McDermott’s Annual European Competition Review summarizes key developments in European competition rules. During the previous year, several new regulations, notices and guidelines were issued by the European Commission. There were also many interesting cases decided by the General Court and the Court of Justice of the European Union. All these new rules and judicial decisions may be relevant for your company and your day-to-day practice.
In our super-connected age, we can be inundated by information from numerous sources and it is difficult to select what is really relevant to one’s business. The purpose of this review is to help general counsel and their teams to be aware of the essential updates.
This review was prepared by the Firm’s European Competition Team in Brussels and Paris. Throughout 2019 they have monitored legal developments and drafted the summary reports.
On 16 January 2019, the Court of Justice of the European Union (CJEU) dismissed the appeal by the European Commission (Commission) against the 2017 judgment of the General Court of the European Union (GCEU). This annuls the Commission’s decision to block the proposed acquisition of TNT Express NV (TNT) by United Parcel Services (UPS) in its entirety (C-265/17 P). The judgment reminds the Commission that it must maintain a balance between the need for speed and the observance of the rights of the defence in merger proceedings.
By decision on 30 January 2013, the Commission blocked the proposed acquisition of TNT by UPS (Case M.6570).
On 7 March 2017, the GCEU annulled the Commission’s decision in its entirety on the grounds that (i) the Commission infringed UPS’s rights of defence by failing to communicate to UPS the final version of an econometric model on which it relied in its prohibition decision and that (ii) UPS might have been better able to defend itself if it had at its disposal the final version of that model.
The Commission challenged the GCEU judgment before the CJEU. First, the Commission argued that it was not required to communicate the final econometric analysis to UPS. Second, the Commission claimed that even if UPS’s rights of the defence had been infringed, the GCEU should have dismissed UPS’s plea alleging infringement of the rights of the defence as ineffective because a significant impediment to effective competition (“SIEC”) could in any event be established in Denmark and the Netherlands without having to rely on the econometric model concerned.
The case follows on from the Commission’s Animal Feed Phosphates cartel decision pursuant to which fines totalling €176 million were imposed on a number of producers of animal feed for price fixing and market sharing throughout the EEA.
During the investigation into the infringement, all the companies involved engaged in settlement discussions with the Commission with a view to obtaining a 10 percent reduction in the fine that would otherwise have been imposed had they not settled with the Commission. However, during the settlement process Timab, a subsidiary of the Roullier Group, decided to withdraw from the settlement procedure. The Commission therefore followed the standard administrative infringement procedure against Timab – despite the fact that it had entered into settlements with the other companies involved in the cartel. This was the first time, therefore, that the Commission rendered a decision in a so-called ‘hybrid’ case i.e. where some parties settle but others do not.
During the initial settlement discussions, several meetings were held between the Commission and Timab, during which evidence of the infringement was discussed. On the basis of the evidence available, the Commission informed Timab that a fine in the range of €41 to €44 million would be imposed on it. However, in its final decision of 20 July 2010, the Commission levied a fine of nearly €60 million on Timab.
Timab challenged the Commission’s decision before the General Court of the European Union (GCEU) in case T-456/10, claiming that the Commission had infringed its legitimate expectations regarding the amount of the fine, on the one hand, and its right not to incriminate itself, on the other. Such challenge was unsuccessful, however.
On 8 September 2016, the General Court of the EU (GCEU) handed down five judgments upholding a decision by the Commission of 19 June 2013 imposing fines on Lundbeck, an originator company, and Merck (the parent company of Generics), Arrow, Alpharma and Ranbaxy, four generic companies. The Commission found that the companies had entered into anticompetitive “pay-for-delay” settlement agreements whereby Lundbeck paid a lump sum to the generic companies in exchange for their agreement to delay their entry on the market for Citalopram, an anti-depressant drug.
This ruling is notable in that it is the first time that the GCEU has been asked to rule on patent settlements between originators and generic companies. The GCEU upheld the Commission’s reasoning, noting that the Commission’s reasoning in this case reflects the provisions of its Guidelines on the application of Article 101 of the Treaty on the Functioning of the EU (TFEU) to technology transfer agreements.
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.
The Court of Justice of the European Union (Court),the EU’s highest court, recently issued a judgment in case C-603/13 P, Galp Energía España SA and others v Commission, reducing the fine imposed on certain companies that were found to have engaged in cartel behaviour. This decision overturned a decision of the General Court of the European Union (GCEU), and is notable because the Court found that the GCEU had exceeded its jurisdiction in the case by considering facts that had not been previously introduced. .
By way of background, in October 2007, the European Commission (Commission) fined several companies for their participation in the bitumen cartel, including Energía España, SA, Petróleos de Portugal (Petrogal), SA and Galp Energia, SGPS, SA (Appellants). Among the infringing conduct, the Commission identified a monitoring system of the cartel and its compensation mechanism. When determining the fines, the Commission reduced the fine imposed on Appellants by 10% in light of their limited involvement in the infringement.
In response, Appellants challenged the Commission’s decision before the GCEU. The GCEU annulled the Commission’s decision as it applied to Appellants, because the Commission failed to establish that Appellants participated in both the monitoring system and the compensation mechanism. However, and critically, based on grounds and evidence that had not been included in the contested decision or on the appeal, the GCEU concluded on its own initiative that Appellants were aware of both the monitoring system and compensation mechanism. Consequently, even though the Commission failed to prove Appellants’ actual involvement in this conduct, the GCEU nevertheless held that the appellant companies could still be held liable because of their alleged awareness. Based on these findings, the GCEU decided to reduce the fine imposed on Appellants by an additional 4%.
Appellants challenged the GCEU’s ruling before the Court. Appellants claimed, among other things, that the GCEU exceeded its jurisdiction because it considered evidence, and substituted grounds for the decision, that had not been introduced in the Commission’s underlying proceedings. The Court agreed, finding that the GCEU exceeded its jurisdiction. The Court found that GCEU concluded that the Commission failed to establish that Appellants participated in the monitoring system and compensation mechanism of the cartel. Yet, the GCEU, based on arguments and facts not considered in the Commission’s proceedings or addressed in the GCEU appeal, continued to find that Appellants were aware of the infringing conduct and could still be held liable for the infringement. Therefore, the Court concluded that the GCEU exceeded its authority by ruling on its own initiative, based on arguments and evidence not before it, that Appellants were liable based on different grounds than those used by the Commission in the contested decision or on the appeal.
The Court’s ruling further clarifies that the GCEU had unlimited jurisdiction in this case to review the matter brought before it i.e. the fine imposed by the Commission. But, this did not give the GCEU the authority to alter the basis for the contested decision. In other words, the Court [...]
By two judgments of January 19, 2015 (Case T-404/12 Toshiba v. Commission and Case T-409/12 Mitsubishi Electric v. Commission), the General Court of the European Union (GCEU) upheld the fines of €131 million imposed by the European Commission (EC) on Toshiba and Mitsubishi for their participation in a cartel on the market for gas insulated switchgear (GIS), dismissing a line of reasoning essentially based on the principle of equal treatment.
The cartel, involving 20 European and Japanese undertakings, consisted in an agreement between competitors with the objective of coordinating the commercial activity worldwide of the members. The cartel members developed a quota system aimed at determining the market shares to allocate between them. In parallel, the cartelists reached an unwritten understanding, according to which GIS projects in the European market and Japanese market were reserved to European members and Japanese members of the cartel, respectively.
In its 2007 decision, the EC found a single and continuous infringement of competition law on the GIS product market between 1988 and 2004 and imposed fines on Toshiba and Mitsubishi, inter alios, of €86.25 million and €113.92 million, respectively. It also found the two Japanese undertakings jointly and severally liable for up to €4.65 million. Both companies challenged the EC decision, which led to two judgments of the GCEU (Case T-113/07 Toshiba v. Commission and Case T-133/07 Mitsubishi Electric v. Commission), subsequently upheld by the Court of Justice of the European Union (CJEU) (Case C-498/11 P Toshiba v. Commission and Case C-489/11 P Mitsubishi Electric v. Commission). The GCEU annulled the fines imposed on the two Japanese undertakings, finding that the Commission had infringed the principle of equal treatment in calculating their fines. The reference year used to calculate the fines for the applicants was indeed different from that chosen for the European participants in the infringement.
Having been asked to reexamine its decision, the EC recalculated the fines imposed on Toshiba and Mitsubishi and fixed them at €56.79 million and €74.82 million, respectively, without changing the amount of the fine for which they were held jointly and severally liable. The two Japanese undertakings then lodged a new appeal before the GCEU seeking the annulment of the revised fines. In support of their action, the applicants alleged, inter alia, an infringement of the principle of equal treatment as regards the determination of their level of culpability as compared to the European participants in the infringement and the starting amount of the fine.
First, Toshiba and Mitsubishi argued that they were less culpable than their European counterparts because their participation had been limited to agreeing not to enter the European Economic Area (EEA) market, whereas the European undertakings had distributed the GIS projects on that same market through active collusion. In other words, they contended that their participation only consisted in a failure to act and that, consequently, they could not be held as liable as the European undertakings for the implementation of the cartel.
The GCEU reiterated its settled case-law, according to which the [...]