Opinion of Mr Advocate General Mischo delivered on 18 May 2000. - Metsä-Serla Oyj, UPM-Kymmene Oyj, Tamrock Oy and Kyro Oyj Abp v Commission of the European Communities. - Appeal - Article 15(2) of Regulation No 17 - Joint and several liability for payment of a fine. - Case C-294/98 P.



European Court reports 2000 Page I-10065



Opinion of the Advocate-General

1. By application lodged on 29 July 1998 Metsä-Serla Oyj, formerly Metsä-Serla Oy, and three other Finnish companies manufacturing cartonboard appealed against the judgment of the Court of First Instance of 14 May 1998 in Metsä-Serla and Others v Commission (hereinafter the contested judgment), seeking to have that judgment set aside.

2. By Decision 94/601/EC of 13 July 1994 relating to a proceeding under Article 85 of the EC Treaty (IV/C/33.833 - Cartonboard) (hereinafter the Decision), the Commission imposed fines on 19 manufacturers supplying cartonboard on the Community market on the ground that they had infringed Article 85(1) of the EC Treaty (now Article 81(1) EC).

3. Among the fines imposed on various undertakings was one relating to the appellants, which is set out in Article 3 of the Decision as follows:

Finnboard - the Finnish Board Mills Association, a fine of ECU 20 000 000, for which Oy Kyro AB is jointly and severally liable with Finnboard in the sum of ECU 3 000 000, Metsä-Serla Oy in the sum of ECU 7 000 000, Tampella Corporation in the sum of ECU 5 000 000 and United Paper Mills Ltd in the sum of ECU 5 000 000.

4. All the abovementioned companies were addressees of the Decision.

5. In the contested judgment, the Court of first Instance described the situation of the appellant companies as follows:

9. The applicants are Finnish cartonboard producers and were addressees of the Decision. They market their products in the Community and on other markets through Finnish Board Mills Association - Finnboard (hereinafter "Finnboard"). Finnboard is a trade association governed by Finnish law which, in 1991, had six member companies, including the applicants.

10. As is apparent from point 174 of the Decision, the Commission imposed a fine on Finnboard on the ground that it was Finnboard itself rather than the member companies which actively and directly participated in the cartel. However, it also decided that each of the applicant companies should be jointly and severally liable with Finnboard for that part of the total fine which is approximately proportionate to the cartonboard sales made on its behalf by Finnboard.

6. In the action against the Decision which they brought on 14 October 1994 before the Court of First Instance, the applicants submitted a single plea in law. They claimed, in essence, that Article 15(2) of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty, did not empower the Commission to adopt a decision making one undertaking liable for payment of a fine which had been imposed on another undertaking. That provision allowed fines to be imposed only on undertakings which had themselves committed an infringement of the competition rules. The Commission had based its arguments on vicarious liability, a concept which is distinct from liability for one's own acts.

7. The applicants also disputed that the Commission was entitled to hold them jointly and severally liable for payment of the fine on the ground that an economic unit existed, and that it could maintain that Finnboard had acted as the alter ego and in the interest of the applicants.

8. For a detailed statement of the complaints formulated by the applicants and the grounds on which the Court of First Instance dismissed their application, I refer to the contested judgment. When expressing my own views, I shall cite only those passages to which reference is made in the appeal.

9. In their appeal against the contested judgment, the appellants claim that the Court of Justice should:

set aside the judgment of 14 May 1998 of the Court of First Instance in Joined Cases T-339/94, T-340/94, T-341/94 and T-342/94 Metsä-Serla, UPM, Tampella and Kyro v Commission of the European Communities, and give a final ruling:

(1) annulling the Decision adopted on 13 July 1994 by the respondent, notified to the appellants on 8 August 1994 and published in the Official Journal of the European Communities on 19 September 1994 and relating to a proceeding under Article 85 of the Treaty (IV/C/33.833 - Cartonboard) in so far as it concerns the appellants, and

(2) ordering the respondents to pay the costs.

10. The Commission contends that the Court should:

- dismiss the appeal;

- order the appellants to pay the costs of the appeal.

It also maintains the submissions it made at first instance.

Preliminary observation

11. The Commission makes the preliminary point that, except in the case of Kyro Oyj Abp, the extracts from the register of companies are produced only in translation, that Kyro Oyj Abp's power of attorney bears, amongst other signatures, that of a person who was not empowered to sign by the extract from the register of companies submitted, and that the other signatory of that power of attorney was not authorised to represent the company on his own.

12. The appellants state that, if the Court considers it necessary, they are prepared to supply the documents allegedly lacking. However, they do not see the need to do so, since Article 112 of the Rules of Procedure of the Court of Justice not only does not provide for the resubmission of the aforementioned documents in the event of an appeal, but precludes it (See Article 112(3) from which it is apparent that Article 38(5) of the Rules of Procedure does not apply to appeals).

13. In this connection it should be pointed out that, according to Article 112(1) of the Rules of Procedure of the Court of Justice, Article 38(2) and (3) apply to appeals. The provision does not, therefore, render applicable Article 38(5) which provides, under (b), that an application made by a legal person governed by private law must be accompanied by proof that the authority granted to the applicant's lawyer has been properly conferred on him by someone authorised for the purpose.

14. Consequently, the Commission's objection cannot be upheld.

15. The Commission also maintains that the appeal only repeats to a large extent the factual and legal arguments put forward at first instance, which are summarised in paragraphs 21 to 30 of the contested judgment, and that, in so far as concerns the criterion of economic unity, it is not based on an infringement of Community law, but on a criticism of the findings of the Court of First Instance, which is inadmissible. I shall consider these issues of admissibility in conjunction with the arguments submitted by the appellants.

Lack of legal basis

16. The appellants claim out that the Decision provides no legal basis on which the Commission may hold them jointly and severally liable for payment of the fine.

17. They maintain that the Court of First Instance erred in law in its interpretation and application of Article 15(2) of Regulation No 17, since that provision does not provide for vicarious liability and could not, therefore, serve as a legal basis on which to make them jointly and severally liable for paying a fine imposed on another undertaking.

18. Indeed, according to that provision, the Commission can impose fines on undertakings or groups of undertakings only if they have intentionally or negligently infringed Article 85(1) of the Treaty. Yet neither the Commission nor the Court of First Instance had established that the appellants had committed such an infringement. On the contrary, it is apparent from Article 1 of the Decision that the appellants had not infringed Article 85(1) of the Treaty.

19. Nevertheless, the Court of First Instance took the view, in paragraph 43 of the contested judgment, that an undertaking could be declared jointly and severally liable with another undertaking for payment of a fine imposed on the latter undertaking, which has committed an infringement, provided that the Commission demonstrates, in the same decision, that the infringement could also have been found to have been committed by the undertaking held jointly and severally liable.

20. This interpretation contains an error of law, since it is contrary to the clear wording of Article 15(2) of Regulation No 17, which requires a finding that the addressee of the Decision has intentionally or negligently infringed Article 85(1) of the Treaty. The fact that the Commission could have found that an infringement had been committed is not enough.

21. Such an interpretation or application of Article 15(2) infringes the basic principle nulla poena sine lege and the prohibition against reasoning by analogy which is its corollary. It is accepted that the fundamental guarantees of criminal law also have to be observed in the law of infringements.

22. The principle of legality is a fundamental right enshrined in Article 7 of the European Convention on Human Rights and Fundamental Freedoms, from which follows a prohibition of reasoning by analogy.

23. The interpretation of the Court of First Instance effectively allows the Commission to impose penalties under Article 15(2) of Regulation No 17 against undertakings without having either to bear the burden of proving an infringement of Article 85(1) of the Treaty or to take into account the individual situation of each undertaking (particularly mitigating circumstances) when assessing the gravity or duration of the infringement in order to fix the amount of the fine.

24. Finally, the Court's interpretation infringes the principle of the presumption of innocence, recognised in Community law. The Court's interpretation contradicts that principle in that it states that the mere possibility of establishing an infringement was enough to justify application of Article 15(2) of Regulation No 17.

25. Faced with these complaints from the appellants, the Commission contends that the appeal is inadmissible, since it simply repeats, to a large extent, the factual and legal arguments invoked at first instance, which are summarised in paragraphs 21 to 30 of the contested judgment.

26. This observation is correct. Nevertheless, we have just seen that the appellants also refer to a specific passage in the contested judgment, namely paragraph 43, which, they maintain, contains an error of law. We should therefore examine the substance of the first part of the plea.

27. In this regard, I agree with the Commission that the appellants are wrong to criticise the interpretation of Article 15(2) of Regulation No 17 which the Court of First Instance gives in paragraph 43 of the contested judgment. The interpretation is consistent with the wording of the provision.

28. An undertaking commits an infringement of Article 85(1) of the Treaty if the conduct of another undertaking, which infringes the same provision, may be attributed to it. Accordingly, the imposition of a fine on the undertaking to which the conduct of another undertaking is attributed and which, therefore, itself infringes Article 85(1) of the Treaty is provided for by Article 15(2) of Regulation No 17.

29. It is true that this is the converse situation of the one which we have to consider in the appeal brought by the undertaking Stora Kopparbergs Bergslags AB (C-286/98 P).

30. In that case, a fine was imposed on a parent company - which did not participate as such in the organs of the cartel - in respect of the participation of its subsidiaries in those organs, when the subsidiaries were not addressees of the Decision.

31. In the present case, a fine is imposed on an entity exercising a commercial function described as an undertaking, in respect of its own participation in the organs of the cartel, but each of the four Finnish cartonboard manufacturers, which were members of that entity and did not themselves participate in the organs of the cartel, is considered jointly and severally liable with Finnboard for that part of the total fine which is approximately proportionate to its share of Finnboard's cartonboard sales.

32. The attribution of the infringement is therefore made in this case, at least apparently, from top to bottom (that is to say, from the company which has participated in the organs of the cartel to its members) and not from bottom to top (the attribution of the conduct of the subsidiaries to the parent company).

33. In my view, however, this does not call in question the fundamental reasoning mentioned above with regard to the possibility of liability being attributed or the reasoning of the Court of First Instance. In paragraphs 44 to 46 the Court stated that:

44. In the present case, whilst Finnboard is the undertaking held specifically and formally liable for the infringement of Article 85(1) of the Treaty (Article 1 of the Decision), and whilst the fine provided for by Article 3(v) of the Decision is therefore imposed on it, each of the applicants is nonetheless declared jointly and severally liable with Finnboard for payment of part of that fine, because the Commission took the view that Finnboard had acted as their "alter ego" and in their interest (point 174, second paragraph, of the Decision).

45. The Court should therefore consider whether the economic and legal links between Finnboard and the applicants were such that the Commission was entitled to hold each of them specifically and formally liable for the infringement.

46. It is clear from the Decision that the Commission took the view that the applicants were liable for the acts of Finnboard ....

34. The Court then considered whether the Commission's assessment was convincing.

35. I consider that there is no error of law in the reasoning of the Court of First Instance. Once the Court of Justice had accepted, as it had, that an undertaking may commit an infringement of Article 85(1) of the Treaty if the conduct of another undertaking may be attributed to it, the Court of First Instance was fully entitled to consider that Finnboard's conduct could be attributed to the four appellant undertakings in so far as they were in fact liable for that company's conduct.

36. The question whether that liability was correctly determined is covered by the second part of the appellants' plea.

37. It is also apparent from the foregoing considerations that the interpretation given by the Court of First Instance to Article 15(2) of Regulation No 17 is not contrary to the principle nulla poena sine lege or to the prohibition against reasoning by analogy. Since they are responsible for Finnboard, the appellants are, in fact, ordered to pay a fine for an infringement which they themselves have committed, through Finnboard, against a legal provision which prescribes a penalty.

38. The Commission then disputes the appellants' claim that, on the interpretation of the Court of First Instance, it is not possible to take into account the individual circumstances of each of the undertakings held jointly and severally liable. The Commission contends that those undertakings may be held jointly and severally liable only if the infringement could also have been found to have been committed by them, which involves taking into account their particular circumstances. That had happened in this case, each of the appellants being liable in a different amount for the fine imposed on Finnboard. Furthermore, the appellants do not plead the existence of individual circumstances which the Commission or Court of First Instance did not take into account.

39. Finally, the Commission states that the principle of the presumption of innocence was not violated. The findings of the Commission and the Court of First Instance justified the imposition of fines directly on the appellants, who received the statement of objections and were therefore able to defend themselves against it without restriction.

40. I consider these submissions made by the Commission to be wholly convincing. I therefore propose that the Court should reject the first part of the appellants' sole plea.

The incorrect interpretation and application in law of Article 15(2) of Regulation No 17, through reliance on the notion of economic unity

41. The appellants submit that the Court of First Instance was wrong to refer to the principles established by the Court of Justice in order to determine fines to be imposed on undertakings which form an economic unit. They maintain that, in any event, the Court of Justice did not infer from those principles liability for a fine imposed on another.

42. Moreover, they take the view that the criteria for economic unity are not satisfied in this case.

43. I shall consider these two arguments in turn.

1. Can the principles of economic unity provide grounds for joint and several liability?

44. According to the appellants, before a parent company can be held liable for an infringement committed by its subsidiary, the Court of Justice always requires, that it should be proved that the parent company has itself infringed the competition rules and that it should be fined.

45. The principles of economic unity cannot therefore be invoked as grounds for the appellants' vicarious liability for payment of a fine imposed on Finnboard, when it has not been found that the appellants committed any infringement and no fine has been imposed on them individually.

46. The appellants add that the Commission's view is not supported by its own administrative practice, it having dealt with only two cases involving joint and several liability. They were fundamentally different, in law and in fact, from the present case, in that proceedings were taken against the undertakings, which had jointly committed an infringement, as joint perpetrators and a single fine was imposed [Commission Decisions 72/457/EEC of 14 December 1972 relating to a proceeding under Article 86 of the Treaty establishing the European Economic Community (IV/26.911 - Zoja/CSC - ICI), and 80/1283/EEC of 25 November 1980, relating to a proceeding under Article 85 of the EEC Treaty (IV/29.702: Johnson & Johnson) ].

47. I agree with the Commission that this part of the appellants' reasoning is inadmissible, since it only repeats, with slight differences, the arguments put forward before the Court of First Instance, summarised in paragraphs 24 and 25 of the contested judgment.

48. I shall therefore make the two following observations as secondary points.

49. First of all, I agreed above with the Commission that the appellants were rightly held responsible for an infringement which they themselves committed, even if through the intermediary of Finnboard.

50. Secondly, I would point out that, as the principle of economic unity makes it possible to hold company A responsible for an infringement committed by company B, where the two companies in fact constitute one economic unit (company B basically carrying out the instructions issued to it by company A), it must a fortiori be possible to declare several companies of the kind of company A (the appellants) jointly and severally liable for payment of the fine imposed on a company of the kind of company B (Finnboard), given that they, together, determined Finnboard's conduct.

51. Moreover, the Commission was absolutely justified in pointing out that a declaration of joint and several liability is a lighter penalty for a company than the straightforward imposition of a fine on one company for an infringement committed by another.

2. Was it possible to establish the existence of economic unity?

52. The appellants maintain, in the alternative, that the conditions which need to be met to establish the existence of economic unity are not satisfied in this case.

53. Firstly, the case-law regarding the attribution to the group parent company of the conduct of its subsidiary is inapplicable to the relationship between Finnboard and its member undertakings, since the condition that the member undertakings hold shares in Finnboard's capital - an essential condition, according to the case-law, for a finding of economic unity between parent company and subsidiary - is not fulfilled.

54. Secondly, a finding of economic unity presupposes that the undertaking to which the conduct of another undertaking is to be imputed is in a position to exercise a certain influence over it and to control its conduct and that it has actually exercised that power of influence and control. However, the contested judgment does not establish that the appellants were in a position to control Finnboard nor suggest that they could exercise actual control. On the contrary, the facts established by the Court of First Instance and the evidence which can be inferred from them show that none of the appellants was able to control Finnboard or did actually control it.

55. The appellants also claim, in this connection, that it is impossible for each of the appellants to control or determine Finnboard's operations in view of the votes they have on the Board of Directors.

56. The appellants add that, unlike the situation in Suiker Unie and Others v Commission, to which the Court of First Instance referred, Finnboard assumed various roles and took financial risks which preclude it from being considered as integrated with one of the member undertakings, like a sales representative, as an auxiliary organ in its principal's undertaking (see paragraph 54 of the contested judgment). The appellants submit that the Court of First Instance was wrong to take the view that Finnboard had no economic interest of its own in raising prices (paragraph 57 of the contested judgment). Finnboard operated on the market as an independent undertaking and acted as an intermediary on behalf of its member companies. The appellants state that its revenue came from the commission it received as remuneration for its role as intermediary; as this represented a percentage of its turnover, it was to its own financial advantage to raise prices.

57. Finally, the appellants consider that the Commission, in its reply, seeks to distort the facts found by the Court of First Instance. There is no reference to shareholders or group of shareholders in the Court's findings. According to the appellants, what needs to be determined in the case of membership of an association incorporated under Finnish law are the powers or opportunities to exercise influence granted to its various members in an organisational structure in which no shares are held in the capital and no voting rights are allocated according to the number of shares held, and how, in those circumstances, it is possible to justify attributing liability and fixing a fine according to the gravity of individual participation in the reprehensible act and the degree of culpability of each one.

58. The Commission counters by saying that, by advancing these arguments, the appellants are not pleading an infringement of Community law but criticising the findings of the Court of First Instance in paragraphs 45 to 59 of the contested judgment, which is inadmissible.

59. I wholly agree with this assessment by the Commission. The finding that there was an economic unit is merely the result of a series of findings of a factual nature made by the Court of First Instance which cannot - except in the case of a distortion of the facts - be called in question in an appeal. The appellants' line of argument, which has to be regarded as a criticism of those findings, is therefore inadmissible.

60. In the alternative, I consider that the Court's reasoning is completely convincing and does not contain any error of law. As the Commission rightly points out, it is not ... true that, for the existence of an economic unity and the imputability to one undertaking of the conduct of another to be accepted, undertakings have to be linked by shares. Economic unity does not require one of the undertakings involved to be a company in which the other undertaking has shares representing a contribution to the capital of the first undertaking. What does matter is that the undertakings constitute a unit as a result of the power of one of them to issue instructions to the other. This economic unity may also exist between undertakings which are not companies with capital, but partnerships or associations. A majority shareholding is likewise not necessary if, owing to other circumstances, one of the undertakings obeys the instructions of the other.

61. In paragraphs 45 to 48 of the contested judgment, the Court of First Instance established that, in its negotiations with purchasers of cartonboard Finnboard had to follow the guidelines issued by each of the appellants. No sale could take place without the prior approval of price and other conditions of sale by the appellant company concerned. Title passed directly from the appellant company to the end customer (paragraphs 55 and 56 of the contested judgment).

62. The appellants have not been able to show that those findings were incorrect.

63. The Court of First Instance therefore correctly concluded in paragraph 58 of the contested judgment that, since Finnboard could not adopt conduct on the market independently of the appellants, it in practice formed an economic unit with each of its cartonboard-producing member companies.

64. The second part of the appellants' single plea, even if it were admissible, must therefore also be rejected on the merits.

Conclusion

65. In the light of the foregoing arguments, I propose that the Court should:

(1) dismiss the appeal;

(2) order the appellants to pay the costs of both proceedings.