Short Reads

General Court confirms that the financial position of shareholders and the possibility to increase credit facilities are relevant when assessing an inability to pay request

General Court confirms that the financial position of shareholders an

General Court confirms that the financial position of shareholders and the possibility to increase credit facilities are relevant when assessing an inability to pay request

01.07.2016 EU law

On 2 June 2016, the General Court ("GC") dismissed an appeal lodged by four companies in the Celsa-group ("GSW") against the European Commission's prestressing steel decision. The companies raised several grounds of appeal which were all rejected by the GC. Of particular interest is that the GC refused to accept the application for inability to pay by the companies.

 

If the imposition of a fine "irretrievably jeopardises the economic viability of the undertaking concerned and causes its assets to lose all their value", the Commission may reduce the fine. The four companies requested such a reduction, arguing that they were unable to pay the EUR 54 million fine and that their economic viability would be jeopardised if the fine was imposed. The Commission rejected their requests on two grounds. First of all, it considered that GSW should be able to increase its short-term credit facilities. Secondly, it found that the Celsa-group and its family owners had sufficient financial resources at their disposal, which they could use to aid GSW.

GSW appealed this decision before the GC. The GC considered that if it could be shown that GSW had opportunities to increase its credit facilities or that its shareholders possessed important financial means, the rejection of GSW's request based on inability to pay would be justified. Taking into account the non-used credit facilities, total assets, consolidated cash flow and a recent refinancing, the GC agreed with the Commission that it was possible for the companies to obtain the necessary funding or guarantees from credit institutions. Moreover, the GC considered that GSW had not submitted the information that was necessary to assess the importance of the shareholder's assets. According to the GC, this "lack of diligence" on behalf of the companies was enough  to reject their application, as it falls to the company submitting an application for inability to pay to provide the necessary factual information to the Commission.

By dismissing the appeals, the GC confirmed that the test for inability to pay requests is applied strictly. In assessing such an application many factors will be relevant, such as the financial position of the shareholders of the applicant but also the possibility for the company to obtain additional financial means via a bank credit or, for example, the issuing of shares.

This article was published in the Competition Law Newsletter of July 2016. Other articles in this newsletter:

1. Court of Justice dismisses appeals in the Calcium Carbide Cartel
2. General Court confirms illegality of non-compete clause in telecoms transaction
3. District Court of Rotterdam rejects the applicability of arbitration clauses in antitrust damages litigation
4. Update on changes in antitrust damages claims legislation in the Netherlands
5. New maximum fines for competition law infringements in the Netherlands as of 1 July 2016
6. General Court rules that an implicit and unlimited guarantee does not necessarily constitute State aid

Related news

02.12.2021 EU law
ECJ: private enforcement in aviation sector also a national court's game

Short Reads - Recently, the ECJ ruled that national courts dealing with private enforcement cases are competent to apply EU competition law to historical behaviour in the aviation sector, regardless of public enforcement by the Commission and national competition authorities, and regardless of whether or not such authorities had authority to pursue public enforcement in the relevant period.

Read more

02.12.2021 NL law
Google Shopping: self-preferencing is a form of abuse of dominance

Short Reads - On 10 November 2021, the General Court (GC) almost entirely dismissed Google’s action against the European Commission’s Google Shopping decision. According to the European Commission (the Commission), Google illegally favoured its own comparison shopping service by displaying it more prominently in its search results than other comparison shopping services (see our July 2017 Newsletter). The Commission found that Google was abusing its dominant position and imposed a EUR 2.42 billion.

Read more

02.12.2021 NL law
Gun jumping: beware, the Commission will take action

Short Reads - The Commission has imposed interim measures on Illumina and GRAIL. These measures include the obligation to run GRAIL by independent management. By adopting interim measures in addition to opening an investigation into whether Illumina and Grail breached the standstill obligation, the Commission has made clear it will not shy away from tough action against gun jumping during an ongoing merger review. 

Read more

02.12.2021 NL law
Back to the future – Commission publishes roadmap for green and digital challenges

Short Reads - The Commission’s Communication “A competition policy fit for new challenges” (link) (the “Communication”) identifies key areas in which competition law and policy can support European efforts in dealing with the challenges of the green and digital transitions. The document covers all areas of competition law (antitrust, merger control, and State aid) and identifies various ways in which new and existing tools can contribute to addressing these challenges.

Read more

02.12.2021 NL law
Dominant firm may refuse to supply retailer after initial delivery

Articles - The Brussels Court of Appeal has held that a dominant producer firm may have valid reasons to refuse further supplies to a retailer, despite its dominance and despite previous deliveries. The Court of Appeal stressed the freedom for any company, including dominant firms, to choose their trading partners, in particular when there are valid and objective non-discriminatory reasons to refuse further direct supplies and when the retailer has alternative sources of supply.

Read more