A problem shared is a problem halved: fine reduction and fine liability are correlated
Companies should beware that when held jointly responsible for a cartel infringement, a fine reduction granted to one of them could affect the joint and several liability of fines allocated to the remaining companies. According to the General Court, in applying the principle of equal treatment, the remaining liability for fine payment should be distributed proportionately by the Commission.
This approach was not taken by the Commission in its heat stabilisers cartel decision as it only applied a fine adjustment to one part of the fine, leaving another company solely responsible for the second part of the fine. The Commission should have applied the reduction proportionally to both parts instead to ensure an equal distribution of liability. Companies are well advised to double check whether any increase in liability resulting from a fine reduction is shared fairly between the remaining co-debtors.
In 2009, the Commission imposed a total fine of EUR 173 million on ten heat stabilisers producers for participating in a cartel. The Commission imposed fines on Aachener Chemische Werke Gesellschaft für glastechnische Produkte und Verfahren mbH (ACW), Chemson Polymer Additive AG (CPA) and GEA Group AG (GEA) as follows:
- GEA, ACW and CPA were held jointly and severally liable for EUR 1,913,971
- GEA and ACW were held jointly and severally liable for a fine EUR 1,432,229.
In 2010, the Commission amended its decision because ACW's fine exceeded the 10% of total turnover-cap under Regulation 1/2003. In the amending decision, the total fines imposed on CPA and GEA remained the same but the allocation of joint and several liability was adjusted as follows:
- GEA, ACW and CPA were held jointly and severally liable for EUR 1,086,129
- GEA and CPA were held jointly and severally liable for EUR 827,842
- GEA was held solely liable for EUR 1,432,229.
On appeal at the General Court, GEA argued that the Commission had breached the principle of equal treatment because the loss of all joint and several co-debtors for part of the fine left GEA at a disadvantage when compared to CPA. GEA claimed the Commission should have applied the 10%-cap proportionally to both fines. The General Court agreed. It found that GEA and CPA were in a comparable situation, since they were both jointly and severally liable for payment of a fine with ACW. By applying the fine reduction granted to ACW only to the fine jointly and severally imposed on GEA, CPA and ACW, the Commission had infringed the principle of equal treatment without any objective justification. The General Court therefore annulled the Commission's decision.
This article was published in the Competition Law Newsletter of November 2018. Other articles in this newsletter:
- Franchise argument in laundry cartel does not wash with Dutch court
- Rotterdam District Court rules on follow-on damages claim in relation to Dutch bitumen cartel
- ACM bound by its own rules during dawn raids
- European Court of Justice clarifies the application of choice of forum clauses in competition damages claims