a fine of 0.14 % of the E.ON subsidiary's turnover, noting that this was the first time it had imposed a fine using these powers.
E.ON appealed the Commission's decision before the General Court claiming that it should be annulled or, in the alternative, that the fine should be reduced. E.ON argued that there was insufficient evidence of an infringement of the law. It submitted that there was an erroneous assumption that the seal was affixed properly, a false assumption that there was something amiss with the condition of the seal on the following day, a false assumption as to the suitability of the security foil, and that there was failure on the Commission's part to consider alternative scenarios. For example, E.ON argued that the seal might have been breached in a number of ways, including due to vibrations from a nearby conference room, the use of an out of date seal, or the use of a strong cleaning fluid.
In its recent judgement, the General Court held that the Commission was entitled to consider, at the very least, that the seal had been negligently broken and that E.ON was required to take all necessary measures to prevent any tampering with the seal, having been clearly informed of the importance of the seal being left untouched and the possible consequences of any breach. The Court also found that the fine imposed by the Commission was not disproportionate to the infringement, given the serious nature of breaking a seal, the size of the company and the need to ensure that the fine dissuaded other companies from considering that it might be advantageous to tamper with a Commission seal during inspections.
Advocate General Mazák delivers opinion on disclosure of leniency applications
On 16 December 2010, Advocate General Mazák delivered his opinion in a reference for a preliminary ruling from the Bonn Local Court arising from a damage claim in the paper cartel in Germany.
By decisions of 2008, the German Federal Cartel Office (FCO) imposed fines totalling € 62 million on the three largest European producers of decor paper (special paper for surface treatment of engineered wood) and on five individuals for their participation in price-fixing agreements and agreements on capacity closure (see VBB on Competition Law, Volume 2008, No. 2). Those decisions were based, inter alia, on information and documents which the FCO had received in the context of its leniency programme. Pfleiderer AG, one of the world's three leading manufacturers of engineered wood, is a purchaser of decor paper. In order to prepare for civil proceedings for the recovery of damages against the cartelists, Pfleiderer applied to the FCO for comprehensive access to the file. The FCO informed Pfleiderer that it intended to accede to its request only in part and to limit access to the file to a version from which the leniency applications and the evidence provided by the leniency applicants had been removed pursuant to the FCO's leniency programme.
Pfleiderer appealed against that decision to the Bonn Local Court, which decided to stay the proceedings and to refer a question to the European Court of Justice ("ECJ") for a preliminary ruling. The Bonn Local Court sought clarification on whether the disclosure of leniency applications, or information and documents voluntarily provided by leniency applicants, to the parties adversely affected by a cartel, for the purpose of bringing damage claims, could undermine the effective enforcement of EU competition law.
In its opinion, Advocate General Mazák noted the apparent tension between, on the one hand, the effective operation of a leniency programme by a national competition authority and thus the public enforcement of competition law and, on the other hand, the grant of access to a third party, for the purposes of assisting it in bringing an action for damages pursuant to Article 101 TFEU, to information provided by a leniency applicant.
In the Advocate General's view, the disclosure by a national competition authority of all the information and documents submitted by a leniency applicant could seriously undermine the attractiveness and thus the effectiveness of that authority's leniency programme as potential leniency applicants may perceive that they will find themselves in a less favourable position in actions for civil damages, due to the self-incriminating statements and evidence which they are required to present to the authority, than the other cartel members which do not apply for leniency.
On the other hand, according to Advocate General Mazák, in the absence of overriding legitimate reasons of public or private necessity, a national competition authority should not deny an allegedly injured party access to documents in its possession which could be produced in evidence in order to assist the latter in establishing a civil claim against a member of a cartel, as this could de facto interfere with and diminish that party's fundamental right to an effective remedy which is guaranteed by Article 101 TFEU and Article 47, in conjunction with Article 51, of the EU Charter of Fundamental Rights, and Article 6(1) of the ECHR.
However, on balance, Advocate General Mazák considered that the tension in question between public enforcement and private enforcement is more apparent than real since in addition to the public interest in effective leniency programmes in order to detect and punish secret cartels, such programmes are also beneficial to private parties injured by such cartels. In the Advocate General's view, the role of the European Commission and national competition authorities is of far greater importance than private actions for damages in ensuring compliance with the EU competition rules.
Under those circumstances, Advocate General Mazák considered it necessary to preserve as much as possible the attractiveness of a national competition authority's leniency programme without unduly restricting a civil litigant's right of access to information and ultimately an effective remedy. To this end, Advocate General Mazák drew a distinction between two types of information:
- voluntary self-incriminating statements made by leniency applicants, in the course of a leniency procedure and for the purpose of that procedure, in which the applicants effectively admit and describe to a competition authority their participation in an infringement of Article 101 TFEU; and
- all other pre-existing documents submitted by a leniency applicant in the course of a leniency procedure, which are not in effect a product of the leniency procedure as they exist independently of that procedure and could, at least in theory, be discovered elsewhere.
Advocate General Mazák suggested prohibiting the disclosure of the first type of information (voluntary self-incriminating statements) as this could substantially reduce the attractiveness and thus the effectiveness of a national competition authority's leniency programme. However, the Advocate General suggested granting access to all other pre-existing documents (except for business secrets and confidential information), in so far as this would assist injured parties in the establishment, for the purposes of a damages action, of the existence of an illegal act in breach of Article 101 TFEU, damage to those parties and a causal link between the damage and the breach. In this respect, Advocate General Mazák went well beyond what the European Commission argued in its observations. According to the European Commission, access to the other documents submitted by the leniency applicant should be assessed on a case-by-case basis and not be granted in all cases, as suggested by the Advocate General.
Should the ECJ follow the opinion of its Advocate General, then the national legislation of several Member States could be incompatible with EU law. In France, for instance, on 14 December 2010, the French Senate adopted a Bill on the simplification and improvement of the quality of law, which prohibits disclosure of any documents elaborated or held by the French Competition Authority in the context of its powers of investigation and decision, which includes documents obtained in the course of the leniency procedure.
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