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Competition Law Newsletter

Competition Law Newsletter

Competition Law Newsletter

01.05.2015 NL law

1. The Court of Justice confirmed that cartel fines may be based on sales not directly affected by the cartel
2. The European Court of Human Rights ruled that national safeguards in dawn raids should be applied by Member States in a concrete and effective manner
3. ACM published its enforcement policy and priorities in the area of vertical agreements
4. Belgium court reconfirmed that the finding of an elevators cartel does not imply that all customers suffered damage as a result of the cartel

1. The Court of Justice confirmed that cartel fines may be based on sales not directly affected by the cartel

On 23 April 2015, the Court of Justice dismissed all grounds of appeal brought by LG Display and LG Display Taiwan and upheld the fine for their participation in the liquid-crystal display panels cartel (C-227/14 P). The judgment confirms that sales from a joint venture to the parent companies may be counted in calculating a fine over the affected turnover.

The Commission has discretion to determine its fining policy for violations of the cartel prohibition. In its Fining Guidelines, the Commission has set out that it will base the fine on the value of sales "to which the infringement directly or indirectly" relates.

In the judgment at hand, the Court of Justice ruled that on the basis of this criterion the Commission cannot base the fine on sales of products and services which fall outside of the scope of the established cartel. At the same time, however, the Commission does not have to limit itself to basing the fine only on sales for which it can establish that they were actually affected by the cartel.

In the case at hand, a specific regime applied to sales from the joint venture to the parent companies, isolating the prices for such sales from the cartel behavior. The Court ruled that the Commission could nevertheless take those sales into account as affected sales for the calculation of the fine.
        
2. The European Court of Human Rights ruled that national safeguards in dawn raids should be applied by Member States in a concrete and effective manner

On 2 April 2015, the European Court of Human Rights ("ECtHR") ruled that the French state breached two companies' fundamental rights under the European Convention on Human Rights ("ECHR"). The ruling concerns the events in the aftermath of unannounced inspections that were conducted by the French competition authority in 2007. The Court held that these violated the companies' right to a fair trial (Art. 6 ECHR) as well as their right for respect for private and family life, home and correspondence (Art. 8 ECHR).

In 2007, the French competition authority conducted inspections at the premises of two construction companies (Vinci Construction and GTM Génie Civil and Services) and seized a large number of documents. These included entire email accounts of employees that also contained privileged correspondence and documents out of scope of the investigation. After unsuccessfully exhausting the national remedies, the companies lodged a complaint before the ECtHR. Among others, the companies claimed that their rights under Art. 6 ECHR had been infringed because they had been unable to lodge a full appeal (i.e. both on the facts and the law) against the decision authorizing the inspections. In addition, the companies argued that the French state had interfered disproportionally with their rights under Art. 8 ECHR through the massive and indiscriminate seizure of documents.

In line with its case law, the ECtHR first concluded that the French appeal procedure in place at the time of the inspections indeed violated Art. 6 ECHR. The Court also found that Art. 8 ECHR had been breached. At the outset, it determined that the inspections in themselves were not disproportionate to the goal pursued, namely the investigation of potential anticompetitive practices. The ECtHR then reviewed whether the existing safeguards in French law against disproportionate conduct had been applied in a concrete and effective manner. Since the companies had been unable to challenge the lawfulness of the seizure of privileged and out of scope documents during the inspections, the ECtHR noted that they should have had that opportunity afterwards. On appeal, however, the judge that reviewed the seizure had only looked at the lawfulness of the formal context in which the inspections had occurred. No concrete review of proportionality had taken place in relation to each of the privileged and out of scope documents that were specifically identified as such by the companies. The ECtHR considered this an infringement of Art. 8 ECHR and awarded damages of EUR15,000.

This ruling shows that legal safeguards regarding the seizure of privileged correspondence and out of scope documents during unannounced inspections must be applied in a concrete and effective manner by Member States. If only on appeal a company can argue, for the first time, that specific documents should not have been seized, the judge that reviews the lawfulness of the inspections must conduct a concrete examination of each of those documents and, if necessary, order their return.

The Court's ruling comes several months after a judgment in which it found that unannounced inspections by the Czech Antitrust Office had also violated Art. 8 ECHR (see: Newsletter December 2014). After having stopped conducting unannounced inspections for a few months, the Czech Antitrust Office resumed its activities earlier this year.
 
3. ACM published its enforcement policy and priorities in the area of vertical agreements

On 20 April 2015, the Dutch competition authority ("ACM") published a long-awaited document setting out its strategy and priorities concerning vertical agreements. The ACM will give priority to agreements which can be harmful to consumers and it will focus on cases in which it can intervene effectively, for instance by clarifying a legal norm. The enforcement priorities of the ACM are therefore in line with the EU Commission Guidelines on Vertical Restraints and EU competition law and practice more generally. The ACM policy document does not contain guidance on what is and what is not allowed in the interaction between suppliers and retailers in, for instance, the fast-moving consumer goods area. The implication is that the ACM does not consider this a priority area, other than for example the German competition authority.

The ACM first sets out the existing legal framework applicable to vertical agreements and summarizes the very limited ACM enforcement practice in this field. So far, the ACM has left the application of the competition rules to vertical agreements mainly to private parties and thus civil law courts. Recent market developments and the response of other national competition authorities ("NCAs") have prompted the ACM to provide insight on its enforcement policy in relation to vertical agreements.

In deciding whether or not to take enforcement action, the ACM will normally first examine the degree of market power of the parties involved in the vertical agreement within the specific distribution chain and the existence of similar parallel vertical agreements in the market. The ACM says it will also examine whether retailers forced the supplier to enter into the vertical agreement at issue (although the ACM does not explain what the relevant test is to establish such coercion). The ACM also pledges to consider possible efficiency gains. In five practical scenarios the ACM illustrates how it will consider these factors in a specific case.

With the policy document, the ACM underscores it is actively monitoring developments in the enforcement of the competition rules in relation to vertical restraints by both the Commission and NCAs. Yet, the ACM reconfirms its view that in the absence of market power vertical agreements are more often than not beneficial for consumers. The ACM document is a useful reconfirmation of the relatively lenient ACM approach to vertical restraints. At the same time, it can serve as a roadmap for complainants who are calling on the ACM to take action in the area of vertical restraints.

4. Belgium court reconfirmed that the finding of an elevators cartel does not imply that all customers suffered damage as a result of the cartel

On 24 April 2015, the Commercial Court in Brussels dismissed the Belgian State’s request for compensation for damages allegedly caused by four elevator companies for overcharges for the maintenance of elevators. The claim followed the Commission decision of 21 February 2007 finding a market sharing agreement that violated EU competition law. The Commercial Court judgment follows a similar decision of the same court relating to a claim for damages from the European Commission (see: Newsletter December 2014).

The Commercial Court considered that the 2007 Commission decision established that the four lift producers committed “a fault” under Belgian tort law but it does not constitute evidence of the application of a surcharge in the contracts between the plaintiffs and the four elevator manufacturers.

The Commercial Court analyzed whether there was damage and a causal link. It concluded that the Belgian State had not established that it suffered any damage in connection with the contracts for the elevators concerned. The conclusion was reached on the basis of current Belgian legislation. The Court considered that the regime envisaged in the European Directive on Antitrust Damages Actions is not yet the relevant legislative framework.

The Commercial Court stated that the 2007 decision of the Commission did not establish a price increasing effect. Referring to the specific nature of a cartel existing of market allocation (as in the elevators cartel) and the presence of public tenders, no automatic price effect of the cartel could be assumed. The Commercial Court also referred to the participation in such tenders by elevator producers which were not part of the cartel. The Court also rejected claims based on the Belgian public procurement law to  impose an additional sanction. Such sanction could amount to three times the overcharge. The Court held that it has no jurisdiction to rule on this claim and that in any event it was unfounded as no overcharge was proven.

Team

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