1. Commission decision on marine hoses cartel partially annulled by the General Court
On 17 May 2013, the General Court (“GC”) partially annulled a Commission decision finding that 11 companies participated in a cartel on the marine hoses market consisting of price- and quota-fixing, the fixing of sales conditions, the allocation of tenders, geographic market sharing as well as illegal information exchanges on price, sales volumes and procurement tenders.
The Commission concluded that the cartel lasted from April 1986 until May 2007. However, between 13 May 1997 and 21 June 1999 the cartel’s activity was almost non-existent due to friction between its members (“the intermediate period”). After June 1999 the cartel was reinforced by the same participants according to the same procedures. Therefore, the Commission concluded that the undertakings concerned participated in a single and continuous infringement (or, at least, a single repeated infringement). In any event, the Commission did not fine the undertakings for the intermediate period due to lack of evidence. Several undertakings appealed that decision. This article briefly discusses two cases in which the GC partially annulled the decision.
Trelleborg Industries and Trelleborg AB
In this judgment (T-147/09 and T-148/09) the main question was whether Trelleborg Industries and Trelleborg AB (“Trelleborg”) had participated in a single and continuous infringement. Trelleborg argued that the Commission had in general failed to prove the continuation of the cartel during the intermediate period, and in any event had no evidence of Trelleborg’s participation in that same period.
The Court agrees with Trelleborg that the Commission erred in law in finding that the infringement was continuous. Indeed, it was clear that during the intermediate period the cartel was almost non-existent. Even though some persons made efforts to restart the illegal cooperation there were, however, no elements indicating that Trelleborg had illegal contacts during the intermediate period, that they initiated a restart of the cartel, or were even aware of it. Accordingly, the interruption of their participation was sufficiently proven to rebut the Commission’s presumption of continued participation (even passively) to the cartel.
In addition, given that there were no indicia that Trelleborg was in contact with other cartel participants during the intermediate period, the Commission also wrongfully held that Trelleborg was liable for a single and continuous infringement because they did not publicly and unequivocally distance themselves from the cartel.
However, the Court found that the infringement of Trelleborg could still be qualified as a single, repeated infringement given that it participated to the cartel before and after the intermediate period and taking into account the identical nature (as well as parties, geographic scope, goods), as well as the single objective of the cartel before and after that period of interruption. Only when such common objective cannot be established, there would be separate infringements. Consequently, a fine for the whole infringement period can be imposed, as long as the Commission leaves out the interruption period (which it did). Accordingly, the infringement before the intermediate period was also not time-barred.
Finally, the Court believes that the re-categorisation of the infringement should not lead to a reduction of the fine. Indeed, the Commission’s categorisation error does not affect the duration of the infringement, especially because the Commission did not impose a fine for the intermediate period. Hence, taking into account the seriousness of the infringement and the particularly long period it lasted, the GC confirms the fines imposed.
Parker ITR SRL and Parker-Hannifin Corp
The main issue dealt with in the judgment of the GC (T-146/09) concerning the appeal launched by Parker ITR and Parker-Hannifin (together hereinafter “Parker”) is that of the principles of personal liability for competition law infringements and economic continuity.
The facts of the case are as follows. The rubber hose business, which was involved in the cartel and is now owned by Parker ITR (100% subsidiary of Parker-Hannifin), was established by Pirelli Treg. The rubber hose assets were taken over by ITR in 1990, which was later on (1993) acquired by Saiag. After starting discussions with Parker-Hannifin, ITR created the subsidiary ITR Rubber to which it transferred the assets of the rubber hose business on 1 January 2002. Parker-Hannifin acquired the ITR Rubber entity on 31 January 2002 and transformed it into Parker ITR. The Commission claimed that the principle of personal liability could only be applied to the transfer of the rubber hose assets from ITR to its subsidiary ITR Rubber. On the other hand, the principle of economic continuity dictated that with the transfer of ITR Rubber to Parker-Hannifin, which was a transfer of a legal entity and not solely a transfer of assets, the liability for the conduct of ITR (and ITR Rubber) prior to this transfer, was, together with the legal entity, transferred to Parker-Hannifin. Therefore the Commission has held Parker ITR Srl liable for the infringement from 1 April 1986 until 2 May 2007. Parker instead claimed that Parker ITR could not be held liable for the infringement before 1 January 2002 (date on which ITR transferred its rubber hose business to ITR Rubber) and that Parker-Hannifin could only be liable for the infringement after 31 January 2002 (date on which Parker-Hannifin acquired ITR Rubber).
The GC has now decided that the Commission was wrong to hold ITR Parker liable for the conduct of ITR prior to 1 January 2002. The GC confirms that the principle of economic continuity can only prevail on the principle of personal liability when 1) the legal entity which was responsible for the conduct has ceased (economically or legally) to exist, 2) when the transfer of the economic activities is done between two companies that on the moment of the transfer had strong structural links which link them economically and organisationally, or 3) when the transfer to a third party is abusive (i.e. not against prevailing market conditions) with the intention of avoiding antitrust penalties. As none of these circumstances is present in the case at hand (ITR still exists, ITR and Parker-Hannifin had no structural links and the transfer was not abusive), Parker ITR could not be held liable for the activities of ITR before the assets of ITR were transferred to ITR Rubber. The fact that ITR Rubber was transferred as a legal entity (instead of a transfer of assets) to Parker-Hannifin has no impact on this analysis.
As a consequence the Court also confirmed that the fine on Parker could not be increased because of the role of leader of the cartel of ITR between June 1999 to September 2001, as Parker cannot be held liable for the conduct of ITR during this period.
2. European Court of Justice affirms the need to show financial independence in order to overcome the rebuttable decisive influence presumption
On 8 May 2013, the European Court of Justice ("ECJ") rendered its judgement in the case Eni SpA v. Commission (C-508/11 P), upholding the General Court's judgement in its entirety. In particular, the ECJ upheld a finding of parental liability based on the rebuttable presumption of decisive influence exercised by an undertaking on its wholly owned subsidiary (the "presumption"). The ECJ upheld the finding of the General Court ("GC") that the presumption could be rebutted through evidence indicating financial independence of the subsidiary.
In its appeal, Eni SpA ("Eni") alleged that the GC had erred regarding the imputability of the subsidiary's infringement to the parent and the impossibility of rebutting that presumption, thereby rendering it strictly liable for the actions of the subsidiary. Eni alleged that a presumption was a violation of the rights of the accused, including Article 52 and 47 of the Charter of Fundamental Rights of the European Union (the "Charter") and Article 6 and 7 of the Convention for the Protection of Human Rights and Fundamental Freedoms (the "ECHR").
The ECJ upheld imputing conduct of a subsidiary to its parent for the purposes of Article 101, recalling that it is established case law that the rebuttable presumption by the undertaking on its wholly owned subsidiary can be overcome by the parent. The ECJ reaffirmed the compatibility of this presumption with the ECHR and the Charter precisely because of the "rebuttable" nature of the presumption. The ECJ dismissed Eni's arguments that the threshold to rebut the presumption was so unachievable that it rendered it strictly liable.
Furthermore, the ECJ upheld the GC's finding that "in the context of a group of companies, a company that coordinates, inter alia, financial investments within the group is in a position to regroup shareholdings in various companies and has the function of ensuring that they are run as one, including by means of such budgetary control." The ECJ thus concluded that to rebut the presumption not only operational but financial independence must be proven by the parent company.
3. European Court of Justice upholds finding that the Commission failed to act within the meaning of Article 265 TFEU after complaints by Ryanair
On 16 May 2013, the European Court of Justice ("ECJ") dismissed an appeal of the European Commission (the "Commission") against a judgment of the General Court ("GC") that held that the Commission failed to act within the meaning of Article 265 TFEU. On the basis of this article, the ECJ can establish that a Community institution (e.g. the Commission) has failed to act. In the present case, the Commission was found to have failed to adopt a decision on complaints by Ryanair concerning alleged unlawful state aid granted to Alitalia (C-615/11 P).
Ryanair had informed the Commission of alleged state aid through multiple letters in 2005 and 2006. When the Commission did not react to Ryanair's complaints, Ryanair sent a formal letter to the Commission demanding it to act on its complaint on the basis of Article 265 TFEU. Thereafter, Ryanair successfully brought an action before the GC, which declared that the Commission had failed to define its position on Ryanair's complaints of alleged state aid granted by the Italian government to Alitalia. The Commission appealed the GC's judgment before the ECJ, claiming in essence that the GC had misinterpreted Articles 10(1) and 20(2) of Regulation 659/1999 (the State Aid Regulation) and erred in the finding that Ryanair's letters were "complaints".
The ECJ dismissed these appeals as unfounded. It noted that on the basis of Article 20(2) of Regulation 659/1999, any interested party may inform the Commission of any alleged unlawful state aid. On the basis of Article 10(1) of Regulation 659/1999 the Commission is required to examine the possible existence of state aid and its compatibility with the internal market when it possesses information regarding alleged unlawful state aid. Information provided to the Commission on the basis of these articles is not subject to any formal requirements. The information should enable the Commission to identify the beneficiary of the alleged unlawful aid, the nature of the advantage granted to that beneficiary and the mechanism by which that advantage has been granted. Where the obligation of Article 10(1) is triggered, the Commission must adopt a decision setting out its position on the information provided. The ECJ found that the GC did not err in law by holding that the letters sent by Ryanair triggered an obligation for the Commission to adopt a decision and that by failing to do so, the Commission failed to act, thereby breaching Article 265 TFEU.
4. District Court of The Hague rules on preliminary defences in paraffin wax damage claims case
On 1 May 2013, the District Court of The Hague ruled in an interim decision on various preliminary defences in an antitrust 'follow-on' litigation case between CDC and Shell, Esso, Sasol and Total. The court rejected the defences regarding jurisdiction and the request to stay the proceedings, at least at this early stage.
On 1 October 2008, Shell, Esso, Sasol and Total were fined by the European Commission for an alleged infringement on the paraffin wax market. CDC is a professional claimant vehicle that has collected claims of companies that were allegedly harmed by the alleged infringement. CDC not only instituted claims against the direct participants in the alleged infringement, but also against their parent companies that were also addressees of the Commission's decision, among them Shell Petroleum NV and Total SA. In its judgment of 1 May 2013, the District Court ruled, inter alia, on preliminary defences relating to jurisdiction and on whether to stay the proceedings.
Regarding jurisdiction, the court ruled that the Dutch courts have jurisdiction to assess the claims against the 'anchor-defendant' Shell Petroleum NV given that it is established in the Netherlands. The court subsequently ruled that it also has jurisdiction with regard to the other defendants, as there was a sufficiently close relationship between the claims to jointly assess them against all the defendants. The court rejected Total's argument that a choice-of-forum clause would apply, as the choice-of-forum clause was included in a contract with its subsidiary and the mere fact that the parent company is part of the same group of companies as the subsidiary is insufficient to accept that the choice-of-forum clause also applies to the parent company.
Furthermore, the court found that at this stage, the proceedings do not have to be stayed although there are pending appeal proceedings before the General Court against the decision on which the damage claims were based. The court considers that it did not yet receive the full contents of the decision and the defendants did not yet submit a statement of defence. Therefore, there would not be any risk that the court will take any contradicting judgement yet. In addition, the court considers it likely that decisions will have to be made about issues unrelated to the validity of the Commission decision, for which there is no risk of contradictory decisions. Moreover, Shell did not appeal the Commission decision, and thus the assessment of these issues will have to take place irrespective of the outcome of the appeals.
The judgment confirms that Dutch courts tend to assume jurisdiction rather easily in international antitrust follow-on litigation cases. Furthermore, the decision confirms that courts assess on a case-by-case basis whether and when to stay proceedings. Earlier, the District Court of Rotterdam decided, on the basis of different grounds, not to stay proceedings in the Bitumen case, while the District Court of Amsterdam did stay proceedings in a case relating to Air cargo.
5. New developments in Dutch landmark cases concerning state aid and state guarantees
On 26 April 2013 the Dutch Supreme Court (the “Hoge Raad”) rendered two judgments in the state aid cases concerning guarantees provided by the Port of Rotterdam (owned by the municipality of Rotterdam). The judgments deal with crucial questions concerning: (i) the consequences that national courts need to attach to a finding that state aid was granted in violation of Article 108 (3) of the TFEU, (ii) such consequences in the particular context of state guarantees and (iii) the issue of imputability of state aid measures.
Since 2004 two disputes have been the subject of parallel litigation before the Dutch and European Courts. Both disputes concern guarantees provided by the Port of Rotterdam which have been found to constitute unlawful state aid at an earlier stage of the Dutch proceedings. Later in the proceedings, various issues relating to the consequences of these findings were raised. Although certainly not marking the end of the state aid cases, the most recent judgments of the Hoge Raad constitute an important new development in these cases.
In the Residex judgment, the Hoge Raad took into account the ruling by the European Court of Justice (“ECJ”) to the preliminary question it had raised. This question concerned the issue whether Article 108 (3) TFEU dictates that where the unlawful aid measure was implemented by granting the lender a guarantee that enabled the borrower to obtain a loan which would not have been available under normal market conditions, the national courts are bound - or at any rate authorised - to cancel the guarantee, even if that does not result in the cancellation of the loan. The ECJ had indicated in its judgment that the Hoge Raad may, in the absence of less onerous procedural measures, declare the cancellation of the guarantee if it takes the view that cancellation may lead to or facilitate the restoration of the competitive situation which existed before that guarantee was provided.
On 26 April 2013 the Hoge Raad gave effect to this judgment and referred the case back to the Court of Appeals. The Hoge Raad held that (i) the initial ruling by the Court of Appeals could not be upheld in view of the answer provided by the ECJ and that (ii) in order to assess whether cancellation of the guarantee would be the appropriate measure under national law, the Court of Appeal needs to assess whether in addition to the borrower, the lender should also have to be considered as the beneficiary of state aid. The proceedings will now be resumed before the Court of Appeal.
In the Commerz judgment the Hoge Raad again referred the case for a preliminary question to the ECJ. In this case, the preliminary question concerns the issue of imputability to the Dutch State of the aid (i.e. the guarantees) granted by the Port of Rotterdam. The facts of the case show that the director of the Port of Rotterdam not only acted alone when granting the guarantees but also intentionally kept secret this course of action, while ignoring the relevant Articles of Association requiring him to involve the Supervisory Board. Moreover, the Hoge Raad considers, on the basis of facts established by the Court of Appeals, that it can be assumed that the municipality of Rotterdam would not have supported the guarantees should it have been appropriately consulted. Against this background, the Hoge Raad now asks the ECJ to clarify if these circumstances would prevent it from imputing the granting of the state aid measures to, ultimately, the Dutch State. The next step in the proceedings will be the submission of briefs before the ECJ.