On 14 September 2017, the European Court of Justice dismissed the appeals brought by LG Electronics Inc. (LG) and Koninklijke Philips Electronics NV (Philips) against the General Court's (GC) judgment in the cathode ray tubes (CRT) cartel [see our October 2015 Newsletter]. The Court of Justice confirmed that the relevant "value of sales" in the EEA includes sales of finished products incorporating the cartelised products in the EEA, even if those cartelised products were first sold to entities outside the EEA by means of intragroup sales.
The European Commission had held Philips and LG liable, both as direct participants in the cartel and as the parent companies of their joint venture, the LPD group. Firstly, Philips and LG claimed that their rights of defence had been breached because the Commission did not send a statement of objections (SO) to their joint venture. The Court confirmed that "the sending of a statement of objections to a given company seeks to ensure that the rights of defence of that company are respected, rather than those of a third party". Since the Commission had decided not to go after the joint venture, it was not required to send an SO.
Secondly, Philips and LG challenged the Commission's method of calculating the fine, in particular how it established the relevant turnover (the "value of sales" in the EEA) which is used as an important parameter in the fine calculation.
Philips and LG submitted that their joint venture sold cartelised CRTs to Philips and LG, which in turn incorporated these CRTs in monitors (the "transformed products") that were sold in the EEA. Philips and LG argued that the Commission should not have included the sales of these "transformed products", incorporating the cartelised CRT sales, in the relevant value of sales for the purposes of calculating the fine. According to Philips and LG, the sales by the LPD group to LG and Philips should not be considered "intragroup sales", but as sales from one independent entity to another.
The Court rejected these arguments and ruled that the LPD group and its parent companies formed a vertically integrated undertaking, and as such constituted a single undertaking "only as regards competition law and the relevant market for the infringement". Therefore, the sales of transformed products in the EEA by the economic unit consisting of the LPD group and its parent companies had to be included in the relevant value of sales. The Court added that vertically integrated participants to a cartel could not, solely because they incorporated the "cartel goods" into products finished outside the EEA and then sold in the EEA, expect that those sales of finished goods are excluded from the calculation of the fine.
This article was published in the Competition Law Newsletter of October 2017. Other articles in this newsletter:
- Court of Justice landmark judgment: Intel's EUR 1.06 billion fine is sent back to the General Court
- Court of Justice clarifies that a change from sole to joint control requires EU clearance only if the joint venture is "full-function"
- Court of Justice provides guidance on examining excessive prices as abuse of a dominant position
- Curaçao Competition Act entered into force on 1 September 2017
- District Court of Rotterdam dismisses Vodafone claims of abuse of dominance by KPN