Antitrust Alert: Europe's Highest Court Confirms Far-Reaching Powers to Impose Antitrust Fines
In an important decision in the LCD panels cartel (InnoLux (Case C-231/14P, 9 July 2015)), the European Court of Justice has endorsed the European Commission's broad-ranging methodology for setting fines for violations of Article 101 TFEU. Under the Commission's methodology, the value of sales, used as a basis for calculating the fine, includes finished products (in the present case, televisions and computers) for which the undertaking's subsidiary had incorporated cartelized products (LCD panels). This value of sales was used even though the subsidiary was established outside the EEA but where the finished products were sold to customers in the EEA.
The Court held that, for the purpose of calculating the value of sales in the EEA of the products implicated by the infringement, the Commission was right to include the value of LCD panels incorporated into televisions and computers by the non-EEA based subsidiary of InnoLux, which were then sold by InnoLux to third parties established in the EEA.
In December 2010, the Commission imposed a €650 million fine on six Korean and Taiwanese producers of liquid crystal display panels (LCD panels) for their participation in a cartel from 2001 to 2006. The Commission identified the following three categories of "sales" of cartelized LCD panels made in the EEA by the cartel participants:
- Direct EEA sales: sales of LCD panels to third parties within the EEA.
- Direct sales of transformed products: intra-group sales of LCD panels to an entity established outside the EEA, which then incorporated the panels into finished products subsequently sold to third parties established within the EEA.
- Indirect sales: sales of LCD panels to a third party outside the EEA, which then incorporated the panels into finished products sold within the EEA.
In determining the basic amount of the fine to be imposed, following its Guidelines on setting fines, the Commission took into account the first two categories of sales. The Commission considered these to be "goods or services to which the infringement directly or indirectly relates in the relevant geographic area within the EEA."
InnoLux appealed the Decision before the General Court, which upheld the Commission's fining method. InnoLux appealed this to the European Court of Justice. Dismissing InnoLux's appeal in its entirety, and declining to follow the opinion of Advocate General Wathelet, the Court upheld the General Court's findings on the scope of the value of sales to be used for the purpose of calculating the fine.
Findings of the Court of Justice
1. For fining purposes, the General Court rightly included the value of sales of finished products sold in the EEA for which InnoLux's non-EEA subsidiaries had incorporated the cartelized LCD panels.
At the outset, the Court established that InnoLux's sales, for the purpose of setting the fines for "direct EEA sales through transformed products," were not made on the market for LCD panels, but on the downstream market for finished products incorporating the cartelized LCD panels. The Court nevertheless held that the General Court correctly found that the Commission could take into account sales of the finished products incorporating the cartelized LCD panels. This is because such sales were taken into account only up to the proportion of the value of the cartelized LCD panels (not their full value) when InnoLux sold the finished products to third parties in the EEA.
The Court emphasized that the concept of "value of sales," as set out in the Guidelines on setting fines, cannot extend to encompass sales "which in no way fall within the scope of the alleged cartel." Nevertheless, the Court held that it would be wrong "if the vertically-integrated participants in a cartel could, solely because they incorporated the goods the subject of the infringement into the finished products outside the EEA, expect to have excluded from the calculation of the fine the proportion of the value of their sales of those finished products in the EEA that are capable of being regarded as corresponding to the value of the goods the subject of the infringement."
The Court concluded that the General Court had correctly determined that "when a vertically-integrated undertaking incorporates the goods in respect of which the infringement was committed into the finished products in its production units situated outside the EEA, the sale by that undertaking of those finished products in the EEA to independent third parties is liable to affect competition on the market for those products and, therefore, such an infringement may be considered to have had repercussions in the EEA, even if the market for the finished products in question constitutes a separate market from that concerned by the infringement."
The Court further noted that to ignore the value of these sales would give an unjustified advantage to vertically-integrated companies that incorporate part of the cartelized goods in their production outside the EEA. Thus, it was appropriate to impose a fine proportionate to the importance on the market for those cartelized goods and the real harm that such conduct inflicts on competition in the EEA.
2. The Commission did not exceed its territorial jurisdiction.
The Court held that the Commission properly exercised its jurisdiction in applying Article 101 TFEU to the cartel even though other jurisdictions also might prosecute the same conduct. This is because the cartel participants, including InnoLux, implemented the worldwide cartel in the EEA by making direct sales of the cartelized LCD panels in the EEA to third parties. It further noted that, for the purpose of calculating InnoLux's fine, it was important to determine the value of sales such that the amount of the fine reflected both the infringement's economic importance and the relative weight of InnoLux in such infringement.
The Court rejected InnoLux's argument that this approach likely would result in concurrent penalties for the same anticompetitive conduct. The Court stated that the principle of non bis in idem (double jeopardy) does not require the Commission to take into account other proceedings and penalties in non-Member States to which the undertaking may be subject.
The Court's judgment confirms the European Commission's wide-ranging interpretation of its fining powers in price fixing cases. The judgment came as a surprise, as the Advocate General, whose opinion is followed in the vast majority of cases, had recommended excluding the sales in question from the fining calculation. The judgment is also at odds with the Motorola case, decided by the Seventh Circuit Court of Appeals in the United States in connection with the same cartel, in which Motorola could not invoke U.S. antitrust law because the "immediate victims" of the price fixing cartel had been the outside U.S. subsidiaries that purchased most of the cartelized LCD panels.
As a result of the Court's judgment, we anticipate that the European Commission will continue to impose substantial fines for antitrust violations that take place abroad but have marketplace repercussions within the EEA.
The European Court of Justice opinion can be found here.
For more information, please contact your principal Jones Day representative or any of the lawyers listed below.
Bernard E. Amory
Eric Barbier de La Serre
Alexandre G. Verheyden
Francesca Marchini Càmia
Sébastien J. Evrard
Beijing / Hong Kong
+86.5866.1111 / +852.2526.6895
J. Bruce McDonald
Houston / Washington
+1.832.239.3822 / +1.202.879.5570
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