1. The ACM imposed fines on investment firms for cartel participation of a (former) portfolio company
On 30 December 2014, the Netherlands Authority for Consumers and Markets ("ACM") published two decisions (6306_20/216_OV and 6306_20/217_OV) in which it imposed fines of EUR 450,000 and EUR 1.5 million on three investment firms for the involvement of one of their former portfolio companies in an alleged cartel on the Dutch flour market.
The ACM had in 2010 issued a fining decision against 15 undertakings for their involvement in this alleged infringement. Addressees of that initial decision were Meneba Meel B.V, Rotterdam Brielselaan B.V. and Meneba Holding B.V., all part of the Meneba group ("Meneba"). On the basis of complaints by two other addressees of the decision and an advice by the ACM's Advisory Committee in the administrative phase of the proceedings, the ACM reassessed whether it should have attributed Meneba's conduct to the shareholders of Meneba Holding B.V. In the decisions now issued, the ACM concluded that the conduct of Meneba could indeed be attributed to its controlling shareholders on the basis of the parent liability doctrine. This doctrine entails that shareholders can be held liable if they can exercise decisive influence over their shareholdings and de facto do exercise this influence or are assumed to have done so during the period of an infringement.
It should be noted that on the basis of the parental liability doctrine, parent companies can, in principle, be held liable for the same amount as the entities actually participating in an infringement. The fines in the present case are, however, relatively modest due to specific circumstances. The amounts of the fines in this case can partly be explained by the statutory limit of 10% of the turnover in the year preceding the decision. The investment funds had divested Meneba at an earlier stage and therefore Meneba's turnover was not taken into account for the statutory maximum. Without this cap, the investment firms would have been fined EUR 97 million and EUR 135 million according to the decisions.
The decisions confirm that investment firms may be held liable for conduct of their portfolio companies, even in the absence of knowledge of anti-competitive conduct of these entities. Earlier in 2014, the European Commission already fined Goldman Sachs EUR 37.3 million for the alleged involvement of one of its portfolio companies in an infringement on the market for high voltage cables. Commissioner Almunia stated at the time that investment companies have the same responsibility for compliance with competition rules as corporates, and that they should take a careful look at the compliance culture of the companies they invest in. The ACM now makes it clear that it follows this approach.
2. The Court of Justice provided further guidance on long-term exclusivity clauses in distribution agreements
In an Order of 4 December 2014, the Court of Justice provided guidance on the compliance of long-term exclusive purchasing or "single branding" clauses in distribution agreements on the basis of preliminary questions from a Spanish civil court. The Court of Justice decided that long-term exclusivity clauses may not have the effect of restricting competition if the parties to the agreement have a limited market share and the duration of the exclusivity clause is not manifestly excessive of what is common in the relevant market.
The case concerned a supply agreement between oil supplier Galp and gas station operator Estación de Servicio Pozuelo, which included a single branding clause on the basis of which Estación de Servicio Pozuelo was bound to exclusively purchase oil products from Galp for a period of at least 30 years.
As already established in previous case law, the court noted that exclusive purchasing clauses cannot have the object to restrict competition but that the effects of the clauses need to be verified. The effects of the clause should not be assessed in isolation but account has to be taken of the legal and economic context, including similar contracts in the relevant market. If the market is not easily accessible as a result of a cumulation of long-term exclusivity clauses in the relevant market, it should be assessed whether the contract at stake significantly contributes to this foreclosure effect, taking into account the market position of the contract parties and the duration of the exclusivity. If the duration of the exclusivity is manifestly excessive of what is common on the relevant market, the clause will in principle be in violation of Article 101 TFEU. This will be a question to be decided by the referring court.
The Court of Justice continued and made an interesting addition by also considering that if the market share of GALP was only 3%, as stated by the referring court, it would be contrary to the purpose of free competition to declare a long-term exclusivity clause void, as this would make it more difficult for GALP to penetrate the market in favor of other parties with a stronger market position (in the case at hand 70% of the market was controlled by three competitors).
The case confirms that exclusive purchasing clauses with a duration that extends beyond the five year exemption for parties with a market share of 30% or less under Article 5 of the Block Exemption Regulation for vertical agreements, may very well still comply with competition law. Such clauses should be assessed on the basis of an effects-based approach, taking into account particularly the market position and relative duration of the clauses in the market context.
See for a more extensive analysis of the legal framework for exclusivity clauses in distribution agreements (in Dutch) S. Tuinenga, "Gas terug bij exclusiviteitsbedingen in de brandstofsector", M&M 2014-4.
3. The Court of Justice ruled that minimum fee provisions in collective agreements for "false self-employed" persons fall outside the scope of Article 101 TFEU
On 4 December 2014, the Court of Justice gave its ruling on whether fee conditions in collective agreements between employers and self-employed service providers, who are members of a trade union and perform the same activities as regular employees, fall outside the scope of Article 101 TFEU. The Court of Justice examined the characteristics of the self-employed persons and found that in this case they were "false self-employed" and accordingly ruled that the provisions fall outside of the scope of Article 101.
The case was brought by the FNV, a trade union representing the employees of orchestras and self-employed substitutes in the Netherlands. The FNV had started legal proceedings to obtain a declaratory judgment that fee conditions in collective agreements setting the minimum fees between employers and self-employed service providers are not contrary to Dutch and EU Competition law. After a negative judgment from the District Court, the question was on appeal referred to the Court of Justice.
In its analysis, the Court of Justice first recalled the established case law that collective agreements concluded between trade unions and employers relating to conditions of employment and working conditions fall outside the scope of Article 101 as they fulfil important social objectives.
The present case deals with a trade union representing regular employees and self-employed persons. The self-employed persons are in principle "undertakings" within the meaning of Article 101 and an organization representing them would then be an association of undertakings. The TFEU does not contain provisions for encouraging self-employed persons to conclude collective agreements with employers, like Articles 153 and 155 for regular employees. Therefore, in principle, provisions such as the one at issue would be within the scope of Article 101.
However, the applicability of Article 101 should be excluded for the "false self-employed," those service providers who find themselves in a situation comparable to that of employees. The Court of Justice recalled the criteria as established in earlier case law that a service provider may lose his status as an undertaking if he: (i) does not determine independently his own conduct on the market but is entirely dependent on the principal, (ii) does not bear any financial or commercial risks, and (iii) operates as an auxiliary within the principal's undertaking. The Court of Justice elaborated further adding that the "false self-employed" person also acts under the direction of his employer in regards to his freedom to choose the time, place and content of his work and forms an "integral part" of that employer's undertaking thereby forming an economic unit with that undertaking.
The Court of Justice also recalled that the fact that a person is classified as "self-employed" under national law does not prevent his classification as "employee" under EU law "if his independence is merely notional." The Court of Justice stated that the national courts will make that determination.
4. The General Court overturned SP fine for erroneous application of 10% fine cap
On 9 December 2014, the General Court ("GC") issued nine separate judgments on appeals against the Commission's second adoption of the Italian steel bar cartel decision. The GC decided in the appeal of SP (Joined Cases T-472/09, T-55/10) that the Commission wrongly applied the 10% statutory fine cap on the basis of the combined turnover of SP and its former parent company Lucchini, as they did not form a single economic entity at the time of the adoption of the decision.
The case has a long history, an earlier decision of the Commission had been annulled by the GC on the ground that the Commission applied the wrong basis for exercising its authority, namely Article 65(1) of the ECSC Treaty, which had expired at the time of the adoption of the decision.
This time the GC validated the basis for the Commission´s authority to act under Article 7(1) of Regulation 1/2003. Arguments relating to alleged procedural errors and breaches of rights of defense were rejected. However, the Commission should not have set the 10% of turnover fine cap on the combined turnover of SP and its former parent company Lucchini. SP and Lucchini formed one undertaking during the infringement but were subsequently split up before the Commission adopted its second decision. In those circumstances, the 10% fine cap should be applied on the basis of the turnover of the companies individually in the year preceding the decision. As SP did not generate any turnover in the year preceding the decision, the fine was fully annulled.
The judgment shows that events after the period of an infringement but before a decision is issued may have important consequences for the level of fines that can be imposed by the Commission.
5. The General Court dismissed the appeal lodged by the Pilkington group in the car glass cartel
On 17 December 2014, the General Court ("GC") dismissed in its entirety an action for annulment brought by Pilkington Group Limited, and various subsidiaries to challenge the Commission's decision fining Pilkington EUR 357 million for its participation in the car glass cartel.
In its decision of 2008, the Commission found that a group of manufacturers of glass and glazing products, including Pilkington, participated in a market-sharing cartel in the automotive glass sector. Pilkington lodged an appeal to annul the decision and to reduce the imposed fine.
The GC confirmed the Commission’s finding that Pilkington was involved in a single and continuous infringement of Article 101(1) TFEU. Although Pilkington maintains that the Commission failed to rely on clear and probative evidence to establish its participation in a single and continuous infringement, the GC emphasized that evidence of cartel activity is often only fragmentary and sparse so that it is often necessary to reconstruct certain details through deduction. (Please see our November 2014 Newsletter discussing how the Commission failed to provide sufficient evidence against Soliver for its alleged participation in the same cartel.)
As for the fine, the GC held that the contested decision was sufficiently clear to enable Pilkington to understand how the Commission examined the gravity and the duration of the infringement, as well as the method of calculation used in order to set the amount of fine. More specifically, the GC held that the rights of defence do not require that the undertakings concerned have the opportunity to make submissions on the way in which the Commission proposes to employ the imperative criteria of the gravity and the duration of the infringement when determining the amount of the fines. Therefore, it was sufficient for the Commission to indicate the main factual and legal elements on which it intended to base its calculation of the fines. It is not to state the manner in which it would use each piece of evidence in calculating the fine.
In addition, the GC concluded that the fine was proportionate and adequate, despite being one of the highest fines imposed; the Commission did not err in converting Pilkington's turnover (denominated in pounds sterling) into euros for the purposes of establishing that the 10% fine ceiling was not exceeded.
6. The Dutch Competition Authority found no abuse of dominant position of AstraZeneca
On 2 December 2014, the Dutch Competition Authority ("ACM") announced it closed its investigation into a possible abuse of a dominant position of the pharmaceutical company AstraZeneca. The ACM investigated the substantial price difference that AstraZeneca charged for the drug Nexium for use inside and outside hospitals. The ACM alleged that AstraZeneca offered the drug Nexium to Dutch hospitals with large discounts and in fact at below cost price in an effort to bind patients in the market for sales outside of hospitals. However, since the ACM failed to prove that AstraZeneca enjoyed a dominant position on any of the relevant markets, no violation of Article 24 of the Dutch Competition Act ("DCA") or Article 102 TFEU could be established.
In the decision, the ACM distinguished two separate product markets: the market for products sold inside hospitals, prescribed by medical specialists to patients (intramural) and the market for outside sales prescribed to those patients that have been discharged from the hospital (extramural). According to the ACM, there were spill-over effects from the intramural to the extramural market, because physicians are inclined to prescribe the same drug administered in the hospital to that patient and patients tend to continue using the same brand. As a result, ensuring a dominant position on the intramural market could foreclose competitors offering cheaper generic versions on the extramural market. Hence, AstraZeneca could offset the losses incurred from offering Nexium to hospitals below costs by selling at much higher prices outside the hospitals.
In the present case, the ACM decided that AstraZeneca did not enjoy a dominant position on the intramural market since its market share only amounted to approximately 30%. In addition, assessing the effects of intramural prescriptions on extramural use, it concluded that there is no relevant product market on which AstraZeneca could behave independently of its competitors within the meaning of Article 24 DCA or Article 102 TFEU. Therefore, the ACM concluded there was no sufficient basis to establish that AstraZeneca had a dominant position on any of the potential relevant markets.
7. The District Court of The Hague rejected a claim that assignments of cartel damage claims to claim vehicle CDC were contrary to public morals
In 2011, CDC Project 14 SA ("CDC"), a subsidiary of CDC Cartel Damages Claims Holding SA ("CDC SA"), filed a claim against Shell Petroleum N.V. and several other parties ("Shell c.s.") relating to an alleged cartel infringement on the market for paraffin-wax. CDC claims compensation for losses allegedly suffered by purchasers of paraffin-wax, who had assigned their claims to CDC. The assignments were governed by German law on the basis of a choice of law by the parties to the assignments.
Shell c.s. argued that the assignments to CDC were void under the applicable German law. They referred to a judgment issued in 2013 by the Landesgericht Düsseldorf in the cement cartel case (See our January 2014 newsletter article). In that case, the Landesgericht had ruled that the assignments of damage claims to another subsidiary of CDC SA were void because the assignments were contrary to the German public morals ("gute Sitten"). The violation of the public morals consisted of CDC SA's subsidiary not being able to pay for litigation costs made by the defendants, should it come to an adverse cost order at a later stage of the proceedings, which would lead to an unjustified shift of the whole risk for the proceedings' costs to the defendants. In the Dutch proceedings, Shell c.s. relied on this reasoning to argue that the assignments in the paraffin-wax case were also void under the applicable German law.
On 17 December 2014, the District Court of The Hague dismissed the challenge of Shell c.s. to the validity of the assignments. The District Court agreed with Shell c.s. that the moment of the assignment is in principle decisive when assessing whether the assignments are contrary to the public morals. The financial position of CDC at the time of the assignment is as such a relevant element. However, the decisive element is whether at the time of the assignments it was "objectively foreseeable" that the assignee would not be able to meet a possible future adverse cost order. In the German case, the Landesgericht had taken into account the development of CDC SA's subsidiairy's financial position after the assignments, more specifically, the official statement that it was not able to pay the court fees and certain statements of its directors during court sessions. The Court ruled that Shell c.s. insufficiently substantiated its claims by submitting nothing more than CDC's annual accounts and referring to the judgment in Germany. Furthermore, the Court noted that the security for procedural costs provided by CDC by way of a deposit was a clear distinction from the German proceedings.
The Court concluded that Shell c.s. had failed to sufficiently substantiate why it was objectively foreseeable that CDC would not be able to meet a future adverse cost order. Therefore, the Court dismissed the challenge of Shell c.s. to the assignments.
8. The District Court of Rotterdam reduced by 10% several fines for manipulating foreclosure real estate sales
On 18 December 2014, the District Court of Rotterdam ("District Court") released three judgments in relation to appeals lodged against fines imposed by the Dutch Competition Authority ("ACM") for anticompetitive conduct on the market for foreclosure real estate sales. The District Court in general upheld the ACM's reasoning, but reduced the fines in two judgments with reference to the substantial adverse financial effects that the applicants had already suffered as a result of the ACM decisions.
In 2013, the ACM fined 65 real estate traders for manipulating foreclosure sales between 2000 and 2009 (the ACM had already fined 14 other traders in 2011 for similar conduct). A number of traders appealed against the ACM's decisions citing various arguments. The Court, however, upheld the ACM's substantial reasoning as regards the establishment of the infringements, their single and continuous nature and the gravity of the conduct.
In relation to the amounts of the fines, however, the District Court decided to reduce these by 10% in two cases. The District Court held that the applicants had already been hit by substantial adverse financial effects as a result of the ACM's decisions. The District Court specifically considered the (announced) termination of banking relations to be a mitigating circumstance that justified a fine reduction of 10%. It did not apply this reasoning in the third judgment, though, as the ACM had already reduced that applicant's fine by more than 98% (to EUR 5,000) in the light of his limited financial capacity.
These three judgments accordingly demonstrate that the District Court is prepared to accept that indirect adverse consequences of ACM decisions, such as the (announced) termination of banking relations, may constitute mitigating circumstances when reviewing the amount of a fine.
9. The Trade and Industry Appeals Tribunal upheld a judgment annulling a fine in the home care sector due to a lack of conclusive evidence
On 18 December 2014, the Trade and Industry Appeals Tribunal ("Tribunal") upheld a judgment of the District Court of Rotterdam ("District Court") which had annulled a decision by the Dutch Competition Authority ("ACM"). The Tribunal agreed with the District Court that the alleged anticompetitive nature of an agreement could not be conclusively established given that a plausible non-anticompetitive alternative explanation for the conduct existed.
In 2010, the ACM imposed fines on CRG and Carinova of EUR 1.3 million and EUR 4.3 million respectively for anticompetitive conduct on the market for home care. Specifically, the ACM considered that the Parties had agreed upon a non-competition clause within the framework of a partnership called 'Plectrum', which effectively constituted a market sharing agreement. The Parties appealed against the ACM's decision and the District Court annulled the ACM's findings on 14 March 2013. It ruled that the evidence submitted by the ACM was insufficient to conclude that the non-competition clause was actually in place at the time of the alleged infringement. The District Court considered the alternative explanation that the non-competition clause would only apply to the period after the end of the alleged conduct. The fact that one of the parties appeared to consider itself bound by the non-competition clause could not lead to a different conclusion.
On appeal, the Tribunal upheld the District Court's judgment. Although the Tribunal considered that the evidence submitted could give rise to a suspicion that an agreement not to compete existed at the time of the alleged infringement, the Tribunal could not rule out that the Parties' alternative explanation was valid. The ACM accordingly did not provide conclusive evidence of the alleged infringement.
This judgment shows that the District Court and the Tribunal are prepared to critically assess evidence in cartel cases, taking into account plausible alternative explanations for the conduct.