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Short Reads

General court dismisses all five appeals in the optical disk drives cartel

General court dismisses five appeals in the optical disk drives cartel

General court dismisses all five appeals in the optical disk drives cartel

01.08.2019 NL law

The General Court recently upheld a Commission decision finding that suppliers of optical disk drives colluded in bids for sales to Dell and HP by engaging in a network of parallel bilateral contacts over a multi-year period. The General Court rejected applicants' arguments regarding the Commission's fining methodology, including that the Commission ought to have provided reasons for not departing from the general methodology set out in its 2006 Guidelines.

On 12 July 2019, the General Court dismissed the appeals of Sony, Sony Optiarc, Quanta Storage, Hitachi-LG Data Storage and Toshiba Samsung Storage Technology of a 2015 European Commission decision finding that the applicants participated in a cartel on the optical disk drives (ODD) market from June 2004 to November 2008. ODD's are used in personal computers (PCs) manufactured primarily by Dell and Hewlett Packard (HP), the two most important OEMs on the global market for PCs. The Commission fined the applicants for coordination (through a network of parallel bilateral contacts) relating to bids organized by Dell and HP for the supply of ODDs. In five separate judgments, the General Court upheld the Commission's findings that the applicants colluded to adjust their volumes on the market and to ensure that prices of ODDs remained at higher levels than they would have been absent the collusion.

The judgments shed light on (among other issues): i) when an agreement will be considered "implemented" in the EEA for purposes of establishing the Commission's jurisdiction; ii) when information exchange among competitors will be found to be a "by object" restriction of competition; iii) when the Commission will be entitled to find that series of individual anticompetitive contacts constitute a single and continuous infringement (SCI); and iv) whether the Commission must provide reasons for not departing from the methodology set out in its 2006 Fining Guidelines.

  1. Commission's jurisdiction based on the implementation of an agreement

The General Court rejected the argument that the Commission lacked jurisdiction because the applicants were established in Asia, participated in contacts only in Asia and the USA and were not aware that the ODDs they supplied would ultimately be shipped to the EEA. The General Court confirmed that the "implementation test" for jurisdiction is satisfied by mere sale within the EEA. Therefore, the fact that some of the ODDs covered by the cartel were sold in the EEA to entities owned by Dell and HP, or shipped to the EEA for operators acting on behalf of Dell and HP, was sufficient to establish the Commission's jurisdiction. In addition, some customers of Dell and HP were established in the EEA, generating "substantial trade flows" of ODDs between member states throughout the infringement.

  1. Anticompetitive information exchange

The General Court confirmed that the prohibition on the exchange of sensitive information among competitors is particularly relevant in oligopolistic markets such as the one at issue. The General Court rejected Sony's argument that information exchanged related to historic information or to future conduct which was not capable of reducing uncertainty about the market. This outcome is not surprising given the low threshold established by EU courts for the Commission to prove that information exchange among competitors reduces uncertainty as to market conduct and is therefore anticompetitive.

  1. Series of bilateral contacts comprising a single continuous infringement

The General Court held that it was not inconsistent for the Commission to find that the anticompetitive practices at issue constituted both i) one SCI and ii) a series of anticompetitive bilateral agreements. This is because an SCI presupposes "a complex" of practices adopted by different parties in pursuit of a single anticompetitive economic aim. The General Court confirmed the Commission's assessment that the applicants intentionally took part in an overall network of parallel contacts pursuing a common objective of undermining the (competitive) bidding mechanisms set up by Dell and HP. Given this common objective, it is not relevant that contacts between some pairs of cartel participants were significantly higher than between other pairs or that certain characteristics of the cartel evolved over time (such as the addition or reduction of cartel participants and the expansion of the cartel to include HP whereas it initially related only to Dell). It was also not necessary for the Commission to prove that "a link of complementarity" connected the individual bilateral agreements for them to comprise an SCI.

  1. Commission's decision to not depart from its 2006 Fining Guidelines

The General Court rejected Hitachi-LG Data Storage's argument that the Commission ought to have departed from the general methodology set out in its 2006 Fining Guidelines due to the "particular circumstances" of its case, or that it ought to have provided reasons for declining to do so. The General Court confirmed that the Commission was not required to exercise its discretion to depart from its general fine methodology because Hitachi-LG Data Storage i) derives the bulk of its revenues from a single product (i.e., ODDs); ii) decided to continue to operate on the ODD market after other participants exited and therefore had a higher 10% cap on total fines which could be imposed by the Commission; and iii) was in a loss-making financial situation. Moreover, the Commission did not have to provide reasons for not exercising its discretion.

For the above reasons (and others), the appeals were dismissed in their entirety. In general, the five judgments represent a clarification and evolution of existing case law rather than a marked departure from it.

 

This article was published in the Competition Newsletter of August 2019. Other articles in this newsletter:

Team

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