EU DEVELOPMENTS
Blocking mergers unlawfully - retreat from the high water mark in Schneider Electric?
The European Court of Justice yesterday handed down in its judgment in the European Commission's appeal again the Court of First Instance's judgment in the Schneider Electric case from July 2007. At issue was the extent to which the Commission can be liable in damages to a party whose acquisition the Commission has unlawfully blocked.
A fuller analysis of the European Court of Justice's judgment can be found in the CW Alert sent out yesterday.
ECJ reduces ADM's citric acid cartel fine by €10 million
The European Court of Justice (the "ECJ") has reduced the fine imposed on Archer Daniels Midland Co ("ADM") for taking part in a citric acid cartel in the 1990s. The ECJ ruled that there was insufficient evidence to establish that ADM had played a leading role in the cartel and reduced its fine from €39.69 million to €29.4 million.
In 2001 the European Commission fined five citric acid manufacturers a total of €135.2 million for cartel activities between March 1991 and May 1995. ADM subsequently brought an appeal before the Court of First Instance (the "CFI") for a reduction in its fine. However, that appeal was dismissed and ADM appealed to the ECJ.
Before the ECJ ADM asserted that the CFI had misjudged a number of issues. In particular ADM disputed the CFI's support of the Commission's finding that ADM was a leader of the cartel and argued that, in classifying ADM as a leader, the CFI had relied on items of evidence not referred to specifically in the statement of objections. ADM claimed that it rights of defence had been breached as a result of this. As leadership constitutes an aggravating circumstance, the finding resulted in ADM's fine being increased by 35%.
ADM made several other submissions including that it was entitled to a reduction due to its cooperation in terminating the infringement as soon as the Commission intervened.
The ECJ largely rejected ADM's arguments but did agree that the Commission had wrongly increased ADM's fine on the basis of its leadership of the cartel. It agreed that the statement of objections had not clearly set out all the essential facts regarding ADM's role as a leader and that simply annexing the evidence relied upon to the statement of objections was not sufficient. As this specific charge was never formally put to ADM it could not adequately defend itself and ADM's fine was accordingly reduced by 35% from €39.69 million to €29.4million.
The ECJ judgment marks the end of a long legal battle with the events at issue having occurred over 14 years ago.
Peugeot's fine for obstructing exports reduced by CFI
On 9 July 2009 the Court of First Instance ("CFI") reduced the penalty fine imposed on Peugeot by the European Commission ("Commission") for breaching Article 81 EC. The fine was reduced from €49.5 million to €44.55 million. The CFI agreed with the Commission that there had been a "very serious" infringement of competition law. However it found that the Commission had failed to take sufficient account of the role that price differentials had played in reducing exports when setting the fine.
In October 2005 the Commission issued a decision finding that Peugeot had implemented a strategy designed to restrict the export of new Peugeot cars from the Netherlands. Peugeot was found to have two main strategies - linked to dealer remuneration and the supply of stock. Peugeot would, for example, refuse to give dealers performance bonuses if they sold any of their cars to non-Dutch customers. It would also threaten to reduce the amount of stock that dealers received if they carried on exporting.
The CFI agreed that, although there was no outright export ban, the conduct did restrict parallel imports and clearly had the object of partitioning the market. It concluded that such conduct was equally as reprehensible as an export ban and agreed that, in setting the penalty fine, it was correct that it had been classed as "very serious". It ruled, however, that despite the Commission's margin of discretion the Commission had erred in setting the fine. The Commission had failed to take proper account of Peugeot's arguments in relation to the role that diminishing price differentials played in the fall in exports from the Netherlands to other member states. This had resulted in the starting amount for calculating the fine being set too high as the impact of the infringement on the market was exaggerated. The CFI accordingly reduced the fine by 10 per cent.
Although the fine was reduced, the CFI rejected the remainder of Peugeot's arguments. In particular the CFI confirmed that the Commission had been correct to conclude that Peugeot's conduct had the object of restricting parallel imports. Accordingly there was no need to take account of the actual effects in determining whether there had been an infringement of Article 81 EC.
The Commission has welcomed the judgment as further confirming its rigorous stance against conduct depriving consumers of the benefits of a Single Market. It remains to be seen however if Peugeot will appeal the judgment to the European Court of Justice.
UK DEVELOPMENTS
British Airways executives plead not guilty to criminal charges in fuel surcharges case
Four current and former executives of British Airways have pleaded not guilty to criminal charges at a pre-trial hearing at Southwark Crown Court. They are accused of participating in cartel conduct relating to British Airways and Virgin Atlantic Airways that fixed prices for fuel surcharges on long haul passenger flights. The four executives are Martin George (BA's former commercial director), Andrew Crawley (current head of sales at the airline), Iain Burns (former head of corporate communications), and Alan Burnett (former head of UK and Ireland sales).
In particular it is alleged that between 1 July 2004 and 20 April 2006 the defendants agreed with named executives of Virgin to dishonestly make or implement arrangements that served to directly or indirectly fix the price of fuel surcharges relating to British Airways and Virgin.
As reported in issue 385 of Community Week, criminal charges were initially brought in August 2008 by the OFT under section 188 of the Enterprise Act 2002 ("the Act"). Virgin secured immunity from prosecution for its executives (as well as immunity from corporate fines) by being the first to come forward and report the conduct to the OFT.
The defence is likely to focus on the "dishonesty" criterion required for a successful conviction in the UK and whether this element is proved beyond a reasonable doubt.
This is the second instance of the OFT using its criminal enforcement powers under the Act the other being the conviction of three UK executives for their role in the marine hose cartel. The current case is the first in which the defendants have contested the charges and is likely to see the OFT's case come under intense scrutiny.
If the defendants are found guilty they face a range of sanctions including imprisonment for up to five years, unlimited fines, director disqualification orders and confiscation of any assets illegally gained.
GERMAN DEVELOPMENTS
Mortar manufacturers fined for cartel conduct
Earlier this month, the German Federal Cartel Office ("BKartA") imposed fines totalling €39.69m on nine mortar manufacturing firms and their senior executives. The nine mortar manufacturers (maxit Deutschland GmbH, Knauf Gips KG, Knauf Marmorit GmbH, Schwenk Putztechnik GmbH & Co., BaumitBayosan Gmbh & Co. KG, Hasit Trockenmörtel GmbH, Saint Gobain Weber GmbH, quick-mix GmbH & Co. KG and Schäfer Krusemark GmbH & Co. KG) and their senior executives are accused of having participated in anti-competitive agreements concerning both the installation and set-up fees for dry mortar silos throughout Germany.
Documents seized in searches conducted in May 2006 and January 2007 provided the BKartA with substantial amounts of evidence. According to the BKartA's findings, the companies engaged in a number of coordination activities throughout 2004 and 2005, which culminated in an agreement, stretching across almost the entire mortar sector, to introduce installation/set-up fees for the erection of dry mortar silos from 2006 onwards. The agreement concerned all dry mortar silos across the whole of Germany.
In the proceedings, the new BKartA guidelines on the setting of fines (dated 15 September 2006) were applied. These guidelines were issued following a statutory increase in the level of fines. In accordance with the guidelines, the calculation of the fines was based on the companies' turnover achieved through mortar sales, as well as the revenue resulting from the set-up fees, in order to accurately reflect the economic significance of the agreements. The fines for the two companies that belong to corporate groups with an annual turnover of more than € 1 billion were significantly increased in order to enhance the deterrent effect of the BKartA decision.
The orders imposing the fines are not yet final. The individuals and undertakings concerned can appeal against them.
FRENCH DEVELOPMENTS
French Competition Authority publishes draft merger control guidelines
On 9 July 2009, the French Competition Authority (the "Authority") issued new draft guidelines concerning merger control in France.
Since the Act of Modernisation of the Economy (the "LME") of 4 August 2008, the Authority has had the power to control merger operations in France. Prior to this date, the French Minister of Economy (the "Minister") was in charge of reviewing mergers and the French Competition Council (the former Competition Authority) was only able to issue non binding opinions on mergers upon request of the Minister.
Once finalised, the new draft guidelines will replace those written in 2004 by the French General Directorate for Competition Policy, Consumer affairs and Fraud control - the DGCCRF- then modified in 2007 to take into account European rules. The objective of this new text is to provide companies with educational guidelines, explaining the proceedings, rules and methods used to analyse a merger investigation.
The draft guidelines set out the modifications added by the LME. In particular, they explain how to calculate the new lower turnover thresholds implemented by the LME relating to (i) mergers in the retail business sector and (ii) companies active in the French overseas departments and territories.
In addition, the draft guidelines provide companies with detailed guidance as to how to present their economic evidence when the merger is submitted to the Authority. These improved and updated draft guidelines confirm the importance of economic analysis in merger control.
The text is available on the Authority's website for public consultation. Interested third parties have until 24 September 2009 to make comments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
