Short Reads

It's in the details: HSBC fine quashed for insufficient reasoning

It's in the details: HSBC fine quashed for insufficient reasoning

It's in the details: HSBC fine quashed for insufficient reasoning

03.10.2019 NL law

The General Court annulled the EUR 33.6 million fine imposed on banking group HSBC for its participation in the euro interest rates derivatives cartel. Full annulment was granted based on the Commission's failure to provide sufficiently detailed reasoning for the first step of the fine calculation, establishing the value of sales. As the value of sales could not be established in a straightforward way, the Commission used a proxy. When doing so, the Commission needs to properly explain its reasoning to allow the companies fined to understand how it arrived at the proxy. 

It is therefore advisable for companies active in industries where sales values are difficult to determine, to always double-check the depth of reasoning behind the Commission's fine calculations.

In 2016, the Commission imposed fines on HSBC, JPMorgan and Crédit Agricole for taking part in a cartel aimed at distorting the pricing of Euro Interest Rate Derivatives (EIRDs). These are derivative financial products whose prices are linked to the Euro Interbank Offered Rate (Euribor). The Euribor is established as an average of the banks' submissions, including those of HSBC. The sanctioned behaviour consisted of exchanges of information concerning the EIRDs and manipulation of the Euribor. The General Court largely agreed with the Commission on the main substantive points. However, it still annulled the fine imposed on HSBC as a result of insufficient reasoning.

The Commission's Fine Guidelines take the companies' value of sales affected by the behaviour as a starting point to reach a fine amount which reflects the economic significance of the cartel. As the financial trading industry does not generate sales in the ordinary sense, the Commission considered cash receipts received under the EIRDs as the starting point. It then applied a reduction factor which was set at a very specific level: 98.849% without, according to the Court, explaining why the reduction factor was set at this level.

The Court found that precision in establishing the reduction factor is fundamental, with the smallest change having a great impact on the fine. Additionally, because the Commission chose to find a proxy for the value of sales, it was essential that HSBC had the chance to verify whether the proxy chosen was vitiated by any error. Therefore, due to the circumstances of the case, the Commission's motivation was insufficient.

Cartel cases in which the fine calculation involves establishing a proxy for the value of sales, put an additional burden on the Commission to properly explain its motivation. In such cases, companies should double-check whether the Commission's reasoning is sufficiently detailed to enable them to verify the fine calculations.

 

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

 

 

 

 

Team

Related news

21.10.2021 EU law
Law and Artificial Intelligence (part three): towards a European perspective in intellectual property? The European Parliament goes one step further…

Articles - For the European Union, it is time to have uniformed rules on artificial intelligence (AI). On 20 October 2020, the European Parliamentary Assembly adopted, on the basis of three reports, three resolutions on AI from three different perspectives. These resolutions have recently (on 6 October 2021) been published in the Official Journal.

Read more

07.10.2021 NL law
Commission reveals first piece of antitrust sustainability puzzle

Short Reads - The European Commission has published a Policy Brief setting out its preliminary views on how to fit the European Green Deal’s sustainability goals into the EU competition rules. Companies keen to be green may be left in limbo by a looming clash with more far-reaching proposals from national competition authorities. More pieces of the antitrust sustainability puzzle will fall into place as soon as the ongoing review of the guidelines on horizontal cooperation is finalised.

Read more

21.10.2021 EU law
Law and Artificial Intelligence (part two): towards a European framework in line with the ethical values of the EU? The European Parliament goes one step further…

Articles - For the European Union, it is time to have uniformed rules on artificial intelligence (AI). On 20 October 2020, the European Parliamentary Assembly adopted, on the basis of three reports, three resolutions on AI from three different perspectives. These resolutions have recently (on 6 October 2021) been published in the Official Journal.

Read more

07.10.2021 NL law
Court of Appeal provides guidance for further course of proceedings in prestressing steel litigation

Short Reads - On 27 July 2021, the Court of Appeal of Den Bosch issued an interim judgment in the Dutch prestressing steel litigation, ruling on three issues: (i) the obligation of claimant to furnish facts; (ii) the assignment of claims; and (iii) the liability of the parent companies. In short, the Court of Appeal allowed the claimant Deutsche Bahn another opportunity to supplement the facts needed to substantiate its claims in the next phase of the proceedings.

Read more

07.10.2021 NL law
Commission’s record fine for gun jumping upheld

Short Reads - Pre-closing covenants protecting the target’s value or commercial integrity pending merger clearance from the European Commission must be drafted carefully. The General Court confirmed the Commission’s record-breaking fines on Altice for violating the EU Merger Regulation’s notification and standstill obligations. According to the General Court, the mere possibility of exercising decisive influence over the target can result in a gun jumping breach.

Read more

07.10.2021 NL law
ACM walks the walk: first-ever vertical price coordination fine

Short Reads - The Dutch Competition Authority (“ACM”) has claimed a first victim in its vertical restraints battle. Samsung Electronics was fined nearly EUR 40 million for having meddled in the online resale prices for televisions at seven retailers. Compared to the European Commission’s fines on four consumer electronics producers for resale price maintenance (“RPM”), the ACM’s summary decision seems to refer to a ‘light’ version of RPM: systematic price coordination without any threats, sanctions or incentives for the retailers to stick to the price.

Read more