Cases T-141/07, T-142/07, T-145/07 and T-146/07

General Technic-Otis Sàrl and Others

v

European Commission

(Competition – Agreements, decisions and concerted practices – Market for the installation and maintenance of elevators and escalators – Decision finding an infringement of Article 81 EC – Bid-rigging – Market sharing – Price fixing)

Summary of the Judgment

Competition – European Union rules – Infringements – Attribution – Parent company and subsidiaries – Economic unit – Criteria for assessment – Presumption of decisive influence exercised by the parent company over its wholly‑owned subsidiaries – Infringement of the principle that penalties must be specific to the offender – None – Infringement of the presumption of innocence – None

The conduct of a subsidiary may be imputed to the parent company in particular where, although it has a separate legal personality, the subsidiary does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company, having regard in particular to the economic, organisational and legal links between those two legal entities. In such a situation, the parent company and its subsidiary form a single economic unit and therefore form a single undertaking. Thus, the fact that a parent company and its subsidiary constitute a single undertaking within the meaning of Article 81 EC enables the Commission to address a decision imposing fines to the parent company, without having to establish the personal involvement of the latter in the infringement. In that regard, the Commission cannot merely find that an undertaking is able to exert a decisive influence over another undertaking, without checking whether that influence was actually exerted. On the contrary, it is, as a rule, for the Commission to demonstrate such decisive influence on the basis of factual evidence, including, in particular, any management power one of the undertakings may have over the other. In the specific case in which a parent company holds 100% of the shares in a subsidiary which has infringed the EU competition rules, first, the parent company can exercise a decisive influence over the conduct of the subsidiary and, second, there is a rebuttable presumption that the parent company does in fact exercise a decisive influence over the conduct of its subsidiary. In those circumstances, it is sufficient for the Commission to prove that the subsidiary is wholly owned by the parent company in order to presume that the parent exercises a decisive influence over the commercial policy of the subsidiary. The Commission will then be able to regard the parent company as jointly and severally liable for payment of the fine imposed on its subsidiary, unless the parent company, which has the burden of rebutting that presumption, adduces sufficient evidence to show that its subsidiary acts independently on the market. The question of any joint management power of parent companies over their subsidiary must in any event be assessed by reference to the circumstances of each case. Consequently, the Commission’s assessments of the facts in earlier cases cannot be transposed to each case under consideration, since the decisions concerning such earlier cases can be no more than indicative when the circumstances of the cases are not the same. Accordingly, where, during the period of an infringement, a parent company directly holds 100% of the share capital in one of its subsidiaries and, indirectly, through that subsidiary, 100% of the share capital in other subsidiaries situated in other Member States, the Commission is entitled to presume that the parent company, throughout the period of the infringement, exercised a decisive influence over the commercial policy of those subsidiaries. (see paras 56-60, 69-70, 108, 381)

By virtue of the principle that penalties and sanctions must be specific to the offender, which applies in any administrative procedure that may lead to the imposition of penalties under EU competition law, an undertaking may be penalised only for acts imputed to it individually. However, that principle must coexist with the concept of ‘undertaking’. It is not because of a parent-subsidiary relationship in which the parent company instigates the infringement, nor a fortiori because of the parent company’s involvement in the infringement, but because they constitute a single undertaking for the purposes of Article 81 EC that the Commission is able to address a decision imposing fines to the parent company. The principle of the presumption of innocence, as it results in particular from Article 6(2) of the European Convention on Human Rights, is one of the fundamental rights that are recognised in the EU legal order and has moreover been reaffirmed by Article 6(2) EU and by Article 48(1) of the Charter of Fundamental Rights of the European Union. Given the nature of the infringements in question and the nature and degree of severity of the ensuing penalties, the principle of the presumption of innocence applies inter alia to the procedures relating to infringements of the competition rules applicable to undertakings that may result in the imposition of fines or periodic penalty payments. In that context, a rule concerning the imputability of an infringement, such as the presumption of decisive influence exercised by the parent company over its wholly‑owned subsidiaries, does not infringe the presumption of innocence. Indeed, the European Court of Human Rights has held that Article 6 of the European Convention on Human Rights does not preclude presumptions of fact or of law provided for in the criminal law, but requires them to be confined within reasonable limits which take into account the importance of what is at stake and maintain the rights of the defence. Thus, the presumption of innocence is not disregarded if, in competition proceedings, certain conclusions are drawn on the basis of common experience provided that the undertakings concerned are at liberty to refute those conclusions. (see paras 71, 73, 77)

The statement of reasons required under Article 253 EC must disclose in a clear and unequivocal fashion the reasoning followed by the EU authority which adopted the measure in question, so as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent court to exercise its power of review. The question whether the statement of reasons for a decision 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. Moreover, the reasoning may be implicit on condition that it enables the persons concerned to know why the measures in question were taken and provides the General Court with sufficient material for it to exercise its power of review. (see paras 80, 97, 301-302)

The fact that a parent company is the holding company of a diversified conglomerate group, whose supervision of the activities of one of its subsidiaries activities was allegedly limited to what was required by virtue of the parent company’s obligations to its own shareholders, does not rebut the presumption of liability for infringement of the EU competition rules which operates against a parent company holding all the share capital in its subsidiaries. Indeed, in the context of a group of companies, a holding company is a company which seeks to regroup shareholdings in various companies and whose function is to ensure that they are run as one. (see para. 84)

As regards the presumption that a parent company holding all the share capital in its subsidiaries is liable for infringements of the EU competition rules committed by those subsidiaries, the fact that certain employees of those subsidiaries disobeyed the parent company’s instructions, in particular by concealing their behaviour from their superiors and the parent company, does not reverse the presumption that the subsidiaries concerned were not autonomous. In that regard, the distinction drawn between the subsidiaries and their employees, who allegedly committed the infringements whilst concealing their behaviour from their superiors and the parent company, is artificial. Those employees are, in relation to the subsidiaries which employ them, in a relationship characterised by the fact that they work for and under the management of each of them and are, throughout the term of that relationship, integrated into those undertakings, thereby forming with each of them an economic unit. (see para. 87)

In the field of competition law, the concept of undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed. The mere fact of holding shares, even controlling shareholdings, is insufficient to characterise as economic an activity of the entity holding those shares, when it gives rise only to the exercise of the rights attached to the status of shareholder or member, as well as, depending on the circumstances, the receipt of dividends, which are merely the fruits of the ownership of an asset. On the other hand, an entity which, owning controlling shareholdings in a company, actually exercises that control by involving itself directly or indirectly in the management thereof must be regarded as taking part in the economic activity carried on by the controlled undertaking. In order to ascertain, when analysing the existence of an economic unit among a number of companies forming part of a group, whether such control is actually exercised, account may be taken of the influence of the parent company on pricing policy, production and distribution activities, sales objectives, gross margins, sales costs, cash flow, stocks and marketing but also of all the relevant factors relating to economic, organisational and legal links which tie those companies to one another, which may vary from case to case and cannot therefore be set out in an exhaustive list. (see paras 101, 103)

In all proceedings in which sanctions, especially fines or penalty payments, may be imposed, observance of the rights of the defence is a fundamental principle of EU law which must be complied with even if the proceedings in question are administrative proceedings. In that regard, the statement of objections constitutes the procedural safeguard applying that fundamental principle. That principle requires, in particular, that the statement of objections which the Commission sends to an undertaking on which it envisages imposing a penalty for an infringement of the competition rules contain the essential elements used against it, such as the facts, the characterisation of those facts and the evidence on which the Commission relies, so that the undertaking may submit its arguments effectively in the administrative procedure brought against it. In that regard, the failure to communicate an incriminating document constitutes a breach of the rights of the defence only if the undertaking concerned shows, first, that the Commission relied on that document to support its objection concerning the existence of an infringement and, second, that the objection could be proved only by reference to that document. If there were other documentary evidence of which the parties were aware during the administrative procedure that specifically supports the Commission’s findings, the fact that an incriminating document not communicated to the person concerned was inadmissible as evidence would not affect the validity of the objections upheld in the contested decision. It is thus for the undertaking concerned to show that the result at which the Commission arrived in its decision would have been different if a document which was not communicated to that undertaking and on which the Commission relied to make a finding of infringement against it had to be disallowed as evidence. (see paras 122-124, 197)

Although the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty may not be regarded as rules of law which the administration is always bound to observe, they nevertheless form rules of practice from which the administration may not depart in an individual case without giving reasons that are compatible with the principle of equal treatment. In adopting such rules of conduct and announcing through their publication that they will henceforth apply to the cases to which they relate, the Commission imposes a limit on the exercise of its discretion and cannot depart from those rules without running the risk of suffering the consequences of being in breach of general principles of law, such as equal treatment or the protection of legitimate expectations. Furthermore, those guidelines determine, generally and abstractly, the method which the Commission has bound itself to use in assessing the fines imposed by the decision and, consequently, ensure legal certainty on the part of the undertakings. (see paras 137-139)

The gravity of infringements of EU competition law must be determined by reference to numerous factors such as, in particular, the specific circumstances and context of the case and the deterrent effect of fines, although no binding or exhaustive list of the criteria to be applied has been drawn up. Under the first paragraph of Section 1A of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, the Commission, when assessing the gravity of the infringement, must undertake an examination of the actual impact on the market only where it is apparent that that impact can be measured. In order to assess that impact, the Commission must take as a reference the competition that would normally have existed had there been no infringement. Thus, where the applicants do not show that the actual impact of the infringements could have been measured, the Commission is not obliged to take account of the actual impact of the infringements when assessing their gravity. The effect of an anti-competitive practice is not a conclusive criterion for assessing the gravity of an infringement. Factors relating to the intentional aspect may be more significant than those relating to the effects, particularly where they relate to infringements which are intrinsically serious, such as market sharing. Accordingly, the nature of the infringement plays a primary role, in particular in classifying infringements as ‘very serious’. It follows from the description of very serious infringements given by the guidelines that agreements or concerted practices seeking inter alia to share markets may, solely on account of their nature, be classified as ‘very serious’, there being no need to categorise such behaviour on the basis of particular impact or geographic extent. That conclusion is corroborated by the fact that, whilst the description of serious infringements expressly mentions their impact on the market and their effects on extensive areas of the common market, that of very serious infringements, on the other hand, does not mention any requirement as to the actual market impact or the effects produced in a particular geographic area. Those infringements are also among the examples of agreements explicitly declared to be incompatible with the common market in Article 81(1)(c) EC. Apart from the serious distortion of competition which they entail, such agreements, by obliging the parties to respect distinct markets, often delimited by national frontiers, cause the isolation of those markets, thereby counteracting the Treaty’s main objective of integrating the Community market. Thus, infringements of this type, especially where horizontal cartels are concerned, are classified by the case-law as ‘particularly serious’ or ‘obvious infringements’. Furthermore, the size of the geographic market is only one of the three criteria which, according to the guidelines, are relevant for the purpose of the overall assessment of the gravity of the infringement. Among those interdependent criteria, the size of the geographic market is not an autonomous criterion in the sense that only infringements affecting several Member States would be classifiable as ‘very serious’. Neither the Treaty, nor Regulation No 1/2003, nor the guidelines, nor the case-law support the conclusion that only geographically very extensive restrictions may be considered as such. Moreover, the entire territory of a Member State, even if relatively small in comparison with the other Member States, in any event constitutes a substantial part of the common market. (see paras 135, 151-152, 156, 158-160, 163-164, 180, 182-184, 195, 202, 206)

As regards Commission decisions finding infringements of the EU competition rules and imposing fines, the size of the relevant market is not as a rule a factor which must be taken into account, but just one among a number of other factors for evaluating the gravity of the infringement, since the Commission is not obliged to define the market concerned or to assess its size where the infringement in question has an anti-competitive object. The Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty do not provide that fines are to be calculated according to the overall turnover of undertakings or their turnover in the market affected. 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 EU law and where circumstances demand it. Furthermore, the Commission is coherent in its setting of the general starting amount of the fines for infringements committed in several Member States where, regard being had to the size of the markets affected, the amounts are larger when the size of those markets is larger, although a precise mathematical formula is not used. Accordingly, there is no need either to reduce the general starting amount of a fine set for an infringement committed in Luxembourg and amounting to half the minimum level normally envisaged by those guidelines for an infringement classified as very serious or to hold that that amount is disproportionate. (see paras 168-172, 174, 176-177, 180, 203)

In the context of calculating fines imposed under Article 23(2) of Regulation No 1/2003, differentiated treatment of the undertakings concerned is inherent in the exercise of the Commission’s powers under that provision. In exercising its discretion, the Commission is required to fit the penalty to the individual conduct and specific characteristics of the undertakings concerned in order to ensure that, in each case, the EU competition rules are fully effective. Thus, the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty state that, where an infringement is sufficiently serious, it may be necessary in cases involving several undertakings, such as cartels, to apply weightings to the general starting amount in order to establish a specific starting amount taking account of the 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. In particular, it is necessary to take account of the effective economic capacity of offenders to cause significant damage to other operators, in particular consumers. In addition, according to those guidelines, the principle of equal punishment for the same conduct may lead to different fines being imposed on the undertakings concerned without that differentiation being governed by arithmetic calculation. The Commission therefore complies with the principle of equal treatment where it takes into account differences between, on the one hand, the situation of an undertaking which has participated in only one aspect of an agreement found to be contrary to the competition rules and, on the other, the situation of undertakings which have participated in several aspects of the infringement and, consequently, takes into account different turnovers for the two categories of undertakings concerned. (see paras 210-212, 220-221)

Under Article 23(2) of Regulation No 1/2003, the duration of the infringement is one of the factors to be taken into consideration when determining the amount of the fine to be imposed on undertakings which have infringed the competition rules, the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty drawing a distinction between infringements of short duration (in general, less than one year), for which the starting amount determined on the basis of the gravity of the infringement should not be increased, infringements of medium duration (in general, one to five years), for which the amount may be increased by up to 50%, and infringements of long duration (in general, more than five years), for which the amount may be increased by up to 10% for each year. The Commission thus applies the rules which it imposed on itself in those guidelines when it increases by 80%, namely 10% per year, the starting amount of the fine on the basis of the duration of an infringement that lasted more than eight years, and such an increase cannot be considered to be manifestly disproportionate having regard to the lengthy duration of the infringement. Moreover, in the case of a single and continuous infringement which is characterised by the fact that, throughout the whole period of the infringement, the participants pursued a common objective of, inter alia, allocating projects between them and restricting their individual commercial conduct when they submitted tenders and which was, as a consequence, very serious in nature throughout the whole of its duration, the Commission is entitled to apply the same rate of increase for the entire period of the infringement. (see paras 225-226, 228-229, 232)

The need to ensure that a fine has a sufficient deterrent effect, where that need is not found to justify raising the general level of fines in the context of the implementation of a competition policy, requires that the amount of the fine be adjusted in order to take account of the desired impact on the undertaking on which it is imposed, so that the fine is not rendered negligible, or on the contrary excessive, in particular in the light of the financial capacity of the undertaking in question, in accordance with the requirements arising from, on the one hand, the need to ensure effectiveness of the fine and, on the other, compliance with the principle of proportionality. In that respect, the Commission is entitled to use the overall turnover of each undertaking participating in a cartel as a criterion relevant for the purpose of setting a deterrence multiplier. Thus, the size and overall resources of an undertaking are relevant criteria in view of the objective pursued, namely ensuring that the fine is effective by adjusting its amount having regard to the overall resources of the undertaking and its capacity to raise the funds necessary to pay that fine. The setting of the rate of increase of the starting amount in order to ensure that the fine has a sufficiently deterrent effect is intended more to ensure the effectiveness of the fine than to reflect the harmfulness of the infringement to normal competition and thus the gravity of the infringement. Furthermore, the fact that consideration may not have been given to the likelihood of repeated infringement on the part of the undertaking concerned does not in any way affect the lawfulness of the multiplier. The link between the size and overall resources of the undertakings, on the one hand, and the need to ensure that a fine has deterrent effect, on the other, is not open to challenge. In this connection, a large undertaking, owing to its considerable financial resources by comparison with those of the other members of a cartel, can more readily raise the necessary funds to pay its fine, which, if the fine is to have a sufficiently deterrent effect, justifies the imposition, in particular by the application of a multiplier, of a fine proportionately higher than that imposed in respect of the same infringement on an undertaking without such resources. Since the increase in the starting amount to ensure that the fine has a sufficiently deterrent effect is intended, inter alia, to guarantee that the fine is effective in view of the undertaking’s financial capacity, the Commission, lastly, is not obliged, when it determines the applicable multiplier, to take into account the fact that the undertaking concerned has set up a competition law compliance programme. (see paras 239-242, 245, 247)

The Notice on immunity from fines and reduction of fines in cartel cases constitutes an instrument intended to define, while complying with higher-ranking law, the criteria which the Commission proposes to apply in the exercise of its discretion when setting fines for infringements of the EU competition rules. That discretion is thus subject to a self-imposed limitation which is not, however, incompatible with the retention of a considerable margin of assessment for the Commission. Thus, the Commission enjoys a broad margin of assessment when it is required to determine whether the evidence provided by an undertaking that has stated that it wishes to benefit from the Leniency Notice represents significant added value for the purposes of point 21 of the notice. Similarly, the Commission, once it has found that the evidence represents significant added value within the meaning of point 21 of the Leniency Notice, has a margin of assessment when it is required to determine the exact level of the reduction of the fine to be granted to the undertaking concerned. The first paragraph of point 23(b) of the Leniency Notice in fact provides for fine-reduction bands for the various categories of undertakings concerned. In those circumstances, the Commission does not manifestly go beyond the bounds of its margin of assessment in granting a reduction of the fine which falls within those bands where the evidence, regardless of its quality or usefulness, was provided at a time when the Commission already had the information necessary to find an infringement of Article 81 EC, had already carried out one round of inspections and had already received an application under the Leniency Notice from another undertaking. (see paras 260-261, 263-265, 270, 273-274, 278, 282-284, 289, 291, 295, 298, 309-312, 322-323, 326, 328-332, 345-349, 375, 377)

A plea, which has been advanced in a footnote to the application and has not been developed in any way by the applicants, does not fulfil the requirements of Article 44(1)(c) of the Rules of Procedure of the General Court and is therefore inadmissible. (see para. 338)

The right to rely on the principle of the protection of legitimate expectations extends to any person who is in a situation in which it is clear that the EU authorities have given him precise assurances, thereby causing him to entertain justified expectations. However, a person may not plead infringement of the principle of the protection of legitimate expectations unless he has been given precise assurances by the authorities. Information that is precise, unconditional and consistent and comes from an authorised and reliable source constitutes such assurances. In the determination of the amount of a fine for infringement of the EU competition rules, the announcement by the Commission in the statement of objections that it is considering granting a reduction in the fine outside the Notice on immunity from fines and reduction of fines in cartel cases does not amount to a precise assurance as to the extent or the rate of the reduction that might, where appropriate, be granted to the undertakings concerned. Accordingly, such an announcement can in no case give rise to any legitimate expectation whatsoever in that regard. Nor can the Commission’s practice in previous decisions serve as a legal framework for the imposition of fines in competition matters. (see paras 359-364)

The principle of proportionality requires that the measures adopted by EU institutions do not exceed the limits of what is appropriate and necessary in order to attain the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued. In that regard, a Commission decision which grants only a minimal reduction of 1% of the fine for not contesting the facts and has regard to the limited value of cooperation offered after the statement of objections does not infringe the principle of proportionality, where that reduction is added to those already granted under the Notice on immunity from fines and reduction of fines in cartel cases. (see paras 366, 370, 383)