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CJEU Rules Maximum Cartel Fine Applies Only to Infringing Subsidiary Turnover and Reduces Fine by €17 Million

by | Sep 10, 2014 |

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 [...]

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Limitation Periods for Antitrust Damages Actions in The European Union

by , and | Jul 2, 2014 | ,

The last decade or so has seen a marked increase in antitrust damages actions brought before the national courts of the EU Member States. As things currently stand, such actions are governed by the various national laws of the 28 Member States. This patchwork of differing national rules further complicates the already complex underpinning of antitrust damages actions. In order to facilitate the initiation of such actions, the European institutions have recently agreed upon a new directive that provides for a minimum degree of harmonisation of certain rules governing actions for damages under national laws (the Damages Directive). Its promulgation is now just a formality.

One of the key, yet often overlooked, legal considerations in antitrust damages actions is the issue of limitation periods. For a defendant, a careful assessment of this issue is core to any cartel defence strategy and must be considered at the time of administrative proceedings, as it can have huge implications on the decision of whether or not an appeal should be considered (see the Morgan Crucible proceedings before the English courts, discussed below).

For a claimant, it is equally crucial in order to ensure that a claim is not time-barred and, as a result, left with no legal remedy. An action brought out of time will fail, no matter how robust the claim is perceived to be. A complication arises in this context, however, given the often cross-border nature of antitrust infringements, which means a claim may be brought in a number of Member States, each of which have different rules in place with respect to the length and calculation of limitation periods.

Calculating a given limitation period will often be a relatively straightforward exercise but complexities do sometimes arise. This is illustrated by the Morgan Crucible cases in the United Kingdom, which only recently resolved key questions relating to the calculation of limitation periods for the purposes of bringing an action before the English courts.

Against this backdrop, this special report looks at the limitation periods in those EU Member States that are arguably at the forefront of developments in antitrust damages actions: France, Germany, Italy, the Netherlands and the United Kingdom. In particular, this report analyses the complexities relating to limitation periods, as illustrated by the UK courts’ attempts to grapple with the matter in a complex line of cases, ending up before the UK Supreme Court. This special report also highlights potential problem areas with respect to the limitation periods that are not addressed by the Damages Directive and may adversely affect the interplay between the public and private enforcement system in the European Union.

Read the full Special Report here.



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EU Court Maintains Tough Stance Against Business Practices by Firms With Strong Market Power

by | Jun 16, 2014 |

The European Union’s court of first instance, the General Court, has confirmed the Commission’s decision in Intel and upheld a record fine of €1.06 billion. In so doing, it condemned a number of Intel’s business practices, including loyalty rebates. The General Court’s approach suggests that it views exclusionary business practices by a company in a position of dominance as anti-competitive by their very nature. On this basis, it is likely that the courts will continue to assess allegations of antitrust infringements by dominant companies without taking into account their effects on the market, and might condemn conduct that may not, in fact, be harmful.

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European Commission Uses EU State Aid Rules Against Aggressive Tax Planning by Multinational Companies

by | Jun 11, 2014 |

by Martina Maier and Philipp Werner (with contribution from Katharina Dietz)

The European Commission (Commission) took the first concrete action towards using EU State aid rules against aggressive tax planning by multinational companies by opening formal investigations against Ireland (Apple), Luxembourg (Fiat Finance and Trade) and the Netherlands (Starbucks). The Commission has concerns that these companies may have benefited from a selective advantage in the form of tax rulings by tax authorities that confer on them a preferential calculation of the taxable basis. The Commission has already announced that it investigates further cases of alleged State aid in the form of tax rulings in at least six EU Member States (including France and the UK) in the upcoming months.

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EU’s Top Court Rules Cartel Victims Can Claim Damages From Cartelists Despite No Contractual Link

by | Jun 10, 2014 | ,

by Martina Maier, Philipp Werner and David Henry

In a landmark ruling, the EU’s top court, the European Court of Justice (ECJ) in Kone and Others C-557/12 of 5 June 2014, has held that, where a cartel causes competing companies to increase their prices, the members of the cartel may be held liable for losses incurred by victims of those price increases.

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New EU Consumer Contracts Legislation Comes Into Force on 13 June 2014: E-Commerce Businesses Should Review Terms and Conditions of Sale Now

by | Jun 9, 2014 | ,

by Rohan Massey, Lionel Lesur, Veronica Pinotti, Vincent Schröder

All e-commerce businesses active in the European Economic Area (EEA) should review their current processes, policies, terms and documentation and implement any changes before 13 June 2014 to ensure they are compliant with the new national laws of the EU Member States implementing EU Directive No 2011/83/EU on consumer rights. In those Member States that fail to implement the Directive into their national laws, the provisions of the Directive will directly apply.

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Revised GBER Reduces Need For Commission Prior Approval of State Aid But Some Conditions Stricter Than Before

by | May 22, 2014 |

The European Commission (Commission) has adopted new rules that exempt public support given to companies by EU Member States, including regional and local authorities, from the requirement of prior notification to, and approval by, the Commission. These new rules, which revise the General Block Exemption Regulation (GBER) significantly extend the scope of support that can be granted by Member States without the Commission’s involvement. Some substantive conditions for exemption will, however, be stricter than before. Public authorities and aid beneficiaries are well advised to take the new opportunities and challenges introduced by the revised GBER into account when designing their aid measures.

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Commission Holds Goldman Sachs Liable for Former Portfolio Company’s Antitrust Infringement

by | Apr 7, 2014 | ,

by Veronica Pinotti, Lionel Lesur, Martino Sforza, Nicolò di Castelnuovo

In its decision of 2 April 2014 in relation to the underground and submarine high voltage power cables cartel case (COMP/39610), the European Commission (Commission) held the parent companies of the producers involved liable, on the basis that they had exercised decisive influence over the producers. The fines levied by the Commission in this case totalled €301.6 million. One of the businesses found liable was Goldman Sachs, the former owner of Prysmian, which is one of the companies that allegedly participated in the cartel.

This case has important implications for private equity funds. It confirms that, in principle, the Commission does not view private equity funds differently to other businesses for the purpose of the application of the parental liability doctrine.

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Significant Changes to UK Competition Regime Now Effective

by | Apr 2, 2014 | , ,

by Andrea Hamilton, David Henry, Aiste Slezeviciute

The Enterprise and Regulatory Reform Act 2013 took effect on 1 April 2014. Increased efficiencies and deterrence are the main drivers of this reform.

As of 1 April 2014, the Enterprise and Regulatory Reform Act 2013 (ERRA) brings about significant substantive and structural change to the United Kingdom’s competition regime. As part of a more general overhaul of this regime, the recently created Competition and Markets Authority (CMA) becomes fully operational, a revised criminal cartel offence enters into force, and the merger control regime becomes more robust. These changes bring in their wake a swathe of new investigatory and enforcement powers and penalties for failure to comply. Businesses are therefore urged to take note of these new changes and to be alert to compliance risk. This On the Subject summarizes some of the key aspects of the reforms.

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European Commission Adopts Revised Competition Regime for Technology Transfer Agreements

by | Mar 25, 2014 |

On 21 March 2014, the European Commission (Commission) adopted a revised set of rules for the assessment of technology transfer agreements by the Commission and national competition authorities. The new Technology Transfer Block Exemption Regulation and accompanying Technology Transfer Guidelines will enter into force on 1 May 2014. The revised regime provides clearer and, arguably much needed, guidance on licensing agreements. This enhanced clarity should make it easier for businesses to assess whether or not their licensing and other collaborative practices aimed at the transfer of technology are in compliance with EU competition law.

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