CELEX: 62000TJ0220
Competition
Cartel
Lysine
Guidelines on the method of setting fines
Applicability
Gravity and duration of the infringement
Turnover
Mitigating circumstances

Facts
Cheil Jedang Corp. (
Cheil or
the applicant), founded by the Korean group Samsung, is the parent company of a group of undertakings operating in the pharmaceutical products
and foodstuffs sector. Cheil entered the lysine market in 1991.
Lysine is the principal amino acid used for nutritional purposes in animal feedstuffs. Synthetic lysine is used as an additive
in feedstuffs, such as cereals, which contain insufficient natural lysine; this enables nutritionists to formulate protein-based
diets which meet the dietary requirements of animals. Feedstuffs to which synthetic lysine is added may also substitute for
feedstuffs which do contain a sufficient quantity of lysine in the natural state, such as soybean.
In 1995, following a secret investigation by the Federal Bureau of Investigation, searches were carried out in the United
States at the premises of several companies operating in the lysine market. In August and October 1996 Archer Daniels Midland
Co. (hereinafter
ADM Company), Kyowa Hakko Kogyo Co. Ltd (
Kyowa Hakko Kogyo), Sewon Corp., Cheil and Ajinomoto Co. Inc., were charged by the American authorities with having formed a cartel to fix
lysine prices and to allocate sales of lysine between June 1992 and June 1995. Pursuant to agreements concluded with the American
Department of Justice, the companies were fined by the judge in charge of the case. Kyowa Hakko Kogyo and Ajinomoto Co. Inc.
were each fined USD 10 million, ADM Company was fined USD 70 million and Cheil USD 1.25 million. The fine imposed on Sewon
Corp. was, it says, USD 328 000. In addition, three executives of ADM Company were sentenced to terms of imprisonment and
fined for their part in the cartel.
In July 1996, on the basis of Commission Notice 96/C 207/04 on the non-imposition or reduction of fines in cartel cases (OJ
1996 C 207, p. 4,
the Leniency Notice), Ajinomoto Co. Inc. offered to cooperate with the Commission in proving the existence of a cartel in the lysine market and
its effects in the European Economic Area (
EEA).
On 11 and 12 June 1997 the Commission carried out investigations at the European premises of ADM Company and Kyowa Hakko Europe
GmbH (
Kyowa Europe) pursuant to Article 14(3) of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles [81] and
[82] of the Treaty (OJ, English Special Edition 1959-1962, p. 87). Following those investigations, Kyowa Hakko Kogyo and Kyowa
Europe informed the Commission of their wish to cooperate and gave it certain information concerning, in particular, a chronology
of the meetings which had taken place between lysine producers.
On 28 July 1997 the Commission sent requests for information, pursuant to Article 11 of Regulation No 17, to ADM Company and
its European subsidiary Archer Daniels Midland Ingredients Ltd (hereinafter
ADM Ingredients), to Sewon Corp. and its European subsidiary Sewon Europe GmbH (hereinafter together referred to as
Sewon) and to Cheil concerning their conduct in the amino acids market and certain cartel meetings specified in the requests for
information. Cheil provided an account of what was discussed at those meetings and provided details of meetings not mentioned
in the Commission's request for information.
On 30 October 1998, on the basis of the information that it had received, the Commission sent a statement of objections to
the applicant and the other companies concerned, namely ADM Company and ADM Ingredients (hereinafter together referred to
as
ADM), Ajinomoto Co. Inc. and its European subsidiary Eurolysine SA (hereinafter together referred to as
Ajinomoto), Kyowa Hakko Kogyo and its European subsidiary Kyowa Hakko Europe (hereinafter together referred to as
Kyowa), Daesang Corp. (formerly Sewon Corp.) and its European subsidiary Sewon Europe GmbH, for infringement of Article 81(1) EC
and Article 53(1) of the Agreement on the European Economic Area (
the EEA Agreement). In its statement of objections the Commission charged the companies in question with fixing lysine prices and sales quotas
in the EEA and with exchanging information on their sales volumes from September 1990 (in the case of Ajinomoto, Kyowa and
Sewon), March 1991 (Cheil) and June 1992 (ADM) to June 1995.
On 17 August 1999, after a hearing of the companies held on 1 March 1999, the Commission sent them a supplementary statement
of objections concerning the duration of the cartel, to which the applicant replied on 7 October 1999.
On completion of this administrative procedure, the Commission adopted Decision 2001/418/EC of 7 June 2000 relating to a proceeding
pursuant to Article 81 of the EC Treaty and Article 53 of the EEA Agreement (COMP/36.545/F3 ─ Amino Acids) (OJ 2001 L 152,
p. 24,
the Decision). The Decision was served on the applicant by letter of 16 June 2000.
The Decision includes the following provisions:
Article 1
[ADM Company] and its European subsidiary [ADM Ingredients], Ajinomoto Company Incorporated and its European subsidiary Eurolysine
SA, Kyowa Hakko Kogyo Company Limited and its European subsidiary Kyowa Hakko Kogyo Europe GmbH, Daesang Corporation and its
European subsidiary Sewon Europe GmbH, as well as [Cheil] have infringed Article 81(1) of the EC Treaty and Article 53(1)
of the EEA Agreement by participating in agreements on prices, sales volumes and the exchange of individual information on
sales volumes of synthetic lysine, covering the whole of the EEA.The duration of the infringement was as follows:
(a)
in the case of [ADM Company] and [ADM Ingredients] from 23 June 1992 to 27 June 1995;
(b)
in the case of Ajinomoto Company Incorporated and Eurolysine SA from at least July 1990 to 27 June 1995;
(c)
in the case of Kyowa Hakko Kogyo Company Limited and Kyowa Hakko Europe GmbH from at least July 1990 to 27 June 1995;
(d)
in the case of Daesang Corporation and Sewon Europe GmbH from at least July 1990 to 27 June 1995;
(e)
in the case of [Cheil] from 27 August 1992 to 27 June 1995.
Article 2
The following fines are hereby imposed on the undertakings referred to in Article 1 in respect of the infringements found
therein:
(a)
[ADM Company] and[ADM Ingredients], jointly and severally liable, a fine of       EUR 47 300 000
(b)
Ajinomoto Company, Incorporated andEurolysine SA,jointly and severally liable, a fine of       EUR 28 300 000
(c)
Kyowa Hakko Kogyo Company Limited andKyowa Hakko Europe GmbH, jointly and severally liable, a fine of       EUR 13 200 000
(d)
Daesang Corporation and Sewon Europe GmbH,jointly and severally liable, a fine of        EUR 8 900 000
(e)
[Cheil], a fine of          EUR 12 200 000
...
In calculating the amount of the fines, the Commission applied the method set out in the Guidelines for calculating fines
imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty (OJ 1998 C 9, p. 3,
the Guidelines) and the Leniency Notice.
First, the basic amount of the fine, determined by reference to the gravity and duration of the infringement, was fixed at
EUR 19.5 million for the applicant, EUR 42 million for Ajinomoto, EUR 21 million for Kyowa, EUR 39 million for ADM and EUR
21 million for Sewon (paragraph 314 of the Decision).
In fixing the starting amount of the fines, determined by reference to the gravity of the infringement, the Commission began
by finding that the undertakings concerned had committed a very serious infringement, having regard to its nature, its actual
impact on the lysine market in the EEA and the extent of the relevant geographical market. Then, observing that the total
turnover figures achieved by each undertaking in the last year of the infringement revealed considerable disparity of size
between the undertakings which had committed the infringement, the Commission went on to apply differential treatment. Consequently,
the starting amounts of the fines were set at EUR 30 million for ADM and Ajinomoto and EUR 15 million for Kyowa, Cheil and
Sewon (paragraph 305 of the Decision).
In order to reflect the duration of each undertaking's involvement in the infringement and determine the basic amount of their
respective fines, the starting amounts were then increased by 10% per annum, giving an increase of 30% in the case of ADM
and Cheil and 40% in the case of Ajinomoto, Kyowa and Sewon (paragraph 313 of the Decision).
Secondly, on account of aggravating circumstances, the basic amount of the fines imposed on ADM and Ajinomoto was increased
by 50%, that is to say EUR 19.5 million for ADM and EUR 21 million for Ajinomoto, on the ground that each had played a leading
role in the infringement (paragraph 356 of the Decision).
Thirdly, on account of mitigating circumstances, the Commission reduced by 20% the increase in Sewon's fine on account of
the duration of its infringement, on the ground that Sewon had played a passive role in the cartel from the beginning of 1995
(paragraph 365 of the Decision). The Commission also reduced by 10% the basic amount of the fine imposed on each of the undertakings
concerned, on the ground that they had all put an end to the infringement as soon as a public authority intervened (paragraph
384 of the Decision).
Fourthly, the Commission allowed a
significant reduction in the fines, pursuant to section D of the Leniency Notice. The fines on Ajinomoto and Sewon were reduced by 50% of the amount
they would have had to pay if they had not cooperated with the Commission, the fines on Kyowa and Cheil were reduced by 30%
and, lastly, the fine on ADM by 10% (paragraphs 431, 432 and 435 of the Decision).
Procedure and forms of order sought by the parties
By application lodged at the Registry of the Court of First Instance on 23 August 2000 the applicant brought this action.
On hearing the report of the Judge-Rapporteur, the Court of First Instance (Fourth Chamber) decided to open the oral procedure
and, by way of measures of organisation of procedure, asked the Commission to give written replies to a number of questions.
The Commission complied with that request within the time allowed.
The parties presented oral argument and answered the questions put to them by the Court at the hearing on 24 April 2002.
The applicants claim that the Court should:
─
annul the Decision, in whole or in part;
annul the Decision, in whole or in part;
─
order the Commission to pay the entire costs;
order the Commission to pay the entire costs;
─
take such other or further steps as justice may require.
take such other or further steps as justice may require.
The Commission contends that the Court should:
─
dismiss the application as unfounded;
dismiss the application as unfounded;
─
order the applicant to pay the costs.
order the applicant to pay the costs.
Law
The action falls into three principal heads of complaint. First, the applicant complains that the Commission calculated the
fine on the basis of the criteria laid down by the Guidelines. Secondly, the applicant pleads several breaches of the Guidelines
and manifest errors of assessment in the Commission's analysis of the gravity and duration of the infringement and of the
mitigating circumstances. Thirdly, the applicant claims that the Decision is insufficiently reasoned on certain points relating
to calculation of the fine.
It is appropriate to observe at this point that, whilst the applicant has applied for annulment of the Decision
in whole or in part, the specific complaints just mentioned challenge solely the part of the Decision devoted to the fines, and more particularly
Article 2 in which the Commission fixed the amount of the applicant's fine at EUR 12 200 000.
1.Applicability of the Guidelines
Arguments of the parties
Breach of the principle of the protection of legitimate expectations
The applicant contends that the Commission infringed the principle of the protection of legitimate expectation in that it
applied the Guidelines for the purpose of calculating the fine without taking account of the situation of companies which,
like itself, cooperated with the Commission before the Guidelines were adopted.
The applicant observes that, according to case-law, the principle of the protection of legitimate expectations means, amongst
other things, that where an existing legal regime is changed, the Commission must take account of the situation of undertakings
which have entered into irrevocable commitments on the basis of the rules then in force, by taking transitional measures if
necessary (Case 74/74
CNTA
v
Commission
[1975] ECR 533).
In the present case, the method of calculating the fine resulting from the Guidelines differs from the Commission's previous
practice, which was to impose fines not exceeding 10% of the turnover achieved from sales of the product in question in the
Community. Application of the Guidelines in Cheil's case resulted in it being fined an amount more than seven times greater
than it would have been fined if the Commission had used the previous method. In so far as Cheil admitted its guilt and provided
the Commission with evidence at a time when adoption of the Guidelines was not envisaged, the Commission's use of the new
method of calculating fines was in breach of the legitimate expectation created by Section E.3 of the Leniency Notice and
by the Commission's past decisions. Instead of obtaining a reduction in the fine in recognition of its cooperation, Cheil
in fact exposed itself to an increase.
Breach of the principle of non-retroactivity of penalties
The applicant maintains that, by applying the Guidelines in the present case, the Commission has infringed the principle of
non-retroactivity of penalties, which is enshrined in Article 7 of the European Convention for the Protection of Human Rights
and Fundamental Freedoms (
ECHR), signed in Rome on 4 November 1950, and takes its place among the general principles of Community law (Case 63/83
Kirk
[1984] ECR 2689, paragraph 22).
On this point, the applicant observes that not only does Article 7(1) of the ECHR prohibit the conviction of a person for
an act which was not an offence at the time when it was committed, but also the imposition of a penalty which is more severe
than the one applicable at the time the offence was committed. In accordance with the settled case-law of the Court of Justice
to the effect that the ECHR has special significance in Community law (see, in particular, the judgment in Case C-260/89
ERT
[1991] ECR I-2925), it is incumbent upon the Community courts to ensure that the Commission does not infringe the principle
of non-retroactivity of penalties or penal provisions.
This principle also falls to be applied in the field of Community competition law, the penal or quasi-penal nature of fines
imposed pursuant to Regulation No 17 having been recognised in Community law.
The applicant concludes from this that the Commission cannot impose on it a fine more severe than that which would have applied
at the time of the offence or, at very least, when it admitted its involvement in the offence. According to the applicant,
the amount of fines imposed by the Commission at that time was approximately 10% of the turnover achieved from sales of the
product concerned in the European Community, which, in Cheil's case, would have amounted to approximately EUR 1.7 million.
By applying the Guidelines rather than following its previous decision-making practice, the Commission, as it admits in the
Decision (paragraph 318), changed, during the course of the administrative procedure, the normally applicable penalties and,
in Cheil's case, increased its fine to EUR 12.2 million.
The Commission maintains, essentially, that by applying the Guidelines in the Decision it in no way breached the principles
of the protection of legitimate expectations and non-retroactivity of penalties.
Findings of the Court
Breach of the principle of the protection of legitimate expectations
First of all, the right to rely on the principle of the protection of legitimate expectations extends to any individual in
a situation where the Community authorities have caused him to entertain legitimate expectations (Case 265/85
Van den Bergh en Jurgens and Van Dijk Food Products
v
Commission
[1987] ECR 1155, paragraph 44, and Case C-152/88
Sofrimport
v
Commission
[1990] ECR I-2477, paragraph 26). However, a person may not plead infringement of the principle unless he has been given
precise assurances by the administration (Case T-290/97
Mehibas Dordtselaan
v
Commission
[2000] ECR II-15, paragraph 59, and the case-law cited).
According to settled case-law (Case C-350/88
Delacre and Others
v
Commission
[1990] ECR I-395, paragraph 33, and Case C-1/98 P
British Steel
v
Commission
[2000] ECR I-10349, paragraph 52), traders cannot have a legitimate expectation that an existing situation which is capable
of being altered by the Community institutions in the exercise of their discretionary power will be maintained.
In the field of Community competition rules, it is clear from the case-law (see,
inter alia
, the judgment of the Court of Justice in Joined Cases 100/80 to 103/80
Musique diffusion française and Others
v
Commission
[1983] ECR 1825, paragraph 109) that effective application of those rules requires that the Commission may at any time adjust
the level of fines to match the needs of Community competition policy. Consequently, the fact that, in the past, the Commission
imposed fines at a certain level for certain types of infringements does not preclude it from raising that level, subject
to the limits indicated in Regulation No 17.
Moreover, according to that same case-law, the Commission is not bound to mention, in the statement of objections, the possibility
of a change in its policy as regards the general level of fines, because that possibility is dependent on general considerations
of competition policy having no direct relationship with the particular circumstances of the case at hand (
Musique diffusion française and Others
v
Commission
, cited above, paragraph 22).
Given that the adoption of the Guidelines, in which the Commission laid down its new general method for calculating fines,
was prior to the statement of objections addressed to each of the members of the cartel and independent of the particular
circumstances of the present case, the applicant cannot,
a fortiori
, reproach the Commission for applying those Guidelines in determining the amount of the fine, unless they can show that the
authorities caused them to entertain a legitimate expectation to the contrary.
On this point, the applicant maintains that the Leniency Notice implied that the method for calculating fines usually employed
by the Commission at the time when it decided to cooperate would remain so, in so far as it was concerned.
It should be pointed out that, in Section E.3 of the Leniency Notice, the Commission states that it
is aware that this notice will create legitimate expectations on which enterprises may rely when disclosing the existence
of a cartel to the Commission.
However, given that the purpose of the Leniency Notice is, as stated in Section A.3 thereof, to
[set] out the conditions under which enterprises cooperating with the Commission during its investigation into a cartel may
be exempted from fines, or may be granted reductions in the fine which would otherwise have been imposed upon them, the only
legitimate expectation which the applicant was entitled to entertain was one relating to the conditions under which a reduction would be allowed
in recognition of its cooperation, not to the amount of the fine
which would otherwise have been imposed upon [it] or to the calculation method that might be used to that end.
Moreover, it should be observed that the applicant does not say that it received any precise assurances from Commission staff
of such a kind as to cause it to believe that the method for calculating fines allegedly used before publication of the Guidelines
would be maintained.
That being so, the complaint of breach of the principle of the protection of legitimate expectations must be rejected.
Breach of the principle of non-retroactivity of penalties
The principle that penal provisions may not have retroactive effect is one which is common to all the legal orders of the
Member States and is enshrined in Article 7 of the ECHR. It takes its place among the general principles of law whose observance
is ensured by the Community judicature (
Kirk
, cited above, paragraph 22, and Case T-23/99
LR AF 1998
v
Commission
[2002] ECR II-1705, paragraph 219).
Although Article 15(4) of Regulation No 17 provides that Commission decisions imposing fines for infringement of competition
law are not of a criminal nature (Case T-83/91
Tetra Pak
v
Commission
[1994] ECR II-755, paragraph 235), the Commission is none the less required to observe the general principles of Community
law, and in particular the principle of non-retroactivity, in any administrative procedure capable of leading to fines under
the Treaty rules on competition (see, by analogy, as regards the rights of the defence, Case 322/81
Michelin
v
Commission
[1983] ECR 3461, paragraph 7, and
LR AF 1998
v
Commission
, cited above, paragraph 220).
Such observance requires that the fines imposed on an undertaking for infringing the competition rules correspond with those
laid down at the time when the infringement was committed (
LR AF 1998
v
Commission
, paragraph 221).
The fines which the Commission is able to impose for infringement of the Community rules on competition are defined in Article
15 of Regulation No 17, which was adopted before the infringement complained of was committed. The Commission is not empowered
to amend Regulation No 17 or to depart from it, even by rules of a general nature which it imposes on itself. Although it
is common ground that the Commission assessed the fine imposed on the applicants in accordance with the general method for
setting fines set out in the Guidelines, in doing so it remained within the framework of the fines set out in Article 15 of
Regulation No 17 (
LR AF 1998
v
Commission
, paragraph 222).
Article 15(2) of Regulation No 17 provides that
[t]he Commission may by decision impose on undertakings or associations of undertakings fines of from [EUR] 1 000 to 1 000
000 ... , or a sum in excess thereof but not exceeding 10% of the turnover in the preceding business year of each of the undertakings
participating in the infringement where, either intentionally or negligently[,] ... they infringe Article [81(1)] ... of the
Treaty; and that
[i]n fixing the amount of the fine, regard shall be had both to the gravity and to the duration of the infringement (
LR AF 1998
v
Commission
, paragraph 223).
The first paragraph of Section 1 of the Guidelines provides that, in setting fines, the basic amount is to be determined according
to the gravity and duration of the infringement, which are the only criteria referred to in Article 15(2) of Regulation No
17 (
LR AF 1998
v
Commission
, paragraph 224).
According to the Guidelines, the Commission is to take as the starting point in calculating the amount of the fines an amount
determined by reference to the gravity of the infringement (
the general starting point). In assessing the gravity of the infringement, account must be taken of its nature, its actual impact on the market, where
this can be measured, and the size of the relevant geographic market (first paragraph of Section 1.A). Within that framework,
infringements are to be put into one of three categories:
minor infringements, for which the likely fines are between EUR 1 000 and EUR 1 000 000,
serious infringements, for which the likely fines are between EUR 1 million and EUR 20 million, and
very serious infringements, for which the likely fines are above ECU 20 million (first to third indents of the second paragraph of Section 1.A) (
LR AF 1998
v
Commission
, paragraph 225).
Next, according to the Guidelines, within each of these categories, and in particular where
serious and
very serious infringements are in issue, the proposed scale of fines is designed to make it possible to apply differential treatment to
undertakings according to the nature of the infringement committed (third paragraph of Section 1.A). It is also necessary
to take into account the effective economic capacity of offenders to cause significant damage to other operators, in particular
consumers, and to set the fine at a level which ensures that it has a sufficiently deterrent effect (fourth paragraph of Section
1.A). Account may also be taken of the fact that large undertakings usually have legal and economic knowledge and infrastructures
which enable them more easily to recognise that their conduct constitutes an infringement and be aware of the consequences
stemming from it under competition law (fifth paragraph of Section 1.A) (
LR AF 1998
v
Commission
, paragraphs 225 and 226).
It may be necessary, in cases involving several undertakings, such as cartels, to apply weightings to the amounts determined
within each of the three categories in order to take account of the specific weight and, therefore, the real impact on competition
of the offending conduct of each undertaking, particularly where there is considerable disparity between the sizes of the
undertakings committing infringements of the same type. Consequently, it may be necessary to adapt the general starting point
according to the specific nature of each undertaking (
the specific starting point) (sixth paragraph of Section 1.A) (
LR AF 1998
v
Commission
, paragraph 227).
As regards the duration of the infringement, the Guidelines draw a distinction between infringements of short duration (in
general, less than one year), for which the amount determined for the gravity of the infringement should not be increased,
infringements of medium duration (in general, one to five years), for which the amount determined for gravity may be increased
by 50%, and infringements of long duration (in general, more than five years), for which the amount determined for gravity
may be increased by 10% per year (first to third indents of the first paragraph of Section 1.B) (
LR AF 1998
v
Commission
, paragraph 228).
The Guidelines then set out, by way of example, a list of aggravating and mitigating circumstances that may be taken into
consideration in order to increase or reduce the basic amount, and go on to refer to the Leniency Notice (
LR AF 1998
v
Commission
, paragraph 229).
By way of a general comment, the Guidelines state that the final amount calculated according to this method (basic amount
increased or reduced by a percentage for aggravating or mitigating circumstances) may not in any case exceed 10% of the worldwide
turnover of the undertaking, as laid down by Article 15(2) of Regulation No 17 (Section 5(a)). The Guidelines further provide
that, depending on the circumstances, account should be taken, once the above calculations have been made, of certain objective
factors such as a specific economic context, any economic or financial benefit derived by the offenders, the specific characteristics
of the undertakings in question and their real ability to pay in a specific social context, and that the fines should be adjusted
accordingly (Section 5(b)) (
LR AF 1998
v
Commission
, paragraph 230).
It follows that, under the method laid down in the Guidelines, fines continue to be calculated according to the two criteria
referred to in Article 15(2) of Regulation No 17, namely the gravity of the infringement and its duration, subject to the
upper limit determined by reference to the turnover of each undertaking, as laid down in that provision (
LR AF 1998
v
Commission
, paragraph 231).
Consequently, the Guidelines do not go beyond the legal framework for fines set out in Article 15(2) (
LR AF 1998
v
Commission
, paragraph 232).
Nor, contrary to what the applicant claims, does the change to the Commission's administrative practice brought about by the
Guidelines constitute an alteration of the legal framework determining the level of fines which can be imposed that is contrary
to the principle of non-retroactivity of penalties (
LR AF 1998
v
Commission
, paragraph 233).
First, the Commission's practice in previous decisions does not itself serve as a legal framework for the fines imposed in
competition matters, since that framework is defined solely in Regulation No 17 (
LR AF 1998
v
Commission
, paragraph 234).
Secondly, having regard to the wide discretion which Regulation No 17 leaves the Commission, the fact that the latter introduces
a new method of calculating fines, which may, in certain cases, lead to an increase in the general level of fines but does
not exceed the maximum level established by that regulation, cannot be regarded as an aggravation, with retroactive effect,
of the fines as legally provided for by Article 15(2) of Regulation No 17 (
LR AF 1998
v
Commission
, paragraph 235).
It is of no avail to argue that, if fines are set according to the method described in the Guidelines, in particular on the
basis of an amount determined, in principle, according to the gravity of the infringement, the Commission will then impose
higher fines than previously. It is settled case-law that under Regulation No 17 the Commission has a margin of discretion
when fixing fines, in order that it may direct the conduct of undertakings towards compliance with the competition rules (Case
T-150/89
Martinelli
v
Commission
[1995] ECR II-1165, paragraph 59, Case T-49/95
Van Megen Sports
v
Commission
[1996] ECR II-1799, paragraph 53, and Case T-229/94
Deutsche Bahn
v
Commission
[1997] ECR II-1689, paragraph 127). Furthermore, the fact that in the past the Commission imposed fines of a certain level
for certain types of infringement does not mean that it is estopped from raising that level within the limits indicated in
Regulation No 17 if that is necessary to ensure the implementation of Community competition policy (
Musique diffusion française and Others
v
Commission
, cited above, paragraph 109, Case T-12/89
Solvay
v
Commission
[1992] ECR II-907, paragraph 309, and Case T-304/94
Europa Carton
v
Commission
[1998] ECR II-869, paragraph 89). The proper application of the Community competition rules in fact requires that the Commission
may at any time adjust the level of fines to the needs of that policy (
Musique diffusion française and Others
v
Commission
, paragraph 109, and
LR AF 1998
v
Commission
, paragraphs 236 and 237).
Lastly, as regards the applicant's complaint that the Commission failed to set the amount of the fine by reference to turnover
generated from sales of lysine in the EEA, that is to say sales of the product concerned by the infringement in the geographical
market in question, it should be borne in mind that the only express reference to turnover in Article 15(2) of Regulation
No 17 concerns the upper limit which a fine may not exceed. Moreover, according to settled case-law, turnover is to be understood
as meaning the total turnover of the undertaking concerned (
Musique diffusion française and Others
v
Commission
, paragraph 119, Case T-43/92
Dunlop Slazenger
v
Commission
[1994] ECR II-441, paragraph 160, and Case T-144/89
Cockerill Sambre
v
Commission
[1995] ECR II-947, paragraph 98). According to case-law predating adoption of the Guidelines, the Commission may, in fixing
a fine, have regard both to the total turnover of the undertaking, which gives an indication, albeit approximate and imperfect,
of its size and economic power, and to the proportion of that turnover accounted for by the goods in relation to which the
infringement was committed, which gives an indication of the scale of the infringement. However, it is important not to attribute
to either of those figures a significance which is disproportionate to the other factors relevant to an assessment and, consequently,
an appropriate fine cannot be fixed merely by a simple calculation based on the total turnover (
Musique diffusion française and Others
v
Commission
, paragraphs 120 and 121, Case T-77/92
Parker Pen
v
Commission
[1994] ECR II-549, paragraph 94, and Case T-327/94
SCA Holding
v
Commission
[1998] ECR II-1373, paragraph 176).
Again, according to case-law predating adoption of the Guidelines, the Commission may calculate a fine without taking into
account the respective turnover figures of the undertakings concerned, provided that Article 15(2) of Regulation No 17, which
sets the upper limit of any fine that may be imposed, is applied. The Court of Justice has held that the Commission may determine
in advance the total amount of the fine to be imposed and then apportion it between the undertakings concerned according to
their respective average market shares and any mitigating or aggravating circumstances relating to each of them individually
(Case 45/69
Boehringer
v
Commission
[1970] ECR 769, paragraph 55, and Joined Cases 96/82 to 102/82, 104/82, 105/82, 108/82 and 110/82
IAZ and Others
v
Commission
[1983] ECR 3369, paragraphs 51 to 53).
It is clear from the case-law just mentioned that, irrespective of the method laid down in the Guidelines, the applicant in
any event had no ground to claim that the final amount of the fine imposed on it should be calculated as a percentage of its
turnover in the market in question.
It follows from the foregoing that the plea alleging infringement of the principle of non-retroactivity of penalties must
be rejected.
2.The gravity of the infringement
Arguments of the parties
Breach of the principle of proportionality
The applicant contends that the Commission breached the principle of proportionality in that it fixed the starting amount
of the fine, determined by reference to the gravity of the infringement, on the basis of its total turnover, rather than its
turnover from sales of lysine in the EEA.
The applicant observes, first of all, that although the 10% limit laid down in Article 15(2) of Regulation No 17 certainly
refers to the worldwide turnover of the undertakings concerned, it is nevertheless clear from the case-law that the Commission
must not attach disproportionate importance to that figure, particularly where the goods concerned account for only a small
part of that figure (
Musique diffusion française and Others
v
Commission
, cited above, paragraph 121). In addition, until the Guidelines were published, it had been the Commission's practice not
to impose fines exceeding 10% of the turnover achieved by the undertaking from sales of the product concerned in the Community.
The Commission itself has acknowledged that this was its practice.
In the present case, the differential treatment applied by the Commission in paragraph 304 of the Decision, based on the total
turnover of the undertakings concerned, leads to a disproportionate result. In Cheil's case, the starting amount of EUR 15
million (for total turnover of EUR 1.5 billion) was almost as much as its turnover from sales of lysine in the EEA (EUR 17
million). Even if the fine had been calculated on the basis of worldwide turnover for lysine, amounting to EUR 40 million,
the maximum fine would have been EUR 4 million. Consequently the starting amount of EUR 15 million is disproportionate.
The Commission replies that the fine must be proportionate to the gravity and duration of the infringement, in accordance
with Article 15 of Regulation No 17. Moreover, irrespective of any previous practice which it may or may not have had, the
Commission submits that it may at any time increase the level of fines in pursuance of a policy of more effective deterrence,
so that there is not necessarily any relationship of proportionality between fines imposed at different times. Finally, Cheil's
lysine turnover in the EEA was in any event the highest among the smaller producers, for whom the starting amount of the fine,
determined for gravity, was set at EUR 15 million.
Breach of the principle of equal treatment
The applicant contends that the Commission made a manifest error of assessment and disregarded the sixth and seventh paragraphs
of Section 1.A of the Guidelines and infringed the principle of equal treatment underlying those provisions, in that it set
the starting amount of the fine on account of the gravity of the offence at the same level for Sewon, Kyowa and itself, without
taking into account Cheil's much smaller size.
On this point, the applicant argues that, according to case-law (
Musique diffusion française and Others
v
Commission
, cited above, paragraph 120), the size and economic power of the undertaking concerned are factors which must be taken into
account in assessing the gravity of the infringement, and observes that, according to the provisions of the Guidelines just
mentioned, the specific weight and therefore the real impact of the offending conduct of each undertaking on competition must
be taken into account. Furthermore, the principle of equal treatment requires that different situations be treated differently,
including in relation to setting the amount of a fine (see judgment in Case T-295/94
Buchmann
v
Commission
[1998] ECR II-813).
In the present case, it is clear from the Decision itself that Cheil was by far the least powerful member of the cartel and
the smallest producer of lysine. In particular, the parties are agreed that the quantitative allocation plan based on each
undertaking's market power gave Cheil sales volumes two or three times smaller than those of Kyowa and Sewon (paragraphs 77,
78 and 104 of the Decision) and that in 1994 its market share was only 7 or 8%, compared with 19% for Kyowa and 14% for Sewon
(paragraphs 154 and 267 of the Decision).
Given those circumstances, the Commission's comparison based on the total turnover of those undertakings in the last year
of the infringement (paragraph 304 of the Decision) is too simplistic because it takes account neither of Cheil's limited
influence on competitive conditions nor of the fact that Kyowa and Sewon had already been present in the market for many years.
Moreover, Cheil's turnover itself shows that Cheil was approximately half the size of Kyowa.
Cheil's small size in comparison with the other companies is also borne out by the fact that, in the United states, Kyowa
was fined USD 10 million compared with a fine of USD 1.25 million for Cheil.
As regards the Commission's argument that, compared with Kyowa and Sewon, Cheil had the biggest lysine turnover in the EEA
in the last year of the infringement, this argument is an
ex post facto
justification, as it is not mentioned anywhere in the Decision.
The Commission contends that its approach was entirely in accordance with the Guidelines, which, moreover, are not legislation
and leave it a broad discretion. Furthermore, the basic amount of the fine determined by reference to the gravity of the infringement
is neither disproportional nor discriminatory.
Findings of the Court
Breach of the principle of proportionality
As was stated in paragraph 60 of the present judgment, it is settled case-law that under Regulation No 17 the Commission has
a margin of discretion when fixing fines, in order that it may direct the conduct of undertakings towards compliance with
the competition rules. The proper application of those rules requires that the Commission be at liberty to adjust at any time
the level of fines to the needs of Community competition policy, increasing them if necessary (
Musique diffusion française and Others
v
Commission
, paragraph 109).
In setting the amount of the fine which it imposed on the applicant in the Decision the Commission used the calculation method
which it imposed on itself in the Guidelines. According to settled case-law, the Commission may not depart from rules which
it has imposed on itself (see Case T-7/89
Hercules Chemicals
v
Commission
[1991] ECR II-1711, paragraph 53, confirmed on appeal in Case C-51/92 P
Hercules Chemicals
v
Commission
[1999] ECR I-4235, and the case-law cited). In particular, whenever the Commission adopts guidelines for the purpose of specifying,
in accordance with the Treaty, the criteria which it proposes to apply in the exercise of its discretion, there arises a self-imposed
limitation of that discretion inasmuch as it must then follow those guidelines (Case T-380/94
AIUFFASS and AKT
v
Commission
[1996] ECR II-2169, paragraph 57, and Case T-214/95
Vlaams Gewest
v
Commission
[1998] ECR II-717, paragraph 89).
Under the Guidelines, the gravity of an infringement is established by reference to a number of factors, some of which the
Commission must now imperatively take into account.
The Guidelines provide that, apart from the specific nature of the infringement, its actual effect on the market and its geographical
extent, it is necessary also to take account of the effective economic capacity of offenders to cause significant damage to
other operators, in particular consumers, and to set the fine at a level which ensures that it has a sufficiently deterrent
effect (fourth paragraph of Section 1.A).
Account may also be taken of the fact that large undertakings are usually better able to recognise that their conduct constitutes
an infringement and more aware of the consequences stemming from it (fifth paragraph of Section 1.A).
In cases involving several undertakings, such as cartels, it may be necessary to apply weightings to the general starting
point in order to take account of the specific weight and, therefore, the real impact on competition of the offending conduct
of each undertaking, particularly where there is considerable disparity between the sizes of the undertakings committing infringements
of the same type. Consequently, it may be necessary to adapt the general starting point according to the specific nature of
each undertaking (sixth paragraph of Section 1.A).
It is appropriate to observe that the Guidelines do not provide that fines are to be calculated according to the overall turnover
of the undertakings concerned or their turnover in the relevant market. However, nor do they preclude the Commission from
taking either figure into account in determining the amount of the fine in order to ensure compliance with the general principles
of Community law and where circumstances demand it. In particular, turnover may be relevant when considering the various factors
mentioned in paragraphs 79 to 81 of the present judgment (
LR AF 1998
v
Commission
, cited above, paragraphs 283 and 284).
Furthermore, it should be borne in mind that, according to settled case-law, the criteria for assessing the gravity of an
infringement may include the volume and value of the goods in respect of which the infringement was committed, the size and
economic power of the undertaking and, consequently, the influence which it was able to exert on the market. It follows that,
on the one hand, it is permissible, for the purpose of fixing a fine, to have regard both to the total turnover of the undertaking,
which gives an indication, albeit approximate and imperfect, of the size of the undertaking and of its economic power, and
to the proportion of that turnover accounted for by the goods in respect of which the infringement was committed, which gives
an indication of the scale of the infringement. On the other hand, it follows that it is important not to confer on one or
other of those figures an importance which is disproportionate in relation to other factors and that the fixing of an appropriate
fine cannot be the result of a simple calculation based on total turnover (
Musique diffusion française and Others
v
Commission
, cited above, paragraphs 120 and 121,
Parker Pen
v
Commission
, cited above, paragraph 94, and
SCA Holding
v
Commission
, cited above, paragraph 176).
In the present case, it is clear from the Decision that, in order to determine the starting point for the fine, the Commission
first considered the specific nature of the infringement, its actual effect on the market and its geographic extent. The Commission
then stated that it was important, given the need to treat each firm individually, to take account of the
effective capacity of the undertakings concerned to cause significant damage to the lysine market in the EEA, the dissuasive effect of the fine and the relative size of each undertaking. In order to assess these factors the Commission
chose to refer to the total turnover of each of the undertakings concerned in the last year of the infringement, on the view
that that figure would enable it
to assess the real resources and importance of the undertakings concerned in the markets affected by their illegal behaviour (paragraph 304 of the Decision).
The Commission's reliance on total turnover rather than turnover from the sale of the products in issue in the EEA is precisely
what the applicant complains of.
It is important to emphasise at this stage that a certain degree of ambiguity arises when the Decision is read alongside the
Commission's pleadings in the present case and that the Commission, on being questioned on the point by the Court at the hearing,
stated that it took account of not only the total turnover of the undertakings concerned, that is to say turnover from all
their activities, but also their worldwide turnover in the lysine market. The two sets of figures are given in a table appearing
in paragraph 304 of the Decision. In addition, it should be noted that, according to paragraph 318 of the Decision,
the Commission has taken due account of the economic importance of the particular activity concerned by the infringement in
its conclusions of gravity.
Nevertheless, it is established that the Commission did not take account of the turnover of each undertaking from sales in
the market concerned by the infringement, namely the lysine market in the EEA.
Now, for the purposes of assessing the
effective capacity of the undertakings concerned to cause significant damage to the lysine market in the EEA (paragraph 304 of the Decision), which implies an assessment of the real importance of the undertakings on the market affected
by their unlawful conduct, that is to say their influence on that market, total turnover is an imprecise guide. It is of course
possible for a powerful undertaking with a multitude of different business activities to have only a very limited presence
in certain specific markets, such as the lysine market. Similarly, an undertaking with a strong position in a geographical
market outside the Community may have only a weak position in the Community or EEA market. In such cases, the mere fact that
the undertaking in question has a high total turnover does not necessarily mean that it has a decisive influence in the market
affected by the infringement. That is why the Court emphasised in paragraph 139 of its judgment in Case C-185/95 P
Baustahlgewebe
v
Commission
[1998] ECR I-8417 that although an undertaking's market shares cannot be a decisive factor in concluding that an undertaking
belongs to a powerful economic entity, they are nevertheless relevant in determining the influence which it may exert on the
market. In the present case, however, the Commission took no account of the undertakings' market shares in terms of volume
in the market affected by the cartel (the EEA lysine market) or even of their turnover in that market, although, given the
absence of any other producers, that would have enabled it to establish the relative importance of each of the undertakings
in the market in that the Commission would have obtained an indirect indication, in value terms, of their respective market
shares (see, to that effect, Joined Cases 240/82 to 242/82, 261/82, 262/82, 268/82 and 269/82
Stichting Sigarettenindustrie
v
Commission
[1985] ECR 3831, paragraph 99).
Moreover, it is clear from the Decision that the Commission made no explicit reference to taking account of the
specific weight and, therefore, the real impact on competition of the offending conduct of each undertaking, which, under the Guidelines, it must now do where it considers, as it did in the present case, that the starting amounts
of the fines must be weighted because the infringement is one that involves several undertakings (a cartel) among which there
is considerable disparity in size (see the sixth paragraph of Section 1.A of the Guidelines).
The Commission's reference in the last sentence of paragraph 304 of the Decision to
the real ... importance of the undertakings does not remedy that omission.
An assessment of the specific weight, that is to say of the real impact of the infringement committed by each of the undertakings,
in fact involves establishing the scale of the infringement committed by each of them, rather than the importance of the undertaking
in question in terms of its size or economic power. Now, as is clear from settled case-law (
Musique diffusion française
v
Commission
, cited above, paragraph 121 and Case T-347/94
Mayr-Melnhof
v
Commission
[1998] ECR II-1751, paragraph 369), the proportion of turnover derived from the goods in respect of which the infringement
was committed is likely to give a fair indication of the scale of the infringement on the relevant market. In particular,
as the Court of First Instance has emphasised, the turnover in products which have been the subject of a restrictive practice
constitutes an objective criterion which gives a proper measure of the harm which that practice causes to normal competition
(Case T-151/94
British Steel
v
Commission
[1999] ECR II-629, paragraph 643).
It follows from the foregoing that, by relying on the applicant's worldwide turnover, without taking into consideration its
turnover in the market affected by the infringement, the EEA lysine market, the Commission disregarded the fourth and sixth
paragraphs of Section 1.A of the Guidelines.
That being so, it is incumbent on the Court to consider whether the Commission's failure to take account of turnover in the
relevant market and its consequential disregard of the Guidelines have led it in this case to breach the principle of proportionality
in setting the fine. It must be remembered in this connection that assessing the proportionality of a fine with regard to
the gravity and duration of an infringement, which are the criteria referred to in Article 15(2) of Regulation No 17, falls
within the unlimited jurisdiction conferred on the Court of First Instance by Article 17 of that regulation.
In the present case, the applicant argues, essentially, that the specific starting point of the fine, set at EUR 15 million,
is disproportionate in that it is almost identical to its turnover in the EEA lysine market in the last year of the infringement,
which was EUR 17 million.
First of all, it is appropriate to state that the fact that the specific starting point is almost the same as the turnover
achieved in the relevant market is not, of itself, conclusive. Indeed, that figure of EUR 15 million is merely an intermediate
figure which, in accordance with the method laid down in the Guidelines, is then adapted to reflect the duration of the infringement
and any aggravating and mitigating circumstances.
Secondly, an intermediate figure such as that may be justified by the very nature of the infringement, its actual effect,
the geographical extent of the market affected, the fact that the fine must have a deterrent effect and the size of the undertaking
in question, all of which were taken into account by the Commission in this case. The Commission was right to classify the
infringement as
very serious in that the applicant participated in a horizontal agreement the object of which was to set price objectives and sales quotas
and to establish a system for exchanging information on sales volumes. Moreover, that agreement had a real effect on the lysine
market in the EEA, causing an artificial price increase and a restriction of sales volumes. As regards the size of the undertakings
and the deterrent effect of the fines, the Commission was entitled to have regard to the total turnover of the undertakings
concerned. According to case-law, total turnover is in fact the figure which gives an indication of the size of the undertaking
(see, to that effect,
Musique diffusion française and Others
v
Commission
, cited above, paragraph 121) and of its economic power, which must be known in order to assess whether a fine will deter
it.
Thirdly, it is important to emphasise that the figure of EUR 15 million adopted in respect of the applicant is significantly
lower than the minimum threshold of EUR 20 million laid down in the Guidelines as standard for
very serious infringements (see the third indent of the second paragraph of Section 1.A of the Guidelines).
Referring expressly to paragraph 121 of the judgment in
Musique diffusion française and Others
v
Commission
, the applicant also argues that the Commission must not, when determining the amount of a fine, attribute disproportionate
significance to total turnover where the goods concerned account for only a small fraction of that figure. In this connection,
it should be remembered that, in
Parker Pen
v
Commission
, cited above, the Court of First Instance upheld a plea of infringement of the principle of proportionality on the ground
that the Commission had failed to take into consideration the fact that the turnover accounted for by the product to which
the infringement related was quite low in comparison with the turnover resulting from the undertaking's business as a whole
and that this justified a reduction in the fine (paragraphs 94 and 95).
It should first be observed, however, that the case-law just mentioned relates to determination of the final amount of a fine,
not, as in this case, the starting amount in light of the gravity of the infringement.
Next, even if the authority of that case were applicable to the present case, it must be pointed out that the Court has power
to assess, in the context of its unlimited jurisdiction, whether or not the amount of a fine is reasonable. That assessment
may justify the production and taking into account of additional information (see, to that effect, case C-297/98 P
SCA Holding
v
Commission
[2000] ECR I-10101, paragraphs 53 to 55) such as, in this case, the applicant's turnover in the EEA lysine market, which
was not taken into account in the Decision.
In this connection, it is important to point out that a comparison of the applicant's various turnover figures for 1995 reveals
two things. First, turnover from sales of lysine in the EEA, amounting to EUR 17 million, can indeed be regarded as small
in comparison with total turnover, whether it be EUR 1.5 billion, as given in paragraph 304 of the Decision and taken up by
the applicant in its pleadings, or EUR 1.9 billion, as mentioned in paragraph 18 of the Decision. Secondly, it appears, by
contrast, that turnover from lysine sales in the EEA represents a significant proportion of Cheil's sales in the worldwide
lysine market, representing either 42.5% or 32.7%, depending on whether it is estimated at EUR 40 million, as stated in paragraph
304 of the Decision and taken up by the applicant in its pleadings, or EUR 52 million, as indicated in paragraph 18 of the
Decision.
Since sales of lysine in the EEA therefore represent not a small fraction but a significant proportion of worldwide turnover
from lysine sales, it cannot validly be argued that the principle of proportionality has been infringed,
a fortiori
because the starting amount of the fine was not set on the mere basis of a simple calculation based on total turnover, but
also by reference to sectoral turnover and other relevant factors such as the nature of the infringement, its actual effect
on the market, the extent of the market affected, the necessary deterrent effect of the sanction and the size and power of
the undertaking.
In light of those reasons, the Court, in the exercise of its unlimited jurisdiction, finds that the starting amount of the
fine, determined by reference to the gravity of the infringement committed by Cheil, is appropriate and that, since the Commission's
failure to adhere to the Guidelines has not, in the present case, led it to breach the principle of proportionality, the applicant's
complaint in this regard must be rejected.
Breach of the principle of equal treatment
When determining the amount of a fine, the Commission must not infringe the principle of equal treatment, a general principle
of Community law which, according to settled case-law, is infringed only where comparable situations are treated differently
or different situations are treated in the same way, unless such difference in treatment is objectively justified (Case T-311/94
BPB de Eendracht
v
Commission
[1998] ECR II-1129, paragraph 309, and the case-law cited).
In accordance with this principle, the sixth paragraph of Section 1.A of the Guidelines provides that, in the case of an infringement
involving several undertakings, it might be necessary to apply weightings to the starting amounts of the fines in order to
take account of the specific weight and, therefore, the real impact of the offending conduct of each undertaking on competition,
particularly where there is considerable disparity between the sizes of the undertakings committing infringements of the same
type.
Thus, under the seventh paragraph of Section 1.A of the Guidelines, the principle of equal punishment for the same conduct
may, if the circumstances so warrant, lead to different fines being imposed on the undertakings concerned without this differentiation
being governed by arithmetic calculation.
In the Decision (paragraphs 303 and 304) the Commission noted that there was considerable disparity between the sizes of the
undertakings which committed the infringement. Consequently, it took the view that, in order to take account of the effective
capacity of the undertakings concerned to cause significant damage to the lysine market in the EEA and the need to ensure
that the amount of the fine has a sufficiently deterrent effect, it was appropriate to divide the parties into two groups
according to size, the first including Ajinomoto and ADM, for whom the starting amount of the fine was set at EUR 30 million,
and the second Kyowa, Cheil and Sewon, for whom the starting amount was set at EUR 15 million.
By contrast with the reasoning which it propounds in the context of its plea of infringement of the principle of proportionality,
the applicant does not point out that account was not taken of turnover in the lysine market in the EEA. It relies, amongst
other things, on a comparison of the worldwide turnover figures of the undertakings involved in the cartel to justify its
assertion that the starting amount of its fine is discriminatory.
However, whilst the applicant's total turnover in 1995, whether it be EUR 1.5 billion or EUR 1.9 billion (paragraphs 304 and
18 of the Decision), does indeed appear significantly lower than that achieved by Kyowa and significantly higher than that
achieved by Sewon, the undertakings with which it was grouped, it cannot be concluded from that fact that there has been any
breach of the principle of equal treatment in this case.
Indeed, a comparison of the turnover achieved in the world lysine market by Cheil, Kyowa and Sewon, as set out in the second
column of the table appearing in paragraph 304 of the Decision, reveals that the Commission was quite right to group those
undertakings together and to take the same specific starting point for the fines imposed on them.
The applicant's turnover in 1995 in the world lysine market was EUR 40 million (or EUR 52 million, according to paragraph
18 of the Decision). That turnover, whether it be 40 million or 52 million, is relatively close to Sewon's turnover of EUR
67 million and slightly lower that Kyowa's turnover of EUR 73 million. The Court points out that the Commission was entitled
in this case to take their relative size into account in its reasoning, in accordance with the seventh paragraph of Section
1.A of the Guidelines.
In addition, the Commission maintains that a comparison of the turnover achieved in the EEA lysine market by each undertaking
justifies its dividing them into two groups.
It is established that, in the present case, the Commission did not take account of those turnover figures and that it thereby
infringed the sixth paragraph of Section 1.A of the Guidelines (see paragraph 92 of the present judgment). Nevertheless, it
should be borne in mind that, as indicated in paragraph 93 of the present judgment, the Court of First Instance has power
to assess, in the context of the unlimited jurisdiction accorded to it by Article 229 EC and Article 17 of Regulation No 17,
the appropriateness of the amount of the fines. That assessment may justify the production and taking into account of additional
information  such as, in this case, the turnover achieved by the undertakings in question in the EEA lysine market (see, to
that effect, C-297/98 P
SCA Holding
v
Commission
, cited above, paragraphs 53 to 55).
If the turnover achieved by the applicant in the EEA lysine market is considered, it becomes clear that it is in an almost
identical position to that of the other two
small producers Sewon and Kyowa. Whilst, in 1995, Ajinomoto and ADM achieved turnover in that market of EUR 75 million and EUR
41 million (paragraphs 5 and 10 of the Decision), Cheil, Kyowa and Sewon achieved only EUR 17 million, EUR 16 million and
EUR 15 million respectively. Thus, it appears that the applicant's influence in the market affected by its unlawful conduct
was, contrary to its assertions, comparable to that of the other two
small producers Sewon and Kyowa. Since those undertakings all participated in the same infringement, it is right that the starting
amount of the fine imposed on them should be the same.
It follows that the starting amount of EUR 15 million set by the Commission is not discriminatory and the applicant's arguments
concerning its weak market share and the modest fine imposed by the American authorities, which, it alleges, reflect its small
size, cannot throw doubt on that conclusion.
3.The duration of the infringement
Arguments of the parties
The excessive increase
The applicant disputes the 30% increase in the fine on account of the duration of the infringement because, according to Article
1(e) of the Decision, the infringement, in its case, went on from 27 August 1992 to 27 June 1995, that is to say two years
and ten months. Such an increase constitutes a manifest error of assessment and is inconsistent with the Guidelines.
On this point, the applicant observes that, according to paragraph 313 of the Decision, the starting amount determined by
reference to the gravity of the infringement was increased by 10% per year. Also, it is clear from the first indent of the
first paragraph of Section 1.B of the Guidelines that there can be no increase in the case of an infringement of less than
one year's duration. Finally, the Commission increased the starting amount of the fine for Ajinomoto, Sewon and Kyowa by only
40%, although their infringement went on for at least five years. Consequently the applicant has been treated in an illogical
fashion.
The applicant takes the view that, as exemplified in the cases of Ajinomoto, Sewon and Kyowa, the system laid down by the
Guidelines implies that the annual 10% increase applies only after the first year. In any event, only a total increase of
18%, or at the most 20%, ought to have been applied.
The Commission observes that the second indent of the first paragraph of Section 1.B of the Guidelines provides that the increase
in the amount of a fine determined by reference to gravity may be up to 50% for infringements lasting between one and five
years. The Guidelines do not therefore require that any increase be proportional to the actual duration of the infringement
or calculated as a fixed percentage for each year of its duration. Admittedly, paragraph 313 of the Decision states that the
starting amounts of the fines determined for the gravity of the infringement were increased by 10% per year. However, to treat
a period of two years and ten months as in fact a period of three years for this purpose cannot be regarded as a manifest
error of assessment. It would be excessively pedantic to suggest that the increase in Cheil's fine should have been 28.33%.
The fact that a 40% increase was applied in the cases of Ajinomoto, Kyowa and Sewon for an infringement lasting five years
is of no consequence. First, the Commission submits that it was exercising the discretion conferred on it by the Guidelines.
Secondly, even if this amounts to treating Cheil differently from the other producers, the only logical conclusion is that
their fines ought to have been higher, with an increase of 50%, not that the increase in Cheil's fine ought to have been less.
Finally, the Commission contends that there is no foundation for the assumption that under the Guidelines the first year of
any infringement must not be taken into account. In fact, it is only where an infringement lasts for less than one year that
the fine may not be increased.
The exclusion of Cheil from cartel meetings for four months and the non-participation of Cheil in the agreements on quantities
and information exchange for eighteen months
The applicant submits, first of all, that the Commission ought to have taken account of the fact that it did not attend any
cartel meetings between 8 December 1993 and 10 March 1994 after being excluded by the other members of the cartel. The Commission
ought, in the applicant's submission, to have reduced the duration of the infringement by four months or, at least, to have
regarded its passive role during that period as a mitigating factor.
According to the applicant, it is clear from the file that it was excluded from the meeting of 8 December 1993 by Ajinomoto,
Kyowa and Sewon and was not readmitted until the afternoon session of the meeting in Honolulu on 10 March 1994, having been
excluded from the morning session because of its opposition to any limitation of production.
Next, the applicant contends that the Commission made a manifest error of assessment in failing to take account of the fact
that, between August 1992 and March 1994, it did not participate either in the quota agreements or in the exchange of information
on sales volumes.
Firstly, as regards the quota agreements, the applicant states that it did not agree to individual allocation of sales volumes
until 10 March 1994, the day of the meeting in Honolulu. The American authorities also reached that conclusion in the criminal
proceedings there.
Secondly, as regards the agreement for the exchange of information on sales volumes, the Commission likewise took no account
of the fact that Cheil was party to that agreement only from 10 March 1994 to 27 June 1995. It is illogical not to give Cheil
credit for not subscribing to the agreement until after it had come into effect, as is acknowledged in paragraph 224 of the
Decision, while at the same time giving credit to Sewon for subscribing to the agreement initially and subsequently abandoning
it.
The Commission disputes the merits of Cheil's reasoning, but admits that the undertaking did not join in the information exchange
agreement until 10 March 1994 and that the agreement had come into effect earlier, at the meeting which Cheil did not attend.
However, that does not justify a smaller increase in respect of the duration of the infringement.
Findings of the Court
Under Article 15(2) of Regulation No 17, the duration of an infringement is one of the factors that must be taken into account
when determining what fine should be imposed on undertakings which infringe the competition rules.
As far as this factor is concerned, the Guidelines establish a distinction between infringements of short duration (in general,
less than one year), for which there should be no increase in the starting amount determined for gravity, infringements of
medium duration (in general, one to five years) for which there may be an increase of 50% of that amount, and infringements
of long duration (in general, more than five years), for which the amount determined for gravity may be increased by 10% per
annum (first to third indents of the first paragraph of Section 1.B of the Guidelines).
In paragraph 313 of the Decision the Commission states:
[i]n the present case, the undertakings concerned have committed an infringement of medium duration (between three and five
years). The starting amounts of the fines determined for gravity (see paragraph 305) are therefore increased by 10% per year,
i.e. as to ADM and Cheil by 30% and Ajinomoto, Kyowa and Sewon by 40%.
As far as the increase in the fine imposed on Cheil is concerned, it must be pointed out that, according to Article 1(e) of
the operative part of the Decision, Cheil's infringement went on from 27 August 1992 to 27 June 1995, that is to say two years
and ten months.
The applicant maintains, essentially, that by treating the period of the infringement as being three full years, the Commission
made a manifest error of assessment and infringed the Guidelines, and that the increase applied ought to have been 20% at
the very most.
The applicant's submission that it is clear from Section 1.B of the Guidelines that the first year of an infringement should
not be taken into account must be rejected. The provision merely states that, in the case of short-term infringements (in
general less than one year) there should be no increase. On the other hand, there will be an increase for longer-term infringements.
That increase may be as high as 50% where, as in the present case, the infringement has gone on for between one and five years.
Moreover, the second indent of the first paragraph of Section 1.B does not provide that there should be an automatic increase
of 10% a year in the case of medium-term infringements but leaves the Commission a margin of discretion. The same may be said
of the third indent of the first paragraph of Section 1.B, concerning long-term infringements, which merely provides for a
possible increase of 10% per year.
Nevertheless, on applying the Guidelines in the Decision, the Commission adopted the principle of a 10% per annum increase
for all the undertakings involved in the infringement which, rightly, it classified as being of medium-term duration.
However, it is clear that, when it applied that principle, it in fact increased the starting amounts of the fines imposed
on Sewon, Kyowa and Ajinomoto by 40%, not 50%, even though their infringing conduct went on for five years (see Article 1(b),
(c) and (d) of the Decision, which states that these undertakings were involved in the infringement
from at least July 1990 to 27 June 1995) and increased the starting amount of the fine imposed on Cheil by 30%, even though its infringement went on for less than
three years.
It must, therefore, be held that the increase of 30% applied in Cheil's case, whilst not in itself contrary to the Guidelines,
is nevertheless manifestly wrong in light of the approach which the Commission adopted in paragraph 313 of the Decision and
purportedly implemented when applying to the undertakings concerned the various increases on account of the duration of the
infringement.
Moreover, the Commission has offered no explanation for the 30% uplift applied in Cheil's case or for the 40% uplift applied
in the case of the three large undertakings, notwithstanding its stated adoption of the principle of applying an increase
of 10% per annum.
Given that the duration of Cheil's infringement was less than three full years and that the Commission in fact applied an
increase of less than 10% per annum in the cases of Sewon, Kyowa and Ajinomoto, there are clearly grounds for the Court, in
the exercise of its discretion, to reduce to 20% the increase in the starting amount of Cheil's fine, thereby reducing the
basic amount of the fine to EUR 18 million.
On the other hand, the Court must reject the arguments which Cheil puts forward in relation to its exclusion from the cartel
for a period of four months as a result of its disagreement with the other members of the cartel regarding the apportioning
of sales volumes and the fact that it did not participate in the agreements relating to sales volumes and the exchange of
information until March 1994. First, it is not disputed that, from 27 August 1992 to June 1995, Cheil participated in the
principal aspect of the infringement, namely the agreement on prices (see, in particular, paragraphs 79, 81, 90 and 92 of
the Decision). Secondly, it is clear from the Decision (see paragraphs 77, 78, 87, 104, 116, 118, 126 and 128 in particular)
that, as far as sales volumes are concerned, Cheil did not voice its disagreement with the need to apportion volumes between
producers in order to keep prices high, but, on the contrary, it asked for a larger share for itself. It thereby accepted
the principle of restricting the sales made by each producer and that remained its position until 10 March 1994, the day on
which it accepted the offer made to it. As is clear from case-law (see, to that effect, Case T-7/89
Hercules Chemicals
v
Commission
, cited above, paragraph 232, confirmed on appeal in Case C-51/92 P
Hercules Chemicals
v
Commission
, cited above), factors such as those are sufficient to establish that Cheil participated in the quotas system, even during
the period from December 1993 to March 1994.
Furthermore, the Commission was careful to state in the Decision (paragraph 224) that it was on 10 March 1994 that the applicant
entered into the agreement for the exchange of information on sales volumes, which the other members of the cartel had entered
into on 8 December 1993, with implementation of the agreement scheduled for the beginning of 1994.
In view of those dates, it cannot be held that the applicant delayed becoming a party to the agreement, as it claims. The
short lapse of time between the conclusion of the agreement ─ or its implementation ─ and the applicant's participation in
it in no way indicates that the Commission made a manifest error of assessment as regards the increase which it applied on
account of the duration of the infringement, such as might warrant a reduction of that increase.
In so far as the applicant claims that the brevity of its participation in the agreement for the exchange of information on
sales volumes
was not taken into account in the Commission's decision which penalised Cheil for one overall infringement of three years'
duration, it should be borne in mind that the Commission rightly took the view that the agreements concluded by the undertakings in
question were in fact a series of anti-competitive agreements concluded in the context of a single, common plan to regulate
prices and supply on the lysine market. The applicant has put forward no argument capable of showing that the Commission erred
in concluding that the actions of the undertakings, including their agreement on the exchange of information, constitute a
single, continuing infringement.
Lastly, although the parties are agreed that the applicant was indeed involved in the infringement from 27 August 1992 to
27 June 1995, the questions whether that involvement was active or merely passive and whether the agreements were actually
implemented must be considered in the Court's examination of the issue of whether the Commission failed to take account of
certain mitigating circumstances.
4.Mitigating circumstances
Arguments of the parties
The passive role played by Cheil
The applicant maintains that its peripheral role in the cartel's activity justified a reduction in its fine in accordance
with the first indent of Section 3 of the Guidelines. It adds that past decisions of the Commission (Commission Decision 89/190/EEC
of 21 December 1988 relating to a proceeding pursuant to Article [81] of the EEC Treaty (Case IV/31.865 ─ PVC) (OJ 1989 L
74, p. 1) and the case-law (Case T-334/94
Sarrió
v
Commission
[1998] ECR II-1439, paragraph 411) confirms that.
In the present case, it is not disputed that the
Asian/European cartel referred to in paragraphs 50 to 68 of the Decision was formed before Cheil entered the lysine market and before it
joined the cartel on 27 August 1992. Even after that date, Cheil's role remained a passive one. For example, it did not attend
the meeting of 27 May 1993 at which Ajinomoto and Kyowa asked Sewon to persuade Cheil to agree to adjust sales volumes. Cheil's
peripheral role, attributable to its small size, is also clear from the meeting in Vancouver on 24 June 1993, at which all
the companies except Cheil agreed to form an official corporation of lysine producers (paragraph 110 of the Decision). Furthermore,
Cheil was never described by the other companies as a leader or active member, in spite of their attempts to shift the blame
to other participants. Lastly, the Commission based its findings on the mere fact that Cheil had attended meetings, without
mentioning the low profile it adopted at those meetings or its exclusion from some of them. That kind of approach, which does
not take into account Cheil's less important role and causes it to be treated in the same way as a large producer, like Kyowa,
has already been criticised by the Court of First Instance in its judgment in
BPB de Eendracht
v
Commission
, cited above.
The Commission states that, in determining the duration of the infringement, it took account of the fact that Cheil was a
late entrant in the market but that that circumstance does not warrant the inference that Cheil played a passive role, for
the reasons set out in paragraphs 361 to 364 of the Decision.
Non-implementation in practice of the agreements
The applicant maintains that the Commission ought, pursuant to the second indent of Section 3 of the Guidelines, to have reduced
the basic amount of its fine by reason of the fact that it did not in practice implement any of the infringing agreements.
The Commission's view that the provision in question refers only to cases where a cartel as a whole is not put into effect
is mistaken for two reasons. First, it would be unfair not to reward a company that has not implemented a cartel in practice
and has therefore not injured the interests of consumers. Secondly, all the other mitigating circumstances referred to in
Section 3 of the Guidelines describe the individual actions of each company.
The Commission submits that the expression
non-implementation in practice of offending agreements or practices used in the Guidelines refers to situations where a cartel as a whole remains unimplemented or is inoperative for a given
period. It does not refer to the individual position of members of an active cartel, especially where an undertaking actively
participates in discussions and in no way dissociates itself from the cartel, as in Cheil's case. That view is confirmed by
case-law, in particular Case T-308/94
Cascades
v
Commission
[1998] ECR II-925, paragraph 230, in which it was held that the fact that an undertaking did not behave on the market in
the manner agreed with its competitors is not necessarily a matter which must be taken into account as a mitigating circumstance
because the undertaking may simply be trying to exploit the cartel for its own benefit.
─ The price agreements
The applicant points out that, according to the Decision itself, the prices successively agreed upon at the meetings of the
cartel members were never matched by the prices which, according to the table in paragraph 47 of the Decision, were charged
by the applicant.
Furthermore, it is clear from the graph submitted by the applicant in reply to the statement of objections (annex 12 to the
application) that the prices which it charged were on average 25% lower than the target prices agreed upon at cartel meetings.
Consequently, the Commission made a manifest error of assessment and breached the Guidelines by failing to allow Cheil a reduction
in its fine by reason of its non-implementation in practice of the price agreements.
The Commission replies that the applicant's figures do not invalidate the findings in the Decision, in particular those in
paragraphs 376 and 377, which state that implementation of an agreement on target prices does not necessarily mean that those
prices will actually be charged in the market, but rather that the undertakings will endeavour to achieve them.
In addition, it is common ground that Cheil was present at most of the meetings at which pricing was discussed. It is therefore
incumbent on Cheil to prove that, notwithstanding that acknowledged fact, its pricing policy was the result of free and full
competition. Moreover, the facts set out in paragraph 47 of the Decision show that Cheil's prices were not the lowest in the
market and that they mirrored the changes in prices charged by the other members of the cartel.
─ The quota agreements
The applicant maintains, first of all, that the Decision itself shows that the applicant did not implement the volume sharing
agreement (paragraph 214) and that, on the contrary, it called for an increase in production (paragraphs 108 and 116), which
is also borne out by the fact that it was excluded from the morning session of the meeting in Honolulu on 10 March 1994, which
was devoted to quotas.
Moreover, the Commission did not expressly reject the evidence which the applicant adduced to show that it had conducted feasibility
studies and placed orders for equipment with a view to doubling its production capacity (annex 13 to the application). The
Commission simply assumed that the agreements were implemented by each of the companies which attended the meetings (paragraph
380 of the Decision). However, by ignoring the evidence which Cheil adduced to show a wide discrepancy between the agreed
prices and the prices which it actually charged, the Commission has in fact treated it in the same way as the other companies
which have been unable to adduce such evidence.
Thus, the Commission has not only manifestly erred in its assessment and breached the Guidelines, but also infringed the principle
of equal treatment.
The argument that the agreement concerned minimum quantities is, according to the applicant, illogical. If this were correct,
neither Cheil nor Sewon would have called for a larger quota.
The Commission replies that Cheil was a willing party to an arrangement under which quotas would be allocated and its sole
disagreement with the other cartel members arose from the fact that it wanted a larger quota.
The fact that Cheil could have sold greater quantities than the other companies sought to impose on it is not a mitigating
circumstance because the quotas fixed were only minimum quantities (paragraph 378 of the Decision). That conclusion is not
inconsistent with the fact that the producers imposed sales limits on themselves because the cartel members, unable to agree
on fixed quotas, were able to agree only on the minimum market shares which they were to preserve. In this connection, it
is significant that the share of the world market allocated to Cheil was 7% and that its actual share remained at 8% (paragraph
267 of the Decision).
Any plans for increasing production capacity are, according to the Commission, irrelevant because they do not equate with
sales volumes.
─ The agreement for the exchange of information on sales volumes
The applicant maintains that it systematically gave the other cartel members inaccurate information. It claims that there
must be a point beyond which the provision of inaccurate information amounts to non-implementation in practice of such an
agreement. Indeed, in such a case the infringing conduct will affect the market to a lesser degree.
The Commission urges the Court to reject the argument that actively participating in a cartel whilst at the same time trying
to mislead its members is a laudable practice justifying a lower fine. During the administrative procedure, moreover, Cheil
claimed that it joined the cartel only to obtain information on the lysine market, an argument which is refuted in paragraph
364 of the Decision.
Findings of the Court
The passive role played by Cheil
As is clear from case-law, where an infringement is committed by several undertakings, the relative gravity of the participation
of each of them must be examined (Joined Cases 40/73 to 48/73, 50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73
Suiker Unie and Others
v
Commission
[1975] ECR 1663, paragraph 623, and Case C-49/92
Commission
v
Anic Partecipazioni
[1999] ECR I-4125, paragraph 150) so that it may be established whether aggravating or mitigating circumstances are applicable
to them.
Sections 2 and 3 of the Guidelines provide for the basic amount of fines to be varied in accordance with certain aggravating
and mitigating circumstances.
In particular, in accordance with the first indent of Section 3 of the Guidelines,
an exclusively passive or
follow-my-leader role in the infringement will, where it is established, constitute a mitigating circumstance. A passive role implies that the undertaking will adopt
a
low profile, that is to say not actively participate in the creation of any anti-competitive agreements.
It is clear from case-law that one circumstance that may indicate the adoption by an undertaking of a passive role within
a cartel is where the undertaking's participation in cartel meetings is significantly more sporadic than that of the
ordinary members of the cartel (see, to that effect,
BPB de Eendracht
v
Commission
, cited above, paragraph 343); another is where it enters the market affected by the infringement late, regardless of the
length of its involvement in the infringement (see, to that effect,
Stichting Sigarettenindustrie
v
Commission
, cited above, paragraph 100); another is where a representative of another undertaking which has participated in the infringement
makes an express declaration to such effect (see, to that effect, Case T-317/94
Weig
v
Commission
[1998] ECR II-1235, paragraph 264).
In the present case, Cheil pleads, in substance, its late entry on the market, the fact that it did not attend certain meetings
concerning sale quotas or the institution of an official lysine corporation, the company's small size and the fact that it
was not cited by the other members as having been an active member.
The argument that Cheil was not cited as an active member by the other undertakings involved must immediately be rejected.
Whilst account may certainly be taken of any express declarations concerning the role played by an undertakings within a cartel,
provided that they emanate from representatives of other undertakings (see, to that effect,
Weig
v
Commission
, cited above, paragraph 264), there is no probative force in the circumstance that no such declarations have been made.
Similarly, the Commission's argument that it took account of Cheil's late entry on the market when determining the duration
of the infringement must also be rejected as irrelevant because the question of calculating the duration of an infringement
committed by an undertaking is distinct from that of its active or passive role.
As regards specifically Cheil's entry on the lysine market, that occurred, as in ADM's case, in 1991, that is to say at a
time when the Asian/European agreement between Ajinomoto, Sewon and Kyowa had already been in effect for some months, since
July 1990 in fact (paragraphs 50 to 68 of the Decision). Moreover, by contrast with ADM, Cheil did not attend the meeting
in Mexico on 23 June 1992, which marks one of the crucial periods for the cartel in that its purpose was to put in place a
new mechanism for controlling prices and quantities in view of the new producers' entry on the market (paragraphs 72 to 75
of the Decision).
It is established that, on 27 August 1992, the Asian producers attended a meeting at Cheil's premises in Seoul during which
they agreed on the price increase proposed by ADM (paragraph 79 of the Decision). That date marks the beginning of Cheil's
participation in the cartel, a fact not in dispute, like that of its continual attendance at meetings concerning collusion
on prices. Moreover, it is clear from the Decision that, although a late entrant on the market, Cheil was quick to ask for
a larger quota than that offered it (paragraphs 77 and 78 of the Decision), something it continued to do until 10 March 1994
when it accepted the quota proposed.
Whilst Cheil's attitude might not exactly fit the definition of a passive role on the part of an undertaking, the consequences
of the company's late entry on the market and of its attitude towards the other producers on the subject of sales volumes
must be assessed in light of the other factors which it pleads, namely the infrequency of its attendance at meetings and its
small size.
The frequency of Cheil's attendance at meetings of producers concerning sales volumes, during the first phase of its involvement
in the cartel (from 27 August 1992 to 10 March 1994) is certainly less than that of the other participants.
It is clear from the Decision that, leaving aside the meetings during that period between the two ringleaders, which it obviously
did not attend, and the other meetings devoted to prices, which, on the other hand, it did attend (paragraphs 79, 81, 90 and
94 of the Decision), Cheil was absent from several meetings of producers devoted to the problem of sales quotas, namely the
meetings of 29 October and 2 November 1992 (paragraphs 86 and 87), of 27 May 1993 (paragraph 102) and, most importantly, of
8 December 1993 (paragraphs 119 and 122) and lastly the meeting on the morning of 10 March 1994 (paragraphs 126 and 127).
By contrast, it participated fully at the meetings of 18 June 1993 (paragraph 104 of the Decision), 24 June 1993 (paragraph
108) and 5 October 1993 (paragraph 116).
Cheil's very attitude at one of those meetings attests to the fact that it played a passive role in relation to the agreements
on sales volumes until 10 March 1994. It is clear from the Decision (paragraph 110) that, at the meeting on 24 June 1993,
all the participants except Cheil agreed to form an official lysine corporation, to be managed by Ajinomoto and ADM. That
decision led to the creation, within an existing professional association (Fefana), of a working group of producers whose
meetings proved decisive in enabling the producers to exchange information and to ensure compliance with the allotted quotas
(see, in particular, paragraphs 122, 125, 133, 139, 150, 158 and 165 of the Decision).
It therefore appears that, between 27 August 1992 and 10 March 1994, Cheil participated fully in only three of the eight meetings
devoted to sales volumes and that, significantly, it was not present at the meetings held on 8 December 1993 and on the morning
of 10 March 1994, which were the most important in so far as sales volumes are concerned. Indeed, it was at those latter meetings
that the other producers agreed a more refined and definitive allocation of sales quotas for 1994 and Ajinomoto was given
the task of maintaining centrally the turnover figures communicated by the other members of the cartel.
In addition to its absence from those two strategic meetings on sales volumes, it should be mentioned that, in the afternoon
of 10 March 1994, Cheil finally accepted a sales quota fixed by the other producers at 17 000 tonnes, an amount appreciably
smaller than that which it had asked for, namely 22 000 tonnes (paragraph 116 of the Decision).
Lastly, Cheil's small size is an important factor to be taken into consideration in assessing the real impact of its late
entry on the lysine market and its conduct in relation to the other producers. Whilst Cheil initially opposed the quota offered
it, the fact remains that the quota proposed by the ringleaders of the cartel was always significantly smaller than that which
they proposed to the other undertakings of similar size, Kyowa and Sewon. In particular, in the case of Sewon, an undertaking
whose total turnover is admittedly much lower than Cheil's but whose total turnover in the lysine sector was higher, it is
significant to note that the quotas proposed varied between 32 900 tonnes (paragraph 104 of the Decision) and 37 000 tonnes
(paragraph 121 of the Decision), in comparison with the 17 000 tonnes finally allotted to Cheil (paragraph 128 of the Decision).
Moreover, the worldwide market shares allotted in 1994 to each producer pursuant to the agreements concluded (see paragraph
267 of the Decision) indicate that Cheil (with 7%) had a much smaller market share than that allotted to Sewon (14%) and Kyowa
(19%), even though they are regarded as undertakings of comparable size. Thus, it is clear that Cheil was put at a disadvantage
by comparison with the other producers within the cartel as far as sales quotas are concerned. That may be interpreted as
a direct consequence of its more sporadic attendance at meetings and its late entry on the market. Against that background,
the fact that Cheil claimed a larger quota than that proposed is of limited significance and does not necessarily indicate
that it played an active role.
That being so, it must be concluded that Cheil played a passive role in the arrangement concerning sales quotas between 27
August 1992 and 10 March 1994, or half of the time during which it participated in the cartel. On the other hand, after 10
March 1994, it attended and actively participated in various cartel meetings, a fact which it does not dispute.
As regards the amount of the reduction which the Court, in the exercise of its unlimited discretion, should allow the applicant,
it is appropriate to observe that the Commission granted Sewon a reduction of 20% of the increase applied on account of duration,
equating to a reduction of 5.71% of the basic amount of the fine, on the ground that it had played a passive role in connection
with the agreements on sales quotas only from 1995 onwards, that is to say for a period of six months out of the five years
during which it was involved in the cartel.
Taking account both of that fact and of the need to ensure equality of treatment as between the parties to the cartel as well
as of Cheil's active participation in the price agreements, a reduction of 10% of the basic amount of the fine appears to
be justified in that Cheil's passive role in the arrangements relating to sales volumes continued for a longer period.
Non-implementation in practice of the agreements
As stated in paragraph 165 of the present judgment, it is clear from case-law that, where an infringement is committed by
several undertakings, the relative gravity of the participation of each of them must be examined so that it may be established
whether aggravating or mitigating circumstances are applicable to them.
That conclusion follows logically from the principle that penalties must fit the offence, according to which an undertaking
may be penalised only for acts imputed to it individually. That principle applies in any administrative procedure that may
lead to the imposition of sanctions under Community competition law (see, as regards fines, Joined Cases T-45/98 and T-47/98
Krupp Thyssen Stainless and Acciai speciali Terni
v
Commission
[2001] ECR II-3757, paragraph 63).
Sections 2 and 3 of the Guidelines provide for the basic amount of fines to be varied in accordance with certain aggravating
and mitigating circumstances particular to each undertaking concerned.
In particular, Section 3 of the Guidelines lays down, under the heading
attenuating circumstances, a non-exhaustive list of circumstances which may lead to a reduction in the basic amount of a fine. Reference is made to
the passive role of undertakings, to non-implementation in practice of agreements, to termination of the infringement as soon
as the Commission intervenes, to the existence of reasonable doubt on the part of the undertaking as to whether the restrictive
conduct does indeed constitute an infringement, to infringements committed by negligence and to effective cooperation by the
undertaking in the proceedings, outside the scope of the Leniency Notice. Those circumstances are thus all particular to the
individual conduct of each undertaking concerned.
It follows that the Commission is clearly wrong to interpret the second indent of Section 3, which speaks of
non-implementation in practice of the offending agreements, as referring only to cases where a cartel as a whole is not implemented and not to the individual conduct of each undertaking.
The Commission is in fact confusing its appraisal of the actual effect of an infringement on the market, which it must carry
out in order to assess the gravity of the infringement (first paragraph of Section 1.A of the Guidelines) and in the context
of which it must consider the effects arising from the infringement as a whole rather than the actual conduct of each undertaking,
with its appraisal of the individual conduct of each undertaking, which it must carry out in order to assess any aggravating
or mitigating circumstances (Sections 2 and 3 of the Guidelines), in the context of which it must, in accordance with the
principle of the individual application of penalties and sanctions, examine the relative gravity of the undertaking's individual
involvement in the infringement.
Moreover, the Commission referred in its defence to the judgment in
Cascades
v
Commission
, cited above, in which the Court of First Instance held that the fact that an undertaking which has been proved to have participated
in a cartel did not behave on the market in the manner agreed with its competitors is not necessarily a matter which must
be taken into account as a mitigating circumstance when determining the amount of the fine to be imposed (paragraph 230).
It should be observed that, in
Cascades
v
Commission
, the Court was reviewing a Commission decision in which the Guidelines ─ which make express provision for non-implementation
in practice of an infringing agreement to be taken into account as a mitigating circumstance ─ had not been applied because
the decision preceded their adoption. However, as the Court has already stated in paragraph 77 of the present judgment, according
to settled case-law, the Commission may not depart from rules which it has imposed on itself. In particular, whenever the
Commission adopts guidelines for the purpose of specifying, in accordance with the Treaty, the criteria which it proposes
to apply in the exercise of its discretion, there arises a self-imposed limitation of that discretion inasmuch as it must
then follow those guidelines (
AIUFFASS and AKT
v
Commission
, cited above, paragraph 57, and
Vlaams Gewest
v
Commission
, cited above, paragraph 89).
In the present case it remains to be established whether the Commission was entitled to conclude that the applicant could
not claim, under the second indent of Section 3 of the Guidelines, the benefit of the mitigating circumstance that the agreements
were not implemented in practice. To that end it is necessary to ascertain whether the circumstances which the applicant pleads
are capable of showing that during the period in which it was party to the infringing agreements it actually avoided applying
them by adopting competitive conduct in the market (see, to that effect, Joined Cases T-25/95, T-26/95, T-30/95 to T-32/95,
T-34/95 to T-39/95, T-42/95 to T-46/95, T-48/95, T-50/95 to T-65/95, T-68/95 to T-71/95, T-87/95, T-88/95, T-103/95 and T-104/95
Cimenteries CBR and Others
v
Commission
[2000] ECR II-491, paragraphs 4872 to 4874).
As regards, first of all, the applicant's claim that it did not implement the price agreements, the Commission observed in
paragraph 376 of the Decision that the agreements in question related to price objectives (or
target prices). Consequently, their implementation implies not that prices corresponding to the agreed price objective be applied, but
that the parties endeavour to approach their price objectives. The Commission also indicated that
[f]rom the information in its possession it [was] clear that, in the present case, after most of the price agreements, the
parties fixed their prices in accordance with their agreements.
In reply to a written question of the Court, the Commission stated that the abovementioned information is in fact the information
on prices charged by the undertakings set out in paragraph 47 of the Decision and used again in the graph illustrating the
movement of target prices and of the prices charged by each of the undertakings concerned (annex 1 to the rejoinder).
In light of that document, it may be observed, first, that whilst Cheil's prices, rather than matching the target prices,
were regularly lower, the same may be said of the prices charged by the other lysine producers, with the exception of ADM,
from March 1992 to the end of the period of the infringement in June 1995.
Next, it is apparent that, whilst Cheil's prices were much the same as Sewon's (being sometimes slightly higher, sometimes
slightly lower) and regularly lower than those charged by the other producers, the differences cannot be regarded as significant
and as revealing any really independent or competitive conduct in the market.
Lastly, and above all, throughout the period of the infringement, Cheil's prices changed in line with the changes in the price
objectives agreed between the cartel members, a fact which, moreover, supports the conclusion that the cartel produced injurious
effects on the market (see, to that effect, Case T-7/89
Hercules Chemicals
v
Commission
, paragraph 340). That correlation in prices, over such a long period of time, demonstrates that Cheil had no desire actually
to avoid applying the price agreements.
In this connection, it should be observed that, in June 1993, the five lysine producers agreed to set the price of lysine
at DEM 3.20 per kilogram (paragraphs 104 and 198 of the Decision), at the same time contemplating staged increases in that
price. The price of lysine subsequently underwent a steep rise and was finally set at DEM 5.30 per kilogram pursuant to an
agreement concluded in October 1993 (paragraphs 114 and 199 of the Decision). From August 1993 onwards, Cheil participated
fully in that price increase, in which all the producers were involved, increasing its prices from DEM 3.04 per kilogram in
July 1993 to DEM 3.77 in August, then to DEM 3.95 in September and, lastly, DEM 4.23 in October 1993. During this important
phase of the cartel Cheil in no way sought to distance itself from the other producers by adopting a truly competitive pricing
policy.
It follows that Cheil has failed to show that it did not implement the price agreements in practice. A difference in the degree
to which it implemented the agreements cannot be regarded as a real failure to implement them.
Secondly, with regard to the alleged non-implementation of the agreements on sales quotas, it should be pointed out at the
outset that the Commission states in paragraph 378 of the Decision that the cartel members considered the quantities allocated
to them as
minimum quantities and that
[a]s long as every party was able to sell at least the quantities allocated it, the agreement was respected.
The undertakings in question have all emphasised, quite rightly, that that assertion is, to say the least, inconsistent with
the alleged facts because the objective of raising prices, which was the cartel members' principal aim, necessarily implied
limiting lysine production and, therefore, allocating maximum sales quotas. That is confirmed,
inter alia
, by paragraph 221 et seq. of the Decision, devoted to the quota agreements' compatibility with Article 81(1) EC, in which
reference is made to the limitation of sales. The Commission's assertion must therefore be treated as wholly irrelevant.
Next, Cheil's argument concerning 1992 and 1993 that it called for an increase in production and was consequently excluded
from meetings must also be rejected. Indeed, it is clear from the Decision that, far from calling for a general increase in
production, it merely sought to obtain an increase in the quota suggested to it by the cartel. That cannot be equated with
non-implementation in practice of the infringing agreements.
Furthermore, the argument that no account was taken of internal documents attesting to the fact that Cheil endeavoured to
develop its production capacity is irrelevant because the documents fail to establish any actual increase in production and
still less in sales volume. In this regard, the applicant's unsupported allegation of a breach of the principle of equal treatment
must be rejected as groundless.
Also, it is apparent that implementation in practice of the agreements on sales volumes may be regarded as having been proved
to the requisite legal standard in view of the table appearing in paragraph 267 of the Decision, which compares the worldwide
market shares allotted to each cartel member under the agreements with actual market shares at the end of 1994. Indeed, as
the Commission has observed, the worldwide market share of each producer, with the exception of Sewon, was largely comparable
to the share which it was allotted as a member of the cartel.
Lastly, as regards application of the quota agreements in 1995, it is clear from the meetings held by the cartel members in
that year, mentioned in paragraphs 153 to 166 of the Decision, that Cheil continued applying the quotas which had been applied
the preceding year.
Thirdly, as regards the agreement to exchange information, it is established that on the morning of 10 March 1994 Cheil agreed
that it would make known its figures for sales of lysine, in accordance with the agreement concluded by the other producers
on 8 December 1993.
As far as implementation of that agreement is concerned, suffice it to observe that it is clear from the Decision (paragraphs
134, 141, 145, 150, 155, 160, 164 and 165) that Cheil did indeed communicate its sales figures. Unlike Sewon, which at the
beginning of 1995 ceased informing the other producers about its sales volumes, which hampered operation of the cartel, Cheil
thus regularly sent the agreed information and received in return information on the sales made by the other cartel members,
which was likely to influence its conduct within the cartel and on the market. By so doing, Cheil implemented the agreement
in question, irrespective of whether the information supplied was incorrect, as alleged.
It follows from all the foregoing considerations that the Commission was right to find no mitigating circumstance in Cheil's
favour in so far as concerns the non-implementation in practice of the agreements.
5.The statement of reasons for the Decision
Arguments of the parties
The applicant begins by stating that the Commission must give a full and clear statement of the reasons for decisions imposing
fines, so that undertakings are able to determine in detail the method of calculation of the fine imposed on them, without
being obliged to bring court proceedings against the Commission decision (see Case T-147/89
Société métallurgique de Normandie
v
Commission
[1995] ECR II-1057, Case T-148/89
Tréfilunion
v
Commission
[1995] ECR II-1063, and Case T-151/89
Société des treillis et panneaux soudés
v
Commission
[1995] ECR II-1191).
In the present case, the Decision is, according to the applicants, insufficiently reasoned in several respects.
First, the Decision does not enable the applicant to ascertain in detail the reasons why the starting amount of the fine,
determined according to the gravity of the infringement, was set at EUR 15 million, that is at the same level as for Sewon
and Kyowa, despite its small size and limited influence on the market. The Decision (paragraph 304) merely states the amount,
with no further explanation, and takes no account of the fact that Cheil's turnover from lysine sales in the EEA was approximately
half that of its closest competitor.
Secondly, the Decision does not enable the applicant to ascertain the reasons why the Commission failed to take account of
the various mitigating circumstances which it pleaded in its defence.
In so far as non-implementation of the agreements in practice is concerned, the applicant claims that the Commission did not
reply, in paragraphs 376 to 378 of the Decision, to the submission that Cheil's prices were consistently lower than the agreed
prices or the submission that the agreement on quotas was not implemented. Also, as regards Cheil's passive, peripheral role,
the Commission did not reply, in paragraphs 363 and 364 of the Decision, to the submission that Cheil was excluded or absent
from meetings or adopted a low profile when present.
The Commission denies any such lacuna in the statement of reasons, having regard, in particular, to the explanation in the
Guidelines.
Findings of the Court
The Court of First Instance has jurisdiction in two respects over actions contesting Commission decisions imposing fines on
undertakings for infringement of the competition rules. First, under Article 230 EC, it has the task of reviewing the legality
of those decisions. In that context, it must in particular review compliance with the duty to state reasons laid down in Article
253 EC, infringement of which renders a decision liable to annulment. Secondly, the Court of First Instance has power to assess,
in the exercise of the unlimited jurisdiction accorded to it by Article 229 EC and Article 17 of Regulation No 17, the appropriateness
of the amounts of fines. That assessment may justify the production and taking into account of additional information which
the duty to state reasons does not as such require to be set out in the decision (see,
inter alia
, Case C-248/98 P
KNP BT
v
Commission
[2000] ECR I-9641, paragraphs 38 to 40).
As regards review of compliance with the duty to state reasons, it is settled case-law that the statement of reasons required
by Article 253 EC must be appropriate to the measure at issue and must disclose in a clear and unequivocal fashion the reasoning
followed by the institution which adopted the measure in such a way as to enable the persons concerned to ascertain the reasons
for the measure and to enable the competent Community Court to exercise its power of review. It is not necessary for the reasoning
to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements
of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules
governing the matter in question (see, in particular, Case C-367/95 P
Commission
v
Sytraval and Brink's France
[1998] ECR I-1719, paragraph 63, and the case-law cited).
As regards the scope of the duty to state reasons for the calculation of the amount of a fine imposed for infringement of
the Community competition rules, it should be borne in mind that the second subparagraph of Article 15(2) of Regulation No 17
provides that
[i]n fixing the amount of the fine, regard shall be had both to the gravity and to the duration of the infringement. In this connection, the Guidelines and the Leniency Notice indicate what factors the Commission takes into consideration
in measuring the gravity and duration of an infringement (see, by analogy,
AIUFFASS and AKT
v
Commission
, cited above, paragraph 57, and
Vlaams Gewest
v
Commission
, cited above, paragraph 79).
That being so, the essential procedural requirement to state reasons is satisfied where the Commission indicates in its decision
the factors which it took into account in accordance with the Guidelines and, where appropriate, the Leniency Notice and which
enabled it to determine the gravity of the infringement and its duration for the purpose of calculating the amount of the
fine.
In the present case the Commission has satisfied that requirement.
Paragraphs 250 to 445 of the Decision set out the factors which the Commission took into consideration, in accordance with
all the rules just mentioned, in calculating the amount of the fine imposed on each of the undertakings concerned. As regards,
in particular, differential treatment of the undertakings in setting the starting amount of the fines, paragraphs 303 to 305
of the Decision set out the factors on which the Commission based its division of the undertakings into two groups according
to size. Similarly, as regards assessing the relative gravity of the infringement committed by each of the undertakings, paragraphs
357 to 396 set out the factors taken into account as mitigating circumstances and, in particular, the reasons for which the
Commission decided that Cheil had not played a passive role in the infringement but had instead implemented the agreements.
The fact that the Commission's assessment is not necessarily well founded on all those points is a matter falling under the
Court's separate review of the legality of the Decision, which has been carried out above. As far as the statement of reasons
is concerned, the Decision is, by contrast, free of defects in that it enabled the applicant to identify the factors which
the Commission took into consideration concerning the various matters which it raised and enabled the Court to exercise its
power of review.
Consequently, the statement of reasons for the Decision must be regarded as sufficient in law.
The method employed in calculating the final amount of the fine
In the Decision the Commission gave the applicant the benefit of a single mitigating circumstance, namely the fact that it
terminated the infringement as soon as the first public authority to do so intervened (paragraph 384). That justified a reduction
in the basic amount of 10%.
It should be observed that, in the Decision, the Commission did not apply reductions on account of mitigating circumstances
in the same way to all the undertakings concerned. It allowed Sewon the benefit of two mitigating circumstances: first, for
its passive role in 1995 in connection with the sales quotas, which led to a reduction of 20% of the increase applied in that
undertaking's case on account of the duration of the infringement (paragraph 365 of the Decision); secondly, for termination
of the infringement as soon as a public authority intervened (paragraph 384 of the Decision), warranting a reduction of 10%
of the figure derived from the first reduction. It is plain that, in those two cases and by contrast with the case of Cheil,
the reductions to reflect mitigating circumstances were not applied by the Commission to the basic amount of the fine, determined
by reference to the gravity and duration of the infringement.
By a written question sent on 7 February 2002 the Court called upon the Commission,
inter alia
, to explain in detail and justify the method which it used to calculate the fines.
In its reply of 27 February 2002 the Commission stated that the proper way to calculate the increases and reductions intended
to reflect aggravating and mitigating circumstances was to apply a percentage to the basic amount of the fine. It also acknowledged
that it did not consistently follow that method in the Decision, especially in the case of Ajinomoto and ADM.
At the hearing the applicant stated that it had no objection to the method used to calculate the fines which the Commission
described in its letter of 27 February 2002.
Against that background, it is important to point out that, according to the Guidelines, the Commission must, once it has
determined the basic amount of the fine to take account of the gravity and duration of the infringement, increase and/or reduce
that figure to reflect aggravating or mitigating circumstances.
Given the wording of the Guidelines, the Court takes the view that any percentage increases or reductions decided upon to
reflect aggravating or mitigating circumstances must be applied to the basic amount of the fine set by reference to the gravity
and duration of the infringement, not to the amount of any increase already applied for the duration of the infringement or
to the figure resulting from any initial increase or reduction to reflect aggravating or mitigating circumstances. As the
Commission rightly noted in its reply to the Court's written question, the method for calculating fines just described may
be inferred from the wording of the Guidelines; it ensures equal treatment between the various undertakings involved in a
cartel.
In the exercise of its unlimited jurisdiction, the Court therefore finds that, to the 10% reduction granted on account of
the fact that the applicant terminated the infringement as soon as a public authority intervened, there should be added a
further reduction of 10% on the ground that Cheil adopted a passive role in the arrangements relating to sales volumes from
27 August 1992 to 10 March 1994 (see paragraph 183 of the present judgment). That gives a total reduction of 20% on account
of mitigating circumstances, which should be applied to the basic amount of the fine, EUR 18 million (see paragraph 139 of
the present judgment), giving EUR 14.4 million before application of the provisions of the Leniency Notice.
In this connection, it must be remembered that, pursuant to Section D of the Leniency Notice, the Commission allowed Cheil
a 30% reduction in the fine which would have been imposed on it had there been no cooperation. That now equates to a reduction
of EUR 4 320 000. The final amount of the fine imposed on the applicant must, consequently, be EUR 10 080 000.
Costs
Under Article 87(3) of its Rules of Procedure, the Court of First Instance may, where each party succeeds on some heads and
fails on others, order that the costs be shared. In this case, it is appropriate to order the applicant to bear its own costs
and two thirds of those incurred by the Commission.
On those grounds,
THE COURT OF FIRST INSTANCE (Fourth Chamber)
hereby:
1.
Sets the amount of the fine imposed on Cheil Jedang Corp. at EUR 10 080 000;
2.
Dismisses the remainder of the application;
3.
Orders Cheil Jedang Corp. to bear its own costs and to pay two thirds of the Commission's costs and orders the Commission
to bear one third of its own costs.
Vilaras
Tiili
Mengozzi
Delivered in open court in Luxembourg on 9 July 2003.
H. Jung
M. Vilaras
Registrar
President
–
Language of the case: English.