Newsletter by our Competition Law practice group, published in October 2014.
- Cartes Bancaires and MasterCard judgments: object and effects restrictions revisited
- Court of Justice: 10% maximum applies to fine imposed on undertaking for its own behaviour, even if it was subsequently acquired by parent company
- Court of Justice provided further guidance on the facts that should be considered when deciding on the imputability of aid measures to Member States
- Dutch Court of Appeal confirmed availability of passing-on defence under Dutch law
- District Court of Rotterdam rejected assertion that Port of Rotterdam Authority has a dominant position
- Amsterdam Court rejected request for preliminary witness hearings in the Air Cargo antitrust litigation case
1. Cartes Bancaires and MasterCard judgments: object and effects restrictions revisited
On 11 September 2014, the Court of Justice issued an important judgment in one of the numerous pending competition law cases around credit card schemes. With its judgment in Cartes Bancaires, the Court of Justice annulled the General Court's ("GC") finding that a series of pricing measures adopted by the French Groupement des cartes bancaires (the "Grouping") had the "object" to restrict competition.
In 2007, the Commission had concluded that the pricing measures had both the object and effect of restricting competition. The GC dismissed the Grouping's appeal against the Commission's decision, inter alia holding that the Commission correctly found the pricing measures to have the "object" to restrict competition. The Cartes Bancaires judgment of the Court of Justice is relevant because of the clarification it provides on the application of the concept of "object restrictions" in the European Union's competition law provisions.
The Court of Justice notes that certain types of conduct reveal such a degree of harm to competition that an examination of the effects is unnecessary for the establishment of a violation of the competition rules. This is because such conduct, e.g. price-fixing between competitors, can be regarded by its very nature to be harmful to the proper functioning of normal competition.
In Cartes Bancaires, the Court of Justice noted that the GC failed to correctly apply its case law on restrictions by object. The GC had concluded that it was sufficient for conduct to have the "potential" to have a negative impact on competition for it to have the object to restrict competition. Referring to Court of Justice case law, the GC held that conduct that is "simply capable" of restricting competition has the object to restrict competition.
According to the Court of Justice, however, the GC erred in law by not taking into account that an object restriction can only be established when the conduct reveals in itself a sufficient degree of harm to competition. The Court of Justice noted that the GC had in no way explained in what respect the alleged restriction to competition revealed a sufficient degree of harm in order for it to be characterised as a restriction of competition by object. Moreover, the Court of Justice concluded that the GC did not properly assess the economic and legal context of the pricing measures at issue. The GC – and the Commission – did consider how the measures could have the effect of restricting competition but that is not the right assessment when establishing whether the relevant measures have the "object" to restrict competition. Moreover, the analysis of the possible negative effects on competition fell short of what has to be done to establish that the measures had the actual effect of restricting competition appreciably.
It should be stressed that the judgment of the Court of Justice was specific to the issues which were central to the Cartes Bancaires case and the way the Commission and the GC dealt with them. Nevertheless, the judgment in Cartes Bancaires does demarcate boundaries to the use of the "object" restriction to establish violations of Article 101 TFEU. The Court of Justice clarified that the Commission cannot establish that conduct has the object to restrict competition only on the basis that the conduct has the "potential" to restrict competition or that it is "simply capable" of restricting competition. The Court of Justice emphasized that the concept of restriction of competition "by object" can only be applied to those types of conduct which by their very nature reveal a sufficient degree of harm to competition. In practice the result is likely to be that European competition authorities will have to limit the "by object" approach to classical forms of collusion, like price fixing and market allocation between competitors and certain territorial restraints in vertical relations.
The Court of Justice also issued its judgment in MasterCard, another case relating to credit card schemes. The central concern in the MasterCard case were the multilateral interchange fees ("MIF") which are applicable within the Mastercard payment system. In this case, however, the Commission and the GC had established that the conduct (the MIF) has the effect of restricting competition.
The Court of Justice judgment provides relevant clarifications on concepts central to the application of Article 101 TFEU. The Court confirmed that the MasterCard MIF could be qualified as a decision of an association of undertakings, even after MasterCard was incorporated and listed on the stock-exchange. The Court also held that the Commission and the GC had correctly applied the "ancillary restraints" test by finding that the MasterCard system could still function without the MIF.
Finally, the Court of Justice explored the application of the "counterfactual" test and concluded that the GC had erred in applying it. The Court of Justice held that both for the application of the "ancillary restraints" test and in the context of establishing anti-competitive effects produced by certain conduct, the Commission and the GC may employ the "counterfactual" test. However, while in relation to the former it is decisive whether a legitimate main operation can function without the restrictive conduct in place, this is not necessarily the case for the latter. To determine whether conduct produces restrictive effects on competition, it is necessary to assess the competition within the actual context in a hypothetical situation without that conduct in place (counterfactual analysis). If a less restrictive situation is available, the GC is obliged to establish whether that hypothetical situation is likely to occur. In the present case, the GC found that a prohibition of ex post pricing would be able to replace the MIF and produce less restrictive effects on competition. However, the Court of Justice found that the GC failed to establish the likelihood of that scenario to materialise in the absence of the MIF. Nevertheless, this has no effect on the validity of the judgment of the GC – and the European Commission decision – since the Court of Justice found that the GC's overall conclusion was well-founded on other grounds. Therefore, the Court of Justice upheld the GC's analysis of the restrictive effects of the MIF, as well as its finding that the MIF did not satisfy the conditions for individual exemption under Article 101(3) TFEU.
2. Court of Justice: 10% maximum applies to fine imposed on undertaking for its own behaviour, even if it was subsequently acquired by parent company
On 4 September 2014, the Court of Justice handed down its judgment in the fasteners cartel (Case C-408/12 P). Although most of the appellants' claims were rejected, the Court recognised that the Commission, followed by the General Court ("GC"), had erred in law as regards the calculation of the fine imposed.
In 2007, the Commission found that YKK Stocko participated in a cartel in the fasteners sector for a period of more than nine years. During this period, YKK Stocko was acquired by YKK Corp and YKK Holding. The Commission held the new parent companies jointly and severally liable for the infringement for the part of the fine imposed on YKK Stocko after the acquisition. However, in determining the 10% turnover upper limit of the fine imposed solely on YKK Stocko for the period before the acquisition, the Commission used the consolidated turnover of the YKK group.
The Court of Justice held that the concept of an "undertaking participating in the infringement," for the purposes of Article 23(2) Reg. 1/2003, must necessarily be the same as for the application of Article 101 TFEU. An undertaking cannot be held responsible for infringements committed independently by its subsidiaries before the date of their acquisition. While the Commission correctly attributed responsibility, it failed to draw the necessary conclusions as regards the application of the 10% upper limit. The Commission, in calculating the fine, must take account of the specific turnover of the acquired undertaking rather than the entire group in order to apply the 10% upper limit.
Therefore, the Court of Justice reduced the part of the fine attributed to YKK Stocko, calculating it solely based on 10% of the YKK Stocko turnover.
3. Court of Justice provided further guidance on the facts that should be considered when deciding on the imputability of aid measures to Member States
The EU state aid rules are directed to Member States. In situations where public undertakings take measures which can be seen as conferring an advantage on another undertaking, the question can arise whether that measure should in fact be imputed to the Member State which owns the public undertaking. Against this background the Court of Justice has developed jurisprudence as to the imputability to the State of measures taken by undertakings.
In the seminal case Stardust Marine the Court of Justice ruled in 2002 that in order to impute a certain measure taken by an undertaking to the State, "the public authorities must be regarded as having been involved, in one way or another, in the adoption of those measures by the public undertaking". The Court of Justice identified a set of indicators which can assist in establishing whether the public authorities must be regarded as having been involved in the adoption of a measure. In the context of a long-running case concerning guarantees granted by the Port of Rotterdam, the Dutch Supreme Court (Hoge Raad) considered that it was unclear on the basis of the indicators identified by the Court of Justice whether a measure can be imputed to the State on the basis of general, institutional (or "organic") indicators or whether it needs to be established that the State was in fact involved in the adoption of the specific measure at hand. The Hoge Raad suspended the case and asked for a preliminary ruling to the Court of Justice.
The facts of the case showed that the director of the Port of Rotterdam not only acted alone when granting the guarantees but that he also intentionally kept secret this course of action, while ignoring the relevant Articles of Association requiring him to involve the Supervisory Board. The Hoge Raad considered that it had to be assumed that the State (the municipality of Rotterdam) would not have supported the decision to grant the guarantees had it been properly consulted.
On 17 September 2014, the Court of Justice rendered judgment in Commerz Nederland (Case C-242/13). The Court of Justice considered that the organisational links between public undertakings and public authorities tend to demonstrate, in principle, that the public authorities were involved or that it was unlikely that they were not involved in the provision of a measure, such as the decision to grant guarantees. Moreover, the fact that a director of a public undertaking acts improperly and outside the boundaries of his competence, does not, of itself, exclude that the measure can be imputed to the State. The Court of Justice effectively held that all factual circumstances concerning a specific measure are relevant, including the possibility that the public authority would have opposed the measure had it been aware of the intention to adopt it. With reference to the specific facts concerning the decision to grant the guarantees, the Court of Justice held that they could exclude imputability to the State provided that it may be inferred from those facts that the guarantees at issue were provided without the involvement of the State.
4. Dutch Court of Appeal confirmed availability of passing-on defence under Dutch law
A hotly debated topic with regard to antitrust damage claims is whether defendants can rely on the passing-on defence. That is, defendants have sought to rely on the argument that direct purchasers suffered no or less damage because they "passed-on" some or all of the alleged damage to the next party in the distribution chain. While case law on this topic already existed in, inter alia, Germany, France and the United Kingdom, a judgment from the Court of Appeal of Arnhem-Leeuwarden of 2 September 2014 is the first authoritative decision on this topic in the Netherlands. This decision confirmed the availability of the passing-on defence.
The case relates to a claim by TenneT against ABB, following on from the 2007 European Commission’s Gas Insulated Switchgear ("GIS") fining decision. The Commission fined ABB Ltd. for its participation in a competition law infringement in the GIS market from 1988 until 2004. TenneT filed a claim for damages with the Arnhem District Court, arguing that it had paid a "cartel overcharge" for the GIS-installation it purchased in 1998 from ABB BV, a Dutch subsidiary of ABB Ltd. The District Court held that both ABB BV and ABB Ltd had committed an unlawful act against TenneT. Furthermore, it concluded essentially that Dutch law barred ABB from raising the passing-on defence. Both ABB entities appealed this judgment. The Arnhem-Leeuwarden Court of Appeal decided in an earlier interim judgment that the District Court had violated the fundamental principle to hear both parties on the passing-on issue and annulled the judgment.
On the merits, the Court of Appeal held that in principle, TenneT suffered a loss on the day it paid an "overcharge" on the goods that were purchased. However, subsequent events are relevant to the damages calculation. If TenneT passed on the alleged overcharge to its own customers – as ABB argued it had – the damages should be reduced accordingly. In this context, the Court of Appeal noted that, as a matter of European law, TenneT’s customers could also sue ABB for the loss they suffered as indirect purchasers of a cartelized product. Therefore, if the passing-on defence were not available to ABB, ABB would potentially face multiple liability for the same overcharge. The Court of Appeal also recognised that if indirect purchasers do not bring claims, ABB might not be stripped of all the cartel profits it earned as a result of the infringement. However, in the view of the Court of Appeal, stripping the defendant of illegal profits is not the aim of antitrust damage claims. The primary purpose of Dutch tort law is compensatory.
In a related case of TenneT against various entities of the Alstom Group ("Alstom") before the District Court of Gelderland (TenneT/Alstom), the District Court decided that also Alstom is liable for selling TenneT an overcharged GIS-installation as a result of the competition law infringement established by the Commission. With regard to the claimed damages the District Court considered, with reference to the above judgement of the Court of Appeal, that both parties should have the opportunity to submit their views on, inter alia, the passing-on of overcharges by TenneT.
5. District Court of Rotterdam rejected assertion that Port of Rotterdam Authority has a dominant position
On 24 September 2014, the District Court of Rotterdam dismissed claims by Europe Container Terminals ("ECT") that the Port of Rotterdam Authority abused its dominant position causing over EUR 1 billion in damage. The allegation of dominance was insufficiently substantiated.
ECT, an operator of container terminals, had claimed that the Port of Rotterdam Authority unlawfully created substantial overcapacity on the market for container terminals by developing two additional terminals in violation of promises and agreements with ECT. In addition, ECT would have been discriminated against in comparison to its competitors in the port. This behaviour could be qualified as abuse of dominance according to ECT.
The Court considered that the relevant product market is the market for the leasing of harbour plots. With regard to the geographic market, the Court notes that ECT disputed the Port of Rotterdam Authority's statements that this was the Hamburg – Le Havre range but did not clarify what it considered to be the actual geographic market.
The Court rejected ECT's argument that the Port of Rotterdam Authority could behave independently from its competitors, indicating a dominant position, by virtue of ECT being "locked" in the Rotterdam port on the basis of long-term leasing agreements and substantial investments in the harbour. The Court referred to a 2005 report from the Dutch Competition Authority ("ACM"), which concluded that the Port of Rotterdam Authority did not have a dominant position. In this report, the ACM considered that, contrary to ECT's statements, long-term leasing agreements protected the renters of harbour plots from price increases, and against the risk of termination of the agreement before investments were recouped. In addition, the evidence in the case file showed that ECT and its competitors were large international firms with considerable countervailing buyer power. For these reasons, the Court decided that ECT insufficiently substantiated that the Port of Rotterdam Authority was dominant on the market for the leasing of harbour plots.
In line with an earlier ruling of the Dutch Supreme Court of 21 December 2012 (IATA/ANVR), this judgment shows that the threshold for stand-alone civil claims based on competition law is relatively high and that such claims need to be well-substantiated.
6. Amsterdam Court rejected request for preliminary witness hearings in the Air Cargo antitrust litigation case
On 25 September 2014, the Amsterdam District Court rejected a request by the claims vehicle Stichting Cartel Compensation ("SCC") to hold preliminary witness hearings. SCC had requested to hear eight individuals on the existence, start, end, duration, scope, content and factual organisation of an alleged cartel in the Air Cargo market. The defendant challenged that SCC had sufficient interest in the preliminary witness examinations. The European Commission issued a decision on the precise topic of SCC's allegations and, once that decision is final, national courts cannot depart form this decision on the basis of Article 16 Regulation 1/2003 (the Masterfoods doctrine). There is no good reason why SCC should not await the publication of the decision and the outcome of the various appeals against this decision.
The Amsterdam Court held that as national courts are bound by the Commission's findings, SCC has no interest in examining witnesses on the start, end, duration and scope of the alleged infringement. In respect of each of those elements, the European Commission decision will ultimately be decisive. Furthermore, SCC had not provided any concrete indication of a longer duration of the infringement than established by the Commission.
During the hearing, SCC had indicated that it also wanted to examine witnesses on the implementation of the alleged agreements, techniques and methodologies used and the effects of the alleged agreements. The Amsterdam Court ruled that it had also failed to substantiate its interests in examining witnesses on these topics.