1. European Court of Justice upholds €38 million fine for breach of seal
On 22 November 2012, the European Court of Justice ("ECJ") handed down its judgment in the broken seal case (Case C-89/11) in which the Commission had imposed a €38 million fine on the German energy company E.ON Energie ("E.ON"). The ECJ upheld the General Court judgment, in which E.ON's appeal against the Commission's decision was rejected.
E.ON had claimed in the proceedings with the General Court that the seal might have been defective, but it failed to adduce evidence substantiating this claim. This allegation was insufficient to rebut the evidence put forward by the Commission. The ECJ concluded that the General Court had not unduly reversed the burden of proof or set aside the principle of the presumption of innocence.
Advocate General Bot concluded in his opinion that the General Court had not exercised its unlimited jurisdiction when considering the proportionality of the fine. The ECJ did not follow the AG's opinion and held that the General Court gave sufficient reasons for its decision, adopted in the exercise of its unlimited jurisdiction, on the proportionality of the fine. In doing so, the ECJ applies the judgments in the cases Chalkor and KME (Cases C-272/09, C-386/10 and C-389/10). In these cases the ECJ held that the principle of effective judicial protection does not require that the General Court should be obliged to undertake of its own motion a new and comprehensive investigation of the file.
As to the level of the fine, E.ON argued that the fine should have been reduced because the Commission failed to demonstrate any evidence that the door of the sealed room had been opened or that documents had been removed. However, the ECJ held that the question whether someone had actually entered the room or not was irrelevant and dismissed E.ON's argument. The ECJ went on to assess the three reasons given by the General Court to explain its decision on the setting of the amount of the fine at €38 million namely: (i) the particularly serious nature of a breach of seal; (ii) the size of E.ON; and (iii) the need to ensure that the fine has a sufficient deterrent effect. The ECJ concluded that the General Court did not err in law with respect to any of the three reasons and rejected all of E.ON's arguments.
The District Court Rotterdam in its judgment of 21 June 2012 (LJN: BW9126, previously reported in Stibbe's Competition Law Newsletter of September 2012) held that in setting the level of the fine not only was the fact that the seal was broken relevant, but also the question of who had broken the seal, or to whom could the breach of seal be attributed to. In this case the undertaking had, within an hour after the breach of seal was discovered, informed the Dutch competition authority on who was responsible for breaking the seal. Subsequently, the Court concluded that the undertaking had provided more information than it was obliged to do. This led to a reduction of the fine by 10%.
In the case of Suez Environnement and Lyonnaise des Eaux, which dealt with a breach of seal, the Commission also took into account the immediate and constructive cooperation provided by the parties. The fine in this case amounted to €8 million.
The decisions in the E.ON case and the Suez Environnement case demonstrate a wider trend by the Commission to pursue procedural infringements during inspections using standalone procedures (see also the Competition Policy Newsletter, number 3 – 2011). This means that the procedural infringement is separated from the procedure regarding potential breaches of Articles 101 or 102 TFEU. At the same time, the General Court in the Nexans/Prysmian case (reported here in this newsletter) confirmed that objections against the way in which an inspection was conducted should be raised in the procedure concerning the infringement of Articles 101 or 102 TFEU.
2. EU allowed to bring damage claim for cartel infringements based on its own cartel decision
With respect to damage claims, the grand chamber of the European Court of Justice ("ECJ") issued a landmark judgment (Case C-199/11) on 6 November 2012. According to the judgment, the Commission is allowed to bring an action—on behalf of the EU—before a national court, claiming compensation for damage sustained by the EU as a result of an infringement of Article 101 TFEU, which the Commission founded itself in one of its decisions.
First of all the ECJ ruled that under Article 282 EC, the Commission was competent to represent the EU institutions in the national court case without need for specific authorisation for that purpose from those institutions and bodies.
On the second question dealing with the right to a fair hearing and the principle that nobody can be both a judge and party in its own case, the ECJ concluded that the EU, just as any other may rely on a breach of Article 101 of the TFEU in proceedings before a national court and claim compensation for the harm suffered when there is a causal relationship between that harm and the violation of Article 101 TFEU.
The principle of effective judicial protection laid down in Article 47 of the Charter of Fundamental Rights of the European Union did not bar the EU (represented by the EC Commission) from introducing such proceedings and thereby from relying on the Commission’s cartel infringement decision itself. The ECJ considered in that respect, among other things, that the manufacturers had the opportunity to have the Commission’s decision reviewed by the EU courts, which they had done. The Commission’s decision establishing the infringement was thus binding upon the judge in the national courts.
However, regarding the causal link and the damage, the situation is entirely different. Indeed, the ECJ clarifies that “the existence of loss and of direct causal link between the loss and the agreement or practice in question remains, by contrast, a matter to be assessed by the national court”.
The ECJ reached its conclusion also on the basis of the fact that the Commission only relied on information available in the non-confidential version of the decision and it recalled (or was it an implicit warning?) that Article 28(1) of Regulation 1/2003 prohibited the use of information gathered in the course of the investigation for purposes other than those of the investigation.
3. Court of Justice puts an end to the Odile Jacob saga: appeals against the judgments of the General Court relating to the 2004 Lagardère/Natexis/VUP merger decision dismissed
On 6 November 2012, the European Court of Justice ("ECJ") rendered the latest in a string of judgments (Case C-551/10, joined cases C-553/10 and C-554/10) related to the Commission’s merger decision of 7 January 2004 (Case COMP/M.2978). The latter decision approved the acquisition by Lagardère of publishing assets of Vivendi Universal Publishing ("VUP", now Editis), albeit subject to structural remedies (divestments).
In a nutshell, the cases find their origin in two actions for annulment lodged by Editions Odile Jacob against the Commission’s conditional clearance on the one hand, and the approval of Wendel Investissement as a suitable purchaser for the divested assets on the other (we have set aside the procedures related to access to documents, culminating in the ECJ judgment of 28 June 2012 in Case C-404/10). On 13 September 2010, the General Court dismissed the first of the two actions (Case T-279/04), while annulling the contested decision in the second case (Case T-452/04). Both judgments were appealed against, the former by Odile Jacob, the latter by the Commission and by Lagardère. Both appeals were dismissed by parallel judgments of 6 November 2012.
With regard to the conditional merger clearance, the ECJ confirms the General Court’s approach vis-à-vis the nominee holding arrangement through which Lagardère had asked one of its subsidiaries to temporarily take its place in order to purchase the target assets from VUP. In particular, the ECJ confirms that even if Lagardère might have infringed the time limits for notification of the concentration and/or the stand-still obligation, such infringements can give rise to penalties, but are of no relevance to the permissibility of the concentration as such. As for the allegation that the Commission had insufficiently motivated the characterisation of the nominee holding arrangement, the ECJ confirms that the Commission does not infringe its duty to state reasons “if, when exercising its power to examine concentrations, it does not include in its decision appraisal of a number of aspects of the concentration which appear to it to be manifestly irrelevant or insignificant or plainly of secondary importance to the appraisal of that concentration.” The ECJ dismisses Odile Jacob’s suggestions that the Commission erred in law in its assessment of the anti-competitive effects of the concentration and the adequacy of the commitments.
The second case relates to the decision approving Wendel as a suitable purchaser for the divested assets. At the outset, the ECJ recalls that the independence of the trustee was a component of the commitments which were undertaken by Lagardère and which had to be fully respected. In casu, however, it was clear that the trustee whose appointment was approved by the Commission was not independent from Editis. In light hereof, and contrary to what the appellants claimed, the General Court was under no obligation to examine whether the trustee had also acted in a way which was evidence of that lack of independence. The ECJ moreover dismisses the argument that the decision approving the sale of the divested assets to Wendel could not have been annulled absent a separate action for annulment against the trustee approval decision by Odile Jacob. According to the Court, it would be pointless and unnecessary formalism to hold that Odile Jacob should have brought a separate action against the trustee approval decision (of which it had received notice only after having instituted proceedings against the decision approving Wendel as a suitable purchaser).
4. General Court: Commission must limit inspection to activities where there is a suspicion of an infringement
On 14 November 2012, the General Court partly annulled two of the Commission's inspection decisions that provided the legal basis for unannounced inspections at the following two companies Nexans and Prysmian. Both companies are active in the electric cables sector. The judgments are especially noteworthy, because it is the first time the Court rules that the Commission cannot use an inspection decision to search premises for documents relating to all company activities. The inspection must be limited to those activities where there is a suspicion of an infringement. Below we will discuss the Nexans case (Case T-135/09). The Court essentially reached the same conclusion in the Prysmian case (Case T-140/09).
In January 2009, the Commission issued a decision according to which Nexans was required to submit to an inspection. The inspection decision referred to all electric cables and all the material associated with those cables, including, amongst others, high voltage underwater electric cables and high voltage underground electric cables. Nexans challenged the Commission's inspection decision, stating that the inspection decision was too vague and that the Commission did not have reasonable grounds to suspect that there had been a competition law infringement relating to all electric cables.
In its judgment the Court first of all ruled that by referring to all electric cables and all the material associated with those cables, the Commission had met its obligation to define the subject-matter of its investigation. The Court held that Nexans was able to assess the scope of its duty to cooperate and that it should have understood that it was in principle required to provide all information regarding all electric cables and all the material associated with such cables.
However, the Court found that in order to adopt the inspection decision, the Commission was required to have reasonable grounds to justify an inspection covering all the activities by Nexans relating to the electric cables and the material associated with such cables. The Court concluded that the Commission had not demonstrated that this was the case, except for high voltage underwater cables and underground electric cables. Therefore, the Court partly annulled the inspection decision.
The consequences of the partial annulment of the inspection decision remain unclear. It is however likely that the documents the Commission retrieved from the inspection that relate to products other than high voltage underwater cables and underground electric cables, cannot be used as evidence to establish that an infringement has been committed.
Nexans also contested the legality of the Commission copying certain computer files and requesting explanations from an employee. The Court however ruled that these acts are regarded as measures implementing the inspection decision and cannot be seen as appealable decisions. Consequently, the applications for annulment relating to these acts were declared inadmissible. Furthermore, the Court reiterated that the review of how an inspection has been conducted can be put forward in an appeal against the final fining decision.
5. General Court suspends Commission decision to publish "extended" non-confidential version of cartel decision
On 16 November 2012, the President of the General Court granted requests for interim relief from Akzo Nobel (Case T-345/12) and Degussa (Case T-341/12). The Commission was thus prevented from publishing confidential information provided to the Commission on the basis of its Leniency Notice.
In 2006, the Commission adopted a decision in which Akzo Nobel and Degussa, amongst others, were fined for participating in a cartel concerning bleaching chemicals. Subsequently, in September 2007, the Commission published a non-confidential version of that decision on its website. Last year however, the Commission made known its intention to publish an extended non-confidential version of the 2006 decision. This extended version would also disclose information provided to the Commission on the basis of the Leniency Notice. This information had not been published before for reasons of confidentiality. Akzo Nobel and Degussa took the matter to court. At the same time both parties lodged interim relief proceedings in which they requested the President of the General Court to suspend the decision to publish the extended non-confidential version.
First of all, the President assessed whether the condition of urgency was satisfied. The President ruled that it was likely that the applicant's fundamental rights could be seriously and irreparably harmed if the application for interim measures was dismissed on the basis of lack of urgency. According to the President, the condition of urgency was clearly met.
The President then went on to assess whether there was a prima facie case. This means that at least one of the pleas put forward by the applicant(s) has to call for a detailed examination that has to be carried out in the main proceedings rather than by the judge dealing with the application for interim measures. The applicants had put forward that the contested decision infringes the obligation of professional secrecy guaranteed by Article 339 of the TFEU. The President found that the question on this matter could not be easily answered and held that there was a prima facie case.
Noteworthy is that the President held that in the main proceedings it will be important to ascertain whether the applicants could rely on the fact that the provided information would enjoy, as information which is inherently confidential, an enduring protection from publication. Furthermore, in the interim proceedings of Akzo Nobel and Degussa the Commission took the position that the implementation of the law on cartels by means of actions for damages is part of the penalty for infringements of competition law for the purposes of paragraph 33 of the Leniency Notice. The President found that it will be necessary to examine to what extent this argument can be reconciled with the position which the Commission defended in the cases EnBW Energie Baden-Württemberg (Case T-344/08) and CDC Hydrogene Peroxide (Case T-437/08). According to the Commission, it cannot be accepted that the protection of the professional secrecy of undertakings which cooperate in cartel proceedings should be affected by an application for access to documents by a third party based exclusively on private law interests.
6. Dutch competition authority clears KPN's acquisition of service providers on local FttH-networks but takes different approach from OPTA on geographical market
On 2 November 2012, the Dutch competition authority ("NMa") published its decision in which it granted a licence to the Dutch telecom company KPN to acquire four service providers of Reggeborgh. The four service providers offer television, internet and fixed telephony services to consumers through Reggefiber’s optical fibre network (Fiber to the Home, “FttH”). Reggefiber in turn is a joint venture of KPN and Reggeborgh.
In its second-phase decision the NMa concluded that there are indications that the geographical dimension of the market for television, internet and fixed telephony is limited to the smallest catchment area of one infrastructure. In view of the still ongoing roll out of the FttH-networks this area comprises the area within a municipality where an FttH-network has been rolled out. The NMa unconditionally cleared the transaction. The NMa took into account that KPN does not only compete with service providers through Reggefiber’s optical fiber fibre network, but also with cable companies that have their own coax-networks and with various other providers through KPN's own copper network.
The case is interesting in that the NMa conducts a competition analysis on the basis of local markets. The decision therefore confirms that according to the NMa the gradual roll-out of the FttH-networks leads to diverging competitive conditions for electronic communications services. The local approach by the NMa differs from the decision-practice of the Dutch telecoms regulator (“OPTA”). OPTA so far considered in its three-yearly market analysis decisions that the geographic dimension of the retail-markets for fixed telephony and internet is national.
The case therefore demonstrates that, notwithstanding the NMa’s praise of the cooperation with OPTA in this case, both regulators feel free to adopt different approaches when analysing cases in the communications sector. On 1 January 2013, the NMa and OPTA are expected to merge into one new authority (The Netherlands Authority for Consumers and Markets (“ACM”)). It therefore remains to be seen to what extent discrepancies as in the underlying case are likely to still occur.
7. Dutch competition authority approves hospital concentrations: temporary price ceiling sufficient to meet concerns
On 2 November 2012, the Dutch competition authority ("NMa") gave the green light to three hospital concentrations after the parties committed themselves to observing a price ceiling.
Initially, the NMa concluded that the proposed concentrations would significantly impede competition on the Dutch market. The NMa therefore opened a second-phase investigation, in which it investigated several scenarios. One of the scenarios indicated that the health insurers would not have sufficient bargaining power to discipline the hospitals. In the absence of such disciplining by the health insurers the NMa considered that there would be a risk of the hospitals significantly raising their prices.
Subsequently, the hospitals committed themselves to observing a price ceiling in that they agreed not to increase the weighted average prices for the so called "DBC products in the B-segment". The NMa confined itself to considering whether the price ceiling met its concerns. It did not however provide a substantive assessment of the price ceiling.
The remedy is only temporary, though it remains unclear when the price ceiling will expire. It will be in force until at least 1 January 2016, which period can be extended with one year.
8. European Competition Network revises Model Leniency Programme
On 22 November 2012, the European Competition Network ("ECN") published its revised Model Leniency Programme ("MLP"). The revised MLP replaces the MLP of 2006. The most significant changes relate to the following aspects.
i. Summary application: all leniency applicants applying to the Commission in cartel cases covering more than three Member States will be able to submit a summary application. Previously, only the first applicant was entitled to use the summary application. A summary application is a uniform "short form" application, intended to relieve the administrative burden on both undertakings and competition authorities in large, cross-border cartel cases which involve multiple leniency filings.
ii. Standard template: the ECN has agreed on a standard template for summary applications, which can be used in all Member States.
iii. Scope of the MLP: the ECN clarified the scope of the MLP in that it also covers "secret cartels", such as "hub and spoke" cartels.
iv. Protection against disclosure of oral and written statements: third parties will not be granted access to any records of any statements, oral and written, before the competition authority has issued the statement of objections. Furthermore, the MLP stipulates that both oral and written statements will only be exchanged between competition authorities when the level of protection at the receiving competition authority is equivalent to the level of protection at the competition authority providing the information.
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