ECJ in Pometon: beware of too much info in staggered hybrid proceedings

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NL Law
EU Law
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EU and Competition Law

In hybrid cartel proceedings (in which one party opts out of settlement), settlement decisions should not pre-judge the outcome of the Commission's investigation into non-settling parties. When the Commission publishes the settlement decision before the decision imposing a fine on the non-settling party, it must be careful in its drafting, the European Court of Justice confirmed. Furthermore, differences in the fining methodology applied to (similarly placed) settling and non-settling parties will have to be objectively justified and sufficiently reasoned.

Companies involved in hybrid proceedings in which the settlement decision is published before the fining decision should therefore double-check whether the Commission followed the drafting guidance set out in the Pometon-ruling. In addition, it is important to verify whether the Commission observed the principle of equal treatment in relation to the fines imposed; the ECJ reduced Pometon’s fine by a further EUR 1.24 million for breach of this principle.

Commission’s decisions

In 2014, the Commission fined four steel abrasives producers EUR 30.7 million in a cartel settlement. One steel abrasives producer, Pometon, opted out of settlement and continued under the standard (contested) cartel procedure which, in 2016, culminated in a fine of EUR 6.2 million. The 2014 settlement decision had mentioned Pometon in the description of the relevant facts.

Appeal before the General Court

On 28 March 2019, the General Court rejected Pometon’s argument that the Commission had infringed its rights of defence by making reference to it in the 2014 settlement decision. The General Court found that the Commission had not predetermined the accusations subsequently made against Pometon in the 2016 fining decision. However, the General Court agreed with Pometon that the Commission had failed to sufficiently explain how it calculated the different percentages of fine reductions granted to Pometon and the settling parties. The General Court therefore reduced Pometon’s fine by almost 40% (approx. EUR 3.87 million).

Ruling by ECJ

On 18 March 2021, the ECJ upheld the General Court’s rejection of Pometon’s argument that the Commission breached its rights of defence. The ECJ considered that:

  1. the Commission had taken “sufficient precautions" in its drafting by stating "unequivocally” (in a footnote) that the settlement decision was not addressed to Pometon and that the references to Pometon in that decision were used exclusively to establish the liability of the other cartel participants, and
  2. the Commission had avoided disclosing more information than necessary by referring to Pometon only where needed to establish the liability of the other members of the cartel.

The ECJ further reduced Pometon’s fine to approx. EUR 2.63 million on the basis that the General Court breached the principle of equal treatment. The General Court had taken the following three criteria into account in granting the fine reduction: (a) individual liability for participating in the cartel, (b) the impact of Pometon’s unlawful conduct on price competition and (c) the size of the undertaking (i.e., total turnover). Weighing these factors, the General Court granted Pometon the same rate of reduction (75%) as the Commission had granted settling party Winoa (who played a more active role in the cartel). The ECJ concluded that the General Court treated these two different situations in the same way, without objective justification for doing so. Further, Pometon’s situation was similar to settling party MTS (who was granted a 90% reduction) except that Pometon’s total turnover was higher. The ECJ held that this factor (total turnover) could not in itself justify the significant difference in the reductions applied to the parties.

Conclusion

The ruling shows that the Commission should take a ‘less is more’ approach to drafting in staggered hybrid proceedings to safeguard non-settling parties’ rights of defence. Double-checking and comparing the Commission’s fining methodology applied to settling and non-settling parties is also important as the principle of equality is one of the few ways in which EU courts are willing to curtail the Commission’s wide margin of discretion in setting fines.

This article was published in the Competition Newsletter of April 2021. Other articles in this newsletter:

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