Case C-408/12 P YKK Corporation and others v Commission: Calculation of competition fine, 10% legal ceiling and parent-subsidiary liability

The Court of Justice does not often interfere, on appeal, with the way fines for competition cases are calculated and scrutinised by the General Court. It will do so, however, if an error of law is made, for example.

In Case C-408/12 P YKK Corporation and others v Commission  EU:C:2014:66 the Court of Justice did find an error and it did readjust the amount of the fine imposed on a company for infringing the competition rules. Here’s what happened….

In 2007 the Commission fined a company, YKK Stocko, €68 250 000 for participating in a cartel in the haberdashery sector for nine years and nine months (from May 1991 to March 2001), the whole duration of the cartel. In 1997, while the cartel was still going on, YKK Corp and YKK Holding bought YKK Stocko and took control of it. As a consequence, the Commission made YKK Corp and YKK Holding jointly and severally liable for part – €49 million – of the fine imposed on YKK Stocko (which remained solely liable for payment of the remainder of the fine imposed on it, namely €19 250 000).

The different YKK companies challenged the decision and the amount of the fine in the General Court which dismissed the action and upheld the Commission decision (YKK and Others v Commission, T‑448/07, EU:T:2012:322).

All well and good, you might think. Well, no…. There was a problem. Quite a big problem, as it happens.

The second subparagraph of Article 23(2) of Regulation No 1/2003 lays down that the fine imposed on an undertaking shall not exceed 10 % of its total turnover in the preceding business year of the decision.

What the Commission had done in its decision was to calculate the total amount of the fine to be imposed on YKK Stocko for the whole duration of the cartel and apply the 10% to the group turnover figures in 2006, thus applying the 10% maximum to the 2006 consolidated sales figures of YKK Corp and YKK Holding. The Commission had applied a single legal maximum on the parent companies and included in its calculation the whole duration of the cartel which comprised also the first period of the infringement – five years and five months from May 1991 to March 1997 – during which YKK Stocko was an independent company over which YKK Corp and YKK Holding had no control (because they only took control of YKK Stocko in 1997).

The General Court had upheld the Commission’s methodology.

The Court of Justice disagreed and overturned the General Court on this point. It pointed out that the part of the fine relating to the initial period of the infringement (May 1991 to March 1997) amounted to €19.25 million, which represented 55% of YKK Stocko’s total 2006 turnover, which was EUR 34.91 million, and was considerably more than the 10% upper limit laid down in the second subparagraph of Article 23(2) of Regulation No 1/2003.

The Court held that where, as in this case, an undertaking regarded by the Commission as responsible for an infringement of Article 101 TFEU is acquired by another undertaking within which it retains, as a subsidiary, the status of a distinct economic entity, the Commission must take account of the specific turnover of each of those economic entities in order to apply to them, where necessary, the 10% upper limit.

In this case, the Commission had correctly divided the responsibilities of each undertaking which participated in the infringement, given that, prior to March 1997, the date when YKK Holding acquired YKK Stocko, the latter company and the YKK group constituted two ‘economic entities’ or distinct undertakings for the purposes of Article 101 TFEU and the second subparagraph of Article 23(2) of Regulation No 1/2003. The Commission had failed to draw from that fact the necessary conclusion as regards the application of the 10% upper limit.

It pointed out that the objective sought by the establishment, in Article 23(2), of an upper limit of 10% of the turnover of each undertaking participating in an infringement is, inter alia, to ensure that the imposition of a fine higher in amount that that ceiling should not exceed the capacity of an undertaking to make payment at the time when it is identified as responsible for the infringement and a financial penalty is imposed on it by the Commission. That is confirmed by the second subparagraph of Article 23(2) of Regulation No 1/2003 which requires, as regards the 10% upper limit, that it should be calculated on the basis of the turnover in the business year preceding the Commission decision imposing a penalty for an infringement. Such a requirement is fully respected where, as in this case, that ceiling is determined solely on the basis of the turnover of the subsidiary, in respect of the fine which is imposed exclusively on it, in relation to the period prior to its acquisition by the parent company, which the appellants do not dispute in this appeal. It follows that, in such circumstances, the structural changes in the undertaking responsible as an economic entity are in fact taken into account in the calculation of the fine.

The Court also pointed out that a company cannot be held to be responsible for infringements committed independently by its subsidiaries before the date of their acquisition, since the latter must themselves answer for their unlawful conduct prior to that acquisition, and the company which has acquired them cannot be held to be responsible (Cascades v Commission, C‑279/98 P, EU:C:2000:626, paragraphs 77 to 79).

Such findings, the Court went on are compatible with, first, the principle of proportionality and, second, the principle of personal responsibility and the principle that penalties must be specific to the individual, as stated in the case-law of the Court (Britannia Alloys & Chemicals v Commission, C‑76/06 P, EU:C:2007:326, paragraph 24, as regards the principle of proportionality; General Química and Others v Commission, C‑90/09 P, EU:C:2011:21, paragraphs 34 to 36; and ThyssenKrupp Nirosta v Commission, C‑352/09 P, EU:C:2011:191, paragraph 143, as regards the principle of personal responsibility and the principle that penalties must be specific to the individual).

Consequently, the Court of Justice set aside the judgment of the General Court on that point.

The Court of Justice drew the necessary consequences of its findings itself and did not refer the case back to the General Court.

It held that it was appropriate that the Court, in the exercise of its unlimited jurisdiction, should fix the fine imposed exclusively on YKK Stocko in respect of the unlawful acts committed by it independently and on its own responsibility at € 3 491 000, that sum representing 10% of the turnover it achieved in 2006, the business year preceding the adoption of the contested decision.

But that was not all ….the appellants had claimed before the General Court that they should qualify for a 20% reduction, pursuant to the 2002 Leniency Notice, in the amount of the fine capped at 10% of their relevant turnover.

The Court held In that regard, taking into consideration the fact that the Commission, in relation to the fine imposed in respect of the infringement in question, granted such a reduction and that that reduction was applied to all the companies in the YKK group, including YKK Stocko, it is appropriate to use for the calculation of the final amount of the fine the same method as that applied by the Commission in the contested decision, in accordance with the provisions of the 1998 Guidelines, and consequently to apply the reduction on the basis of cooperation after the application of the upper limit of 10% of turnover. Accordingly, that 20% reduction, pursuant to the 2002 Leniency Notice, must be applied to the revised amount of the fine.

Thus, the fine imposed exclusively on YKK Stocko, as regards the infringement in question,was fixed at € 2 792 800.

The Court thus followed AG Wathelet’s opinion.

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