Source: https://iclg.com/practice-areas/cartels-and-leniency-laws-and-regulations/cartel-updates-recent-trends-in-fine-calculations-and-cartel-liability
Timestamp: 2019-04-25 10:23:45+00:00

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3. Recent cases handed down by the GC show its willingness to defend the parties’ rights of defence and to scrutinise in detail the Commission’s reasoning, particularly when it comes to calculating the fine.
5. In the same case, the GC also annulled the fines imposed in full, on the basis that the Commission’s reasoning in calculating such fines was insufficient. The GC recalled that the obligation to state reasons in Article 296 TFEU is an essential procedural requirement which goes to the substantive legality of a contested measure.3 When the Commission issued the Fining Guidelines,4 it generally limited its discretion in setting the amount of the fines; however, paragraph 37 allows the Commission to depart from the general methodology set out in the Fining Guidelines where “the particularities of a given case” justify such departure. In doing so, the Commission must provide details on the reasons why it is necessary to make an exceptional adjustment to the fine,5 enabling the undertakings to understand the justification for the Commission’s calculation methodology and for the Court to review such justification. In particular, the Commission must indicate the factors which enabled it to determine the gravity and duration of the infringement, and explain the weighting and assessment of the factors taken into account in calculating the fine.
7. The GC therefore concluded that the decision did not provide the minimum information which might have made it possible for Icap to understand and ascertain the relevance and weighting of the factors considered by the Commission in calculating its fine. As a result, the GC annulled the fine imposed on Icap in full due to insufficient reasoning.
9. The Commission had imposed a fine on Stührk in 2013 for its involvement in a price-fixing cartel in Germany from March 2003 to November 2007. Stührk lodged an appeal with the GC seeking annulment of both the Commission’s decision and the fine imposed, or, in the alternative, a reduction of the fine imposed. Among the nine grounds of appeal raised by Stührk, one referred to the arbitrary adjustment of the fine under paragraph 37 of the Fining Guidelines and led the GC to annul the fine in full.
10. The Commission considered that the case was unique as all the undertakings involved were active on the same market and participated in the infringement for a significant period of time. As a consequence, the 10% cap should have been considered as reached for all of them.8 However, this finding would have rendered the specific conduct of each undertaking irrelevant as regards the fine calculation (e.g., the gravity of the infringement committed and the mitigating factors applicable). In light of these circumstances, the Commission applied different percentage reductions to the undertakings (70% to Stührk and 75% to the other undertakings) on the basis of paragraph 37 of the Fining Guidelines.
12. The Commission also granted Stührk a smaller reduction of the fine compared to the other undertakings, despite the fact that for Stührk, the cartelised products represented only a small part of its production (22%) (therefore, arguably, meaning that Stührk did not generate substantial profits from the unlawful conduct compared to mono-product companies, for whom the basic fine amount should be higher). It was therefore unclear why the Commission effectively penalised Stührk by granting it a smaller reduction compared to the other undertakings (70% as opposed to 75%). As a result, Stührk was not in a position to understand the reasons for its different treatment and the GC was unable to exercise a full review of whether the principle of equal treatment had been violated.
13. As a result, the GC, raising of its own motion the ground of an insufficient statement of reasons in line with previous case law,10 annulled the fine imposed on Stührk in full due to the impossibility of determining whether the undertakings involved were in comparable situations and whether the principle of equal treatment had been violated in the Commission’s application of different percentage reductions of the fines. In doing so, it reiterated the position in Icap that an adequate statement of reasons is even more important in cases where the Commission has departed from its usual fine calculation methodology and applied paragraph 37 of the Fining Guidelines. In other words, the GC confirmed that “the particularities of a given case” justifying the application of paragraph 37 always need to be sufficiently explained.
15. On 12 July 2018, the GC handed down 12 judgments relating to the Commission’s decision in the submarine power cables cartel.13 One of these judgments upheld the Commission’s decision to hold Goldman Sachs Group Inc (“Goldman Sachs”) jointly and severally liable with its direct subsidiary Prysmian and Prysmian Cavi e Sistemi Energia (“Prysmian”) for its participation in the power cables cartel. In particular, the Commission applied the presumption of decisive influence originally set out in AkzoNobel14 for companies with a 100% shareholding of their subsidiaries and presumed, based on Goldman Sachs’ economic, organisational and legal links with Prysmian, that by exercising all the voting rights in Prysmian, Goldman Sachs exerted a decisive influence over Prysmian’s market conduct and was therefore liable for its anti-competitive behaviour.
16. Goldman Sachs appealed the Commission’s decision on the basis that the Commission committed: (i) an error of law in applying the presumption of actual exercise of decisive influence during the period of Goldman Sachs’ investment in Prysmian (from 2005 to 2007); (ii) an error of assessment by taking the view that, in any event, Goldman Sachs exercised decisive influence over Prysmian during the entire period (from 2005 to 2009); and (iii) a manifest error of assessment in finding that Goldman Sachs was not a pure financial investor.
17. During the first period, between 2005 and 2007, Goldman Sachs’ shareholding varied between 84.4% and 91.1%, except during a period of 41 days when Goldman Sachs had a 100% shareholding in Prysmian. In May 2007, Prysmian’s shares were then offered to the public in an initial public offering (“IPO”) on the Milan Stock Exchange. According to Goldman Sachs, the Commission was wrong to apply the presumption of decisive influence to Goldman Sachs for the first period because: (i) it held much less than 100% of Prysmian’s share capital; (ii) holding 100% of voting rights cannot be equated to holding 100% of share capital; (iii) it had divested a part of its shareholding in Prysmian to minority shareholders; and (iv) in any case, it was able to rebut the presumption of decisive influence.
19. As for the second period (i.e. when Goldman Sachs’ shareholding dropped after the IPO), the GC held that the Commission could not rely on the presumption of decisive influence, but that the Commission was right to have analysed all the relevant factors related to the economic, organisational and legal links between Goldman Sachs and Prysmian in order to show that Goldman Sachs did in fact exert decisive influence over Prysmian. In reaching its conclusion, the Commission had correctly analysed different factors such as Goldman Sachs’ power to call shareholder meetings and the management powers of its representatives on the board of directors.20 The GC therefore agreed that Goldman Sachs was indeed in a position to exercise decisive influence over Prysmian during such period.
20. Finally, the GC confirmed that the presumption of parental liability can also apply to financial investors, such as investment banks or private equity companies like Goldman Sachs. Most importantly, the GC held that Goldman Sachs did not succeed in showing that its shareholding in Prysmian was solely intended as a “pure financial investment”.21 As a result, the GC has clearly confirmed that investors would have to demonstrate on a case-by-case basis that their investment is purely financial and that they have no actual influence over the management of the subsidiary in which they have invested in order not to be held liable for such subsidiary’s anti-competitive conduct. Institutional investors should therefore conduct careful due diligence focused on potential anti-competitive conduct by companies before investing in such companies.
22. This was in the case of Mr. Pisciotti, an Italian national who had been under investigation since 2007 in the US in relation to his involvement in the Marine Hose cartel. As a result, the US authorities had requested his extradition under the EU-US extradition agreement and in June 2013, Mr. Pisciotti was arrested in Frankfurt’s airport during a flight stop-over. Following orders of the Higher Regional Courts of Frankfurt, Germany approved the extradition of Mr. Pisciotti. He later pleaded guilty to the cartel offences, served his prison sentence in the US and was released in April 2015.
25. It therefore appears that the ECJ is generally supportive of extradition for cartel infringements (provided that the necessary procedures are complied with), even though Mr. Pisciotti was the first individual to be extradited by the US competition authorities.27 In any case, it remains to be seen how the ECJ’s ruling will be dealt with by the Berlin Regional Court who referred the question, and, in particular, whether the judgment will encourage more extraditions for individual criminal cartel offences in the future.
1. See Judgment of the General Court in Case T-180/15 Icap and others v. Commission, 10 November 2017 (“Icap”).
2. For further information on the Icap case please see, for example, Icap v. Commission: General Court upholds cartel liability of facilitators, but attempts to rein in Commission’s approach in settlements, published in November 2017 and available at: https://www.shearman.com/perspectives/2017/11/icap-v-commission-general-court-upholds-cartel. See also: Case T-180/15 Icap v. Commission: The Facilitator Doctrine and Other Cartel Concepts in Hybrid Settlements, Journal of European Competition Law & Practice Vol. 9 Issue 5 1 May 2018, and Facilitation, facilitation, facilitation: the General Court’s ICAP judgment, published in January 2018 and available at: http://www.elexica.com/en/legal-topics/antitrust-and-merger-control/020118-facilitation-the-general-courts-icap-judgment.
4. Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003, O.J. C 210, 1 September 2006, pp. 2–5 (“Fining Guidelines”).
6. See Icap, paragraph 295.
7. See Judgment of the General Court in Case T-58/14 Stührk Delikatessen v. Commission, 13 July 2018 (“Stührk Delikatessen”).
8. See Stührk Delikatessen, paragraph 296.
9. See Stührk Delikatessen, paragraph 327.
10. See, for example, Judgment of the General Court in Case T-166/01 Lucchini v. Commission, 19 September 2006.
11. See Judgment of the Court of Justice in Case C-516/15 P AkzoNobel v. Commission, 27 April 2017. For further details, please see the GTDT article Parental Liability in Cartel Infringements in the EU and US, published in July 2018 and available at: https://gettingthedealthrough.com/intelligence/172/article/6234/cartels-parental-liability-cartel-infringements (“GTDT Article”).
12. See Judgment of the General Court in Case T-419/14 The Goldman Sachs Group, Inc. v. Commission, 12 July 2018 (“Goldman Sachs v. Commission”).
13. See Decision C(2014) 2139 of 2 April 2014 in Case AT.39610 – Power cables.
14. See Judgment of the Court of Justice in Case C-97/08 P AkzoNobel and Others v. Commission, 10 September 2009. The conduct of a subsidiary can be imputed to the parent company where the parent is able to exercise decisive influence over the conduct of the subsidiary, and does in fact exercise such decisive influence. According to settled case law, the Commission is entitled to presume that a parent exercises decisive influence over a subsidiary if it holds 100% of the share capital. This presumption also applies when a parent holds such shares in a subsidiary indirectly, through intermediate holding companies. Despite the rebuttable nature of such presumption, few have escaped liability by successfully rebutting it in practice.
15. See Goldman Sachs v. Commission, paragraphs 50 to 66.
16. For further information, please see the GTDT Article.
17. See Case C-508/11 P Eni v. Commission, 8 May 2013, and Judgment of the General Court in Case T-206/06, Total v. Commission, 7 June 2011.
18. See Case C-407/08 P Knauf Gips, 1 July 2010, where the ECJ noted at paragraph 108 that “the legal structure of a group is not decisive where that structure does not reflect the effective functioning and actual organisation of the group”.
19. See Goldman Sachs v. Commission, paragraphs 69 to 77.
20. Overall, the Commission analysed: Goldman Sachs’ power to appoint the members of the various boards of directors of Prysmian; its power to call shareholder meetings; its power to propose the revocation of directors or of entire boards of directors; its actual level of representation on Prysmian’s board of directors; the management powers of the Goldman Sachs’ representatives on the board of directors; the important role played by Goldman Sachs on the committees established by Prysmian; Goldman Sachs’ receipt of regular updates and monthly reports; the measures to ensure continuation of decisive control after the IPO date; and evidence of behaviour typical of an industrial owner.
21. See Goldman Sachs v. Commission, paragraph 156.
22. See Judgment of the Court of Justice in Case C-191/16 Pisciotti v. Bundesrepublik Deutschland, 10 April 2018 (“Pisciotti”).
25. In particular, the Italian authorities had been kept fully informed of Mr. Pisciotti’s situation by the German authorities and had not sought the surrender of Mr. Pisciotti.
26. See Pisciotti, paragraph 56.

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