Short Reads

Low prices, high fines: Commission's creative purchase cartel fine upheld

Low prices, high fines: Commission's creative purchase cartel fine up

Low prices, high fines: Commission's creative purchase cartel fine upheld

06.06.2019 NL law

Companies should take note that the European Commission will deviate from its own general fining methodology if a particular case calls for it. The General Court recently upheld the Commission's novel fining approach in regard of a purchase cartel.

The Commission's fining guidelines use the amount of sales affected by the cartel as a basis to set a fine with sufficient deterrent effect. This works when dealing with cartels aiming to increase sales prices: the more successful the sales cartel, the higher the value of sales and therefore the fine amount. However, this does not apply to cartels intended to reduce purchase prices: the more successful a purchase cartel, the lower the amount of the value of purchases and thus the lower the fine level. The General Court agreed with the Commission that to avoid under-deterrence, a 10% increase in the imposed fine was justified. This ruling shows that the Commission's fining methodology is not set in stone; adjustments can be made.

The European Commission fined three recycling companies EUR 68 million for fixing prices for purchasing scrap automotive batteries in February 2017. Unlike more 'conventional' price-fixing cartels - where companies collude to increase their sales prices - the recycling companies colluded to reduce the purchase price paid to scrap dealers and collectors for used car batteries. As the cartel affected purchases instead of sales, the Commission departed from its general fining methodology and took account of the value of the purchases made by each of the recycling companies to determine the fine level. However, since purchases are normally lower than sales in value terms, the Commission, under point 37 of its fining guidelines, applied a 10% increase of the amount of the fine to ensure sufficient deterrent effect aimed not only at the recycling companies but also at all other companies engaging in purchase cartels.

On appeal, one recycling company argued that the Commission had wrongly applied point 37 of the fining guidelines to increase the fines by 10%. The General Court first recalled that the Commission may, on the basis of point 37, depart from the general methodology of its fining guidelines, as long as it sufficiently states the reasons why. The General Court considered that the Commission had adequately done so in this case; it had explained that, because there were no sales values available, it had used the value of purchases to set the fine level, but that this constituted an imperfect basis for ensuring that the fine acted as a sufficiently strong deterrent, and therefore applied a 10% increase to ensure this.

Companies should keep in mind that the Commission's fining guidelines are not set in stone. Adjustments can and will be made if a particular case calls for it - although the Commission will always need to substantiate its reasons for departing from its own fining guidelines.

 

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

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