Competition Law Newsletter

Competition Law Newsletter

Competition Law Newsletter


1. Commission fines in Dutch bitumen cartel largely upheld by General Court  

On 27 September 2012, the General Court rendered sixteen judgments in the Dutch bitumen case. In fourteen cases, the appeal grounds were rejected in their entirety. In two cases, the European Commission's decision was partially annulled, leading to significant reductions of the fines imposed. An overview of all judgments in this case is included below.

On 13 September 2006 the Commission's decision ("Decision") in the Dutch bitumen case was adopted fining a large number of companies (suppliers of bitumen and construction companies using bitumen as input) for a cartel taking place between 1994 and 2002 and consisting of gross price fixing arrangements, the fixing of rebates and the operation of a monitoring system. Pending the appeals before the General Court, the first signs of follow-on civil litigation already appeared in Dutch courts (LJN: BP7518).

With fourteen out of sixteen cases in which the General Court upheld the Decision, the Commission appears to have delivered a convincing case. At this point, we limit ourselves to giving a brief overview of the cases in which the General Court annulled the Decision partially.

Shell Petroleum and Others

In this case (Case T-343/06) the fine was significantly reduced as the Court ruled that there was insufficient evidence to fine Shell for either instigating or leading the cartel. In its analysis the Court first of all noted that a possible role of instigator should be examined separately from a possible role as leader in the cartel.

In relation to the former the Commission had based its claim on evidence purportedly demonstrating that Shell was at the origin of the establishment of a rebate arrangement. The Court found that although the evidence relied upon by the Commission revealed that Shell had submitted proposals to establish a rebate, this evidence did not suffice to conclude whether it had done so on its own initiative or at the request of another participant (Koninklijke Volker Wessels Stevin). Also the claim that Shell had attempted to persuade ExxonMobil to join the cartel was rejected by the Court. In that context it referred to the vagueness of the underlying pieces of evidence which may not have pertained to the arrangements subject to the Decision. As a result the allegation of instigation could not be upheld.

In relation to the alleged role as a leader in the cartel, the Commission had relied on five types of alleged conduct by Shell (e.g. taking initiatives, having prominent roles in parts of the conduct) purportedly demonstrating its leading position in the behaviour. Upon review of the evidence the Court concluded that although Shell had played a particular role at the beginning of the cartel, it was insufficiently established whether it was the driving force of the cartel after the initial phase when the cartel developed into a multiparty arrangement. As a result, it could not be upheld that Shell qualified as a leader in the infringement, leading to a reduction of the fine as set out above.

Another noteworthy element of the judgment lies in the fact that the Court found that the 40% v. 60% shareholder relationship of the parents of the Shell group in the entity involved in the infringement, allowed the Commission to rely on the "presumption of decisive influence" (see Akzo Nobel and others v. Commission, Case C-97/08). As the two separate holding companies later on merged into a single parent and various close links had been present between the separate holding companies up to that moment, the Court concluded that "the situation was one analogous to a single company holding the entire share capital of its subsidiary".

Finally, on recidivism, the General Court rejected the argument that the Commission – in the earlier cartel cases that involved Shell – had not attributed the fine to the parent companies in the group at that time. As that circumstance does appear to have been decisive in ThyssenKrupp (Case T-144/07), it is unfortunate that the appeal before the European Court of Justice in that case, in which the exact standard for recidivism was to be clarified, has been withdrawn (case formerly registered under C-516/11).

Ballast Nedam Infra

In this case (Case T-362/06) the fine imposed was reduced as the Commission – for part of the duration of the infringement – had not communicated clearly in the statement of objections that it intended to hold the applicant liable in its capacity as a parent company of another participating entity. In this context, the Court considered it insufficient that the Commission did include a general statement in the introductory part of the Statement of Objections, indicating that it intended to hold jointly liable all parent companies for the behaviour of their infringing subsidiaries.

Due to this lack of clarity in the Statement of Objections, the Court concluded that the applicant had not been able to exercise its rights of defence which demand that the accused is enabled to respond to the allegations made. This resulted in the Court reducing the fine.

Case Outcome
Shell Petroleum and Others
Partial annulment of Commission Decision – failure to establish to requisite legal standard that the applicants played the role of instigator and leader in the infringement.
Reduction of the fine from €108 million to €81 million.
Ballast Nedam Infra
Partial annulment of Commission Decision – failure to inform applicant clearly of the capacity in which the Commission intended to hold the applicant liable for the behaviour.
Reduction of the fine from €4.65 million to €3.45 million.
Appeal dismissed in its entirety.
Nynäs Petroleum and Nynas Belgium
Appeal dismissed in its entirety.
Total Nederland
Appeal dismissed in its entirety.
Dura Vermeer Groep
Appeal dismissed in its entirety.
Dura Vermeer Infra
Appeal dismissed in its entirety.
Vermeer infrastructuur
Appeal dismissed in its entirety.
BAM NMB Wegenbouw and HBG Civiel
Appeal dismissed in its entirety.
Koninklijke BAM Groep
Appeal dismissed in its entirety.
Koninklijke Volker Wessels Stevin
Appeal dismissed in its entirety.
Koninklijke Wegenbouw Stevin
Appeal dismissed in its entirety.
Heijmans Infrastructuur
Appeal dismissed in its entirety.
Appeal dismissed in its entirety.
Ballast Nedam
Appeal dismissed in its entirety.
Kuwait Petroleum
Appeal dismissed in its entirety. 

2.  General Court annuls Greek Lignite decision – Commission must establish an actual or potential abuse of dominant position when adopting a decision on the basis of Article 102 juncto 106(1) of the TFEU
On 5 March 2008, the European Commission ("Commission") adopted its so-called Greek lignite decision ("Decision", C(2008)824 final), concerning the grant or maintenance by Greece of lignite extraction rights to Dimosia Epicheirisi Ilektrismou AE ("DEI").

Prior to the liberalisation of the electricity market, DEI enjoyed the exclusive right to produce, transport and supply electricity in Greece. Nowadays, DEI is a limited liability company controlled by the Greek State (which holds 51% of its shares). DEI holds approximately 97% of the market for the supply of lignite, i.e. a combustible used to fuel electricity plants, as well as more than 85% of the wholesale electricity market.

In its Decision, the Commission found that Greece had infringed Article 86(1) EC in combination with Article 82 EC (now Articles 106(1) and 102 of the TFEU) by granting and maintaining privileged rights in favour of DEI for the exploitation of lignite in Greece. In doing so, according to the Commission, Greece had created a situation resulting in an inequality of opportunity as regards access to primary combustibles for the purposes of producing electricity and it allowed DEI to maintain and reinforce its dominant position on the Greek wholesale electricity market by excluding or hindering new entrants.

By judgment of 20 September 2012 (Case T-169/08), the General Court annulled the Greek Lignite decision. The Court ruled that the Commission could not "base its argument solely on the question whether the inequality of opportunities between economic operators, thereby distorting competition, is the result of a "State measure". Instead, the Court agreed with DEI and Greece that for such infringement to be established, the Commission must also establish a real or potential abuse of dominance resulting from such measures.

By reference to its case law, the Court emphasised that the abuse of a dominant position by an undertaking enjoying an exclusive or special right may either result from the possibility of exercising that right in an abusive way or be a direct consequence of that right, e.g., if the mere exercise of the right gives rise to a situation where the undertaking is manifestly unable to meet demand or is induced to charge disproportionate prices. By contrast, the mere fact that the undertaking in question finds itself in an advantageous position in comparison with its competitors, by reason of a State measure, is in itself insufficient to constitute an abuse of a dominant position. As for the various precedents cited by the Commission, the Court found that the Commission had relied on formulations from other judgments without, however, taking into account the context of those judgments.

The contested decision was thus annulled, without it being necessary to examine the other pleas raised by DEI and Greece. 
3.  General Court rules that the Commission committed a manifest error of assessment in applying the private investor test in its decision approving all measures adopted by France in favour of SNCM 

On 11 September 2012, the General Court partially annulled the decision ("Decision", 2009/611/CE of 8 July 2008) of the European Commission ("Commission") approving all measures adopted by France in favour of the Société nationale maritime Corse-Méditerranée ("SNCM", Case T-565/08). More importantly, the General Court concluded that a recapitalisation in the amount of €158 million, corresponding to redundancy payments due in the event of liquidation, constituted state aid. The Commission did not bring sufficient evidence that the private investor test was met.

In 2002, the French state, through the Compagnie générale maritime et financière ("CGMF"), had made a capital investment of €76 million in SNCM. After a privatisation plan in 2006, 25% of its capital remained in the hands of CGMF. Furthermore, the privatisation also included a recapitalisation of SNCM for €158 million, an additional capital investment by CGMF of €8.75 million and an advance on a current account amounting to €38.5 million, aimed at financing a possible social plan put in place by the private companies that took over SNCM.

The Court started its reasoning by stating that in a social market economy, a prudent private investor, would not ignore its responsibility towards all of the undertaking’s shareholders as well as the evolution of the social, economic and environmental context. Consequently, taking responsibility for additional redundancy payments could be an appropriate and legitimate practice for a private investor to preserve brand image or stimulate social dialogue. Nevertheless, in this case the measure was not based on economic rationality, but rather on social or political factors. This led the Court to conclude that the Commission's Decision could not be upheld regarding the application of the principle of the private investor in a market economy.

Furthermore, in its Decision the Commission had concluded that the cost of liquidation would be higher than the cost of recapitalisation and, therefore, the recapitalisation did not constitute state aid. The Court ruled that the Commission should have assessed the economic activities of the French State in relation to which the rationale of the measure at issue must be assessed, but failed to do so. In addition, the Commission did not put forward sufficiently objective and verifiable evidence that (i) the payment of additional redundancy benefits is a sufficiently established practice amongst private undertakings, or (ii) the conduct of the French state was motivated by the reasonable likelihood that it could entail indirect material profit. 

4.  Rotterdam District Court reduces Wegener fines for failure to comply with remedies and revokes fining decisions addressed to supervisory board members 
On 27 September 2012, the Rotterdam District Court substantially reduced fines imposed by the Dutch Competition Authority ("NMa") on the Dutch media company Wegener and three of its executives for failure to comply with merger remedies. In addition, the District Court ruled that the NMa had wrongfully imposed personal fines on two supervisory board members for exercising de facto leadership over the infringement (LJN: BX8528). The District Court considered that some of the remedies imposed by the NMa were insufficiently clear, the fine imposed on Wegener was disproportionate, and supervisory board members can only be considered to exercise de facto leadership (which is required for the imposition of fines on private individuals) in exceptional circumstances.

With reference to the NMa's Remedy Guidelines 2007, the District Court emphasised that a remedy needs to be detailed, as well as written in clear and understandable terms and not open to several interpretations. The District Court considered that for the interpretation of the remedy, account should be taken of the text of the remedy and not of any unclear intentions of the NMa at the time of the imposition of the remedy. Consequently, the District Court concluded that not all of Wegener's conduct constituted a violation of the remedies, and the fines imposed on Wegener could therefore not be upheld. In addition, the District Court ruled that the 2009 fining policy rules of the Minister of Economic Affairs on the imposition of administrative fines did not provide enough nuance for this case to arrive at a proportionate fine. The District Court illustrated this by noting that a cartel infringement – the most serious form of anti-competitive behaviour – would lead to a much lower fine for Wegener in the region of Zeeuws-Vlaanderen, because the fine would have been based on the turnover in this region. The District Court thereupon reduced the fine imposed on Wegener from more than €19 million to €2 million and the fines imposed on Wegener's executives to €50,000 and €100,000.

The District Court furthermore ruled that the role of a member of a supervisory board can only in exceptional circumstances be reconciled with the notion of de facto leadership, as this role will usually be limited to supervision. A member of a supervisory board would need to have a special, for a member of a supervisory board atypical role within the company in order to qualify for de facto leadership. The fact that in this case the two members of the supervisory board had specific powers to approve certain decisions of the executive board with regard to the mutual independence of the newspapers was not sufficient to qualify them for de facto leadership, neither was the exercise of their role in practice. The District Court consequently concluded that the NMa was not authorized to impose personal fines on the members of the supervisory board, and revoked the decisions addressed to them. 
5.  Judge in interim proceedings suspends request for information due to failure to state reasons on necessity of the information request 
In its interim judgment of 5 September 2012 (LJN: BX6988), the President of the Rotterdam District Court suspended the periodic penalty payments imposed by the Netherlands Authority of the Financial Markets ("AFM") on three investment companies. The reason for the suspension is that according to the President, the AFM failed to state the reasons as to why a very broad request for information is necessary to establish an infringement or the scope of an infringement. As the same provisions of the General Administrative Law Act apply to company visits conducted by the Dutch Competition Authority ("NMa"), this judgment is also relevant in the context of competition law investigations.

In its judgment, the President considered that if a regulator demands access to a full email system, it should explain the reasons as to why this access is necessary in order to establish an infringement or the scope of an infringement. Unfortunately, the judge failed to elaborate on what such explanation should consist of. In addition, it does not become clear whether this duty to provide reasons also extends to more limited requests for information, for example to requests to access one specific email account, or to access the results of a search on the basis of specific key words. In an earlier case, the District Court Rotterdam ruled that a regulator should enable an alleged infringer to monitor that a regulator does not search documents outside the scope of an investigation (Fortis-Allianz, LJN: BH2647). This exercise would be made slightly easier for a company if a regulator is required to explain the reasons as to why certain documents are relevant in order to establish an infringement.

The President also ruled that the regulator in this case had an extended duty to state the reasons as to why it was necessary to obtain access to documents of specific employees considering the fact that a criminal investigation was already pending against these employees. The judge observes the risk of détournement de pouvoir. The President stresses that the AFM should not use its competences in order to assist the public prosecution office in a pending criminal investigation.

This raises the question whether a similar risk could arise in competition law cases. The answer to this question is probably negative. Article 91 of the Dutch Competition Act only allows the NMa to provide information on ongoing investigations to administrative bodies that are responsible for the enforcement of competition law provisions. The inverse situation is more likely: the NMa has in the past started investigations on the basis of evidence acquired from wiretaps of the public prosecution office.

Finally, the President also found that neither the duty to grant access nor the duty to provide information nor the duty to provide assistance as laid down in the General Administrative Law Act requires alleged infringers to send their full digital administration to a regulator. In order to obtain information, a regulator may only ask written or oral questions or make copies of relevant documents during a company visit. In practice the effect of this judgment may be limited as the regulator might be able to use a different avenue to come to the same result, namely the acquisition of documents. A regulator can for example visit a company to copy documents or it can threaten to conduct such a visit.
6.  English Court of Appeal rules on the "anchoring" of defendants 
On 13 September 2012, the English Court of Appeal handed down an important judgment (Case No: A3/2011/2818) on the "anchoring" of damage claims under English law. It decided that the United Kingdom subsidiary of one of the cartel members could be "used" as an anchor defendant by the claimants, even though the subsidiary itself had not been identified as a member of the cartel by the European Commission.

In 2003, the Commission found an infringement on the market for industrial tubes. In 2009, Toshiba Carrier UK Limited and others brought a suit for damages under English law against nine producers of industrial tubes. Of those nine defendants, only one was domiciled in the UK (KME Yorkshire Limited). This UK subsidiary of KME was not an addressee of the Commission's decision, but its non-UK parent company was. The claimants argued that the High Court should take jurisdiction over the UK subsidiary on the basis of Article 2 of the Brussels I Regulation (because it is domiciled in the UK) and over the non-UK companies on the basis of Article 6 of the Brussels I Regulation (because the claims are closely connected).

The defendants argued that the case against the UK subsidiary should be struck out because it had not been found by the Commission to have participated in the cartel. As a result, the defendants argued that the English court would no longer have jurisdiction over the entire case. However, on appeal the Court of Appeal dismissed the defendant's appeal. The Court of Appeal held that the allegations in the claim form included not only a follow-on claim based on the Commission's decision, but also a stand-alone claim for an infringement of Article 101 of the TFEU, alleging that the UK subsidiary participated in the cartel. Therefore, the Court of Appeal decided the appeal should be dismissed. 

7.  Commission publishes frequently asked questions on application of General Block Exemption Regulation for state aid 
On 19 September 2012, the European Commission ("Commission") issued a set of frequently asked questions ("FAQs") on the application of the General Block Exemption Regulation ("GBER"). The FAQs aim at clarifying questions on the application of the GBER that have arisen since it came into force.

The first chapter of the FAQs deals with questions regarding common provisions, such as the GBER's scope, definitions, conditions for exemption, transparency, et cetera. The second chapter contains questions and answers regarding the specific provisions for the different categories of aid, for example regional aid, aid for environmental protection, aid for research and development and innovation, et cetera.


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