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Philip Bentley focuses his practice principally on EU antitrust and EU anti-dumping, and also extends to related matters such as state aid, subsidies, customs, marketing authorizations (notably for genetically modified organisms (GMOs)) and judicial review litigation before the EU General Court and Court of Justice. Read Philip Bentley, QC's full bio.

It is difficult for General Counsel and their teams to monitor all new developments adequately. With the growth of the Internet and the daily updates to EU competition rules, everyone receives and has access to masses of information, but it is difficult to select that which is really relevant to one’s business.

McDermott’s EU Competition team across Brussels, France, Germany and Italy has authored the EU Competition Annual Review 2016 to help General Counsel and their teams to focus on the essential updates that they should be aware of.

This Special Report summarizes recent developments in EU competition rules during the year 2016 where several new regulations, notices and guidelines were issued by the European Commission and many interesting cases were decided by the General Court and the EU Court of Justice.

All these new rules and judicial decisions can be relevant for international companies operating in the EU. Indeed, in addition to the daily update, this booklet provides an overview of the main recent developments in EU competition rules and can be kept as a ready reference when dealing with complex issues of EU competition law.

Read the full report.

On 7 July 2016, the European Commission adopted a decision accepting commitments by 14 shipping liner companies to change their practices concerning announcements of intended price increases for containerised shipping services. The Commission considered that these announcements were anti-competitive and resulted in higher prices for container liner shipping services, thereby harming customers. Continue Reading European Commission Challenges Public Price Announcements by Shipping Liner Companies

As a general proposition, when the validity of a European Commission antitrust decision is challenged before the General Court of the European Union (GCEU), the procedure is one of judicial review, not a retrial on the merits (although the GCEU does have special jurisdiction to increase or reduce the amount of any fine). Thus there are only three possible outcomes: annulment of the Commission’s decision; variation in the amount of any fine, upwards or downwards; or rejection of the challenge altogether.

In the case of annulment, Article 266 of the Treaty on the Functioning of the European Union requires that the Commission “take the necessary measures to comply with the judgment” of the GCEU. Provided that the limitation period has not expired, the Commission may take a new decision on the case, taking care to avoid the illegalities identified by the GCEU in respect of the first decision. The new decision can be different from the first decision, as illustrated by the recent judgments in Mitsubishi Electric and Toshiba, but it can also be substantially the same, as illustrated by the recent judgment in Éditions Odile Jacob.

The Mitsubishi Electric and Toshiba cases arose out of the gas insulated switchgear cartel. Mitsubishi Electric and Toshiba were fined for their participation in the cartel. The companies challenged the Commission’s decision imposing the fines, and the GCEU annulled the fines imposed individually on Mitsubishi Electric and Toshiba on the ground that the Commission had infringed the principle of equal treatment by choosing, when calculating the fine, a reference year for Mitsubishi Electric and Toshiba which was different from that chosen for the European participants in the infringement.

Following the annulment, the Commission addressed a letter of facts to Mitsubishi Electric and Toshiba informing them of its intention to adopt a new decision remedying the unequal treatment criticised by the GCEU. Mitsubishi Electric and Toshiba submitted comments on the Commission’s letter of facts and had meetings with the Commission team responsible for the case. Subsequently the Commission adopted a new decision imposing lower individual fines on Mitsubishi Electric and Toshiba than in the first decision.

Continue Reading Recent Judgments Illustrate How the European Commission Can Correct Its Errors Post-Annulment

McDermott has published an EU Competition Annual Review for 2015. This 87 page booklet will help General Counsel and their teams focus on the most essential EU competition updates for 2015. Beyond being used to understand recent developments, this booklet is a great reference when dealing with complex issues of EU competition law.

Read the full Annual Review here.

On 9 July 2015, the Court of Justice of the European Union (CJEU) issued its judgment in InnoLux Corp. v Commission C-231/14P, confirming the existence of a new concept in cartel fining: “direct European Economic Area [EEA] sales through transformed products”. This new concept can be used by the European Commission to calculate fines of an amount higher than a restrictive reading of its Fining Guidelines might suggest.

Background

The judgment arose out of the liquid crystal display (LCD) cartel case, which involved several LCD producers in Asia. The European Commission determined that the cartel participants had three channels of sale into the EEA:

Direct EEA sales, i.e., LCD panels for IT or television applications directly sold to another undertaking in the EEA.

Direct EEA sales through transformed products, i.e., LCD panels incorporated intra-group into a final IT or television product and subsequently sold to another undertaking in the EEA.
Indirect Sales, i.e., LCD panels sold by one of the cartel participants to another undertaking outside the EEA, which would then incorporate the panels into final IT or television products and sell them in the EEA.

The Commission took the view that inclusion of the third channel was not necessary for the purposes of imposing a fine to achieve a sufficient level of deterrence, but did take account of the first two channels. InnoLux challenged the inclusion of the second channel, and the General Court of the European Union rejected the challenge.

The CJEU’s Judgment

The CJEU upheld the decisions of the EU General Court and the Commission, notwithstanding the opinion of the Advocate-General to the contrary.

The CJEU referred first to the established case law, according to which the amount of the fine imposed on an undertaking must reflect “the economic significance of the infringement and the relative size of the undertakings’ contribution to it”.

Next, the CJEU observed that, applying this principle, the existing case law (Guardian Industries C-580/12P 12 November 2014) concludes that sales of the product concerned to a related party in the EEA should be taken into account in the same way as sales direct to unrelated parties.

The CJEU then took an innovative step. It extended the approach in Guardian Industries as follows. When sales of a cartelised product are made to a related party outside the EEA, and the product is incorporated into a downstream product that is sold to independent third parties inside the EEA, the sales of the downstream product into the EEA can be taken into account in determining the amount of the fine. The value to be taken into account is not the full value of the downstream product, but the proportion of that value that corresponds to the value of the cartelised product that was incorporated into the downstream product.

The CJEU emphasised that this case was not about whether or not the Commission had jurisdiction. The Commission’s jurisdiction was not in dispute because the cartel participants, including Innolux, made some sales of LCDs direct to independent third parties in the EEA.

Practical Consequences

The case shows that the CJEU is prepared to give a wide interpretation to the expression in the Commission’s Fining Guidelines: “the value of the undertaking’s sales of goods or services to which the infringement directly or indirectly … relates … within the EEA”. This enlargement of the Commission’s fining powers should be highlighted in all competition compliance programmes.

Margrethe Vestager, former Deputy Prime Minister of Denmark, is designated to become the next European Union Competition Commissioner in November 2014. In a three hour hearing before the European Parliament (EP) last night (2 October), Ms Vestager answered the EP’s questions and revealed a number of issues that she would like to focus on during her five year term of office. These priorities include vigorous cartel enforcement and—at least initially—assessment of whether or not certain tax arrangements in a small number of EU Member States infringe State aid rules.

Read the full article.

In an announcement made on 10 September 2014, the President-elect of the next European Commission, Jean-Claude Juncker from Luxemburg, unveiled his team and announced that Magrethe Vestager from Denmark will replace Joaquin Almunia as the EU Commissioner for Competition.  Ms Vestager is to take office in November, subject to confirmation by the European Parliament.

The new Commissioner and her agenda will have a significant impact on business in the European Union in the upcoming years.  The EU Commissioner for Competition is one of the most powerful figures in Europe because this role has the ability to review deals, impose fines for cartel behaviour or abuse of dominance (monopolisation) and order the recovery of illegal subsidies.

Read the full article.

 

On 4 September 2014, the Court of Justice of the European Union (CJEU) confirmed that the maximum fine of 10 per cent of turnover imposed on the infringing subsidiary of a non-infringing parent company should be calculated on the basis of the turnover of that subsidiary, and not the parent company, if and to the extent that the infringement occurred during the period prior to the acquisition of the subsidiary by the parent company.

In 2007, the European Commission issued a decision fining the participants in a cartel operating on the market for zips and other fasteners.

Stocko Fasteners participated in the cartel as an independent company from 1991 until 1997, when it was acquired by the YKK Group and renamed YKK Stocko Fasteners.  It continued to participate in the cartel until 2001.  YKK Stocko Fasteners was fined €19.25 million for its participation in the cartel from 1991 to 1997, calculated on the basis of the YKK Group’s turnover.  The YKK Group companies (including YKK Stocko Fasteners) were fined €49 million jointly and severally for the period 1997 to 2001.

These fines were upheld by the EU General Court and the YKK Group appealed to the CJEU, inter alia, against the fine imposed on YKK Stocko Fasteners.  The YKK Group argued that the limit on fines of 10 per cent of total turnover prescribed by Article 23(2) of Regulation (EC) No 1/2003 should have been applied only to YKK Stocko Fasteners’ turnover and not to the turnover of the whole YKK Group.  The fine of €19.25 million imposed on YKK Stocko Fasteners amounted to significantly more than 10 per cent of that company’s total turnover in 2006, the business year preceding the imposition of the fine.

The CJEU’s Ruling

The CJEU observed that Article 23(2) of Regulation (EC) No 1/2003 provides that “For each undertaking… participating in the infringement, the fine shall not exceed 10 per cent of its total turnover in the preceding business year” (authors’ emphasis).  Stocko Fasteners was a separate undertaking until its acquisition by the YKK Group in 1997, so the CJEU found the Commission was wrong to treat YKK Stocko Fasteners and the rest of the YKK Group as a single undertaking for the purposes of the 10 per cent limit.  In fact, if YKK Stocko Fasteners did not pay the €19.25 million fine, the Commission could not enforce payment by the rest of the YKK Group.
The CJEU consequently decided to set aside the General Court’s judgment and annul the Commission’s decision, and reduced the fine imposed on YKK Stocko Fasteners to €2.79 million.  This figure corresponded with 10 per cent of its turnover as a YKK subsidiary in 2006, the year preceding the imposition of the fine, less an allowance for leniency.

Comment

Over recent years, the way fines against cartels are calculated and attributed has become ever more hotly debated.  In most cases, the central issue has been the attribution of the fine to parent companies for infringements by their subsidiaries, or to shareholding partners for infringements committed by their joint ventures before or after the acquisition of a stake in the venture.
The YKK case is valuable in this context in that it provides clear and unequivocal guidance on the application of the 10 per cent cap to fines imposed on companies that have changed ownership at some point during the period a cartel existed.  This ruling is, therefore, an important development that should be welcomed, noted and borne in mind in any future cases where successive ownership and responsibilities are at stake.