The judgment of the Court of Justice of 12 November 2014 in Guardian Industries Corp and Guardian Europe Sarl v Commission, C-580/12 P, EU:C:2014:2363, is a rare instance of the Court of Justice on appeal reducing the amount of a fine imposed for the breach of the competition rules that had been upheld at first instance by the General Court.
In 2007, the Commission adopted a decision in 2007 which found that Guardian, Asahi Glass, Pilkington and Saint-Gobain had breached the competition rules by unlawfully fixed prices in the flat-glass sector in the EEA.
The Commission imposed a fine of €148 million on Guardian. Guardian challenged the decision and the amount of the fine but the General Court upheld that decision in 2012 in its judgment in T-82/08, EU:T:2012:494.
Guardian then appealed to the Court of Justice asking for the judgment of the General Court to be set aside and the fine reduced. It argued that the General Court failed to have regard to the principle of equal treatment in refusing to accept that, when the fine was calculated, sales between entities belonging to the same undertaking (internal sales) must be taken into account on the same basis as sales to independent third parties (external sales): the Commission had included both internal sales and external sales in the case of Guardian but had not done likewise for all the undertakings punished for the cartel.
The Court of Justice upheld the appeal and reduced the fine from €148 million, to €103 600 000, a 30% reduction. As said earlier, that doesn’t happen often on appeal.
The judgment is interesting because the Court of Justice sets out seven basic parameters to be taken into account when calculating a competition fine.
First, the fine may not exceed 10% of the undertaking’s total turnover in the preceding business year. That is the limit set by the second subparagraph of Article 23(2) of Regulation No 1/2003.
Second, the Commission must assess, in each specific case and having regard both to the context and the objectives pursued by the scheme of penalties created by Regulation No 1/2003, the intended impact on the undertaking in question, taking into account in particular a turnover which reflects the undertaking’s real economic situation during the period in which the infringement was committed (Britannia Alloys & Chemicals v Commission, C-76/06 P, EU:C:2007:326, paragraph 25).
Third, the Commission can, for the purpose of fixing the fine, have regard both to the total turnover of the undertaking, which gives an indication, albeit approximate and imperfect, of the size of the undertaking and of its economic power, and to the proportion of that turnover accounted for by the goods in respect of which the infringement was committed, which gives an indication of the scale of the infringement (Musique Diffusion française and Others v Commission, 100/80 to 103/80, EU:C:1983:158, paragraph 121; Dansk Rørindustri and Others v Commission, C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C-213/02 P, EU:C:2005:408, paragraph 243; and Archer Daniels Midland and Archer Daniels Midland Ingredients v Commission, EU:C:2006:328, paragraph 100).
Fourth, while the Commission enjoys a certain margin of discretion according to Article 23(2) of Regulation No 1/2003, that discretion is limited:
– first, because the amount of the fine that may be imposed on an undertaking is subject to a quantifiable and absolute ceiling, with the result that the maximum amount of the fine that can be imposed on a given undertaking can be determined in advance.
– And second, the exercise of that discretion is also limited by rules of conduct which the Commission imposed on itself, in particular in the 2006 Guidelines (see, to that effect, Schindler Holding and Others v Commission, C-501/11 P, EU:C:2013:522, paragraph 58).
Point 13 of the 2006 Guidelines states, ‘[i]n determining the basic amount of the fine to be imposed, the Commission will take the value of the undertaking’s sales of goods or services to which the infringement directly or indirectly … relates in the relevant geographic area within the EEA’. Point 6 of those guidelines states that ‘[t]he combination of the value of sales to which the infringement relates and of the duration of the infringement is regarded as providing an appropriate proxy to reflect the economic importance of the infringement as well as the relative weight of each undertaking in the infringement’. Thus, point 13 of the 2006 Guidelines pursues the objective of adopting, as the starting point for the calculation of the fine imposed on an undertaking, an amount which reflects the economic significance of the infringement and the relative size of the undertaking’s contribution to it.
Fifth, while the concept of the value of sales referred to in point 13 of those guidelines admittedly cannot extend to encompassing sales made by the undertaking in question which do not fall within the scope of the alleged cartel, it would, however, be contrary to the goal pursued by that provision if only the turnover achieved by the sales in respect of which it is established that they were actually affected by that cartel were taken into account (Team Relocations and Others v Commission, C-444/11 P, EU:C:2013:464, paragraph 76).
Sixth, a distinction must not therefore be drawn between those sales depending on whether they are to independent third parties or to entities belonging to the same undertaking. To ignore the value of the sales belonging to that latter category would inevitably give an unjustified advantage to vertically integrated companies by allowing them to avoid the imposition of a fine proportionate to their importance on the product market to which the infringement relates (KNP BT v Commission, C-248/98 P, EU:C:2000:625, paragraph 62). That is why the EU Courts have always rejected pleas by which vertically integrated producers have sought to have their internal sales excluded from the turnover figure used as a basis for calculating their fine (KNP BT v Commission, EU:C:2000:625, paragraph 62; see also Europa Carton v Commission, T-304/94, EU:T:1998:89, paragraph 128; KNP BT v Commission, T-309/94, EU:T:1998:91, paragraph 112; Lögstör Rör v Commission, T-16/99, EU:T:2002:72, paragraphs 360 to 363; and Tokai Carbon and Others v Commission, Joined cases T-71/03, T-74/03, T-87/03 and T-91/03, EU:T:2005:220, paragraph 260) (En passant, the Court of Justice now cites judgments of the General Court ?).
Seventh, the principle of equal treatment is a general principle of EU law, enshrined in Articles 20 and 21 of the Charter. According to settled case-law, that principle requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified (Akzo Nobel Chemicals and Akcros Chemicals v Commission, C-550/07 P, EU:C:2010:512, paragraphs 54 and 55 and the case-law cited). When the amount of the fine is determined, there cannot, by the application of different methods of calculation, be any discrimination between the undertakings which have participated in the same infringement of Article 81 EC (101 TFEU) (Alliance One International and Standard Commercial Tobacco v Commission and Commission v Alliance One International and Others, C-628/10 P and C-14/11 P, EU:C:2012:479, paragraph 58).
The Court repeated that for the purposes of assessing the proportion of the overall turnover deriving from the sale of products which are the subject of the infringement, a distinction must not be drawn between internal sales and sales to independent third parties. Thus, vertically integrated undertakings are in a comparable situation to that of non-vertically integrated producers. Those two types of undertaking must therefore be treated equally. Excluding internal sales from the relevant turnover would effectively favour the first type of undertaking by reducing its relative weight in the infringement to the detriment of the other undertakings, on the basis of a criterion having no connection with the objective pursued when that turnover is determined, namely that of reflecting the economic importance of the infringement and the relative weight of each of the undertakings that took part in it.
The Court held that the General Court had erred in law in the judgment under appeal by finding that vertically integrated undertakings were not in a comparable situation to that of non-vertically integrated producers. Accordingly, it upheld Guardian’s appeal in so far as it alleges an infringement of the principle of equal treatment and set aside the judgment under appeal in so far as it rejected the plea alleging infringement of the principle of non-discrimination as regards the calculation of the amount of the fine.
The Court of Justice did not send the case back to the General Court however. It held that it was in a position to give a final judgment in the action and could rule in accordance with the unlimited jurisdiction conferred on it by Article 31 of Regulation No 1/2003, on the amount of the fine to be imposed on Guardian (Commission v Verhuizingen Coppens, C-441/11 P, EU:C:2012:778, paragraph 79, and Alliance One International v Commission, C-679/11 P, EU:C:2013:606, paragraph 104).
As to the amount of the correction to the fine, the Commission took the view that the fact that the inclusion of internal sales could have led to higher fines for other cartel participants and thus did not justify a lowering of the fine imposed on Guardian.
The Court rejected the Commission’s argument and held that it may, in the exercise of its unlimited jurisdiction, substitute its own appraisal for the Commission’s and, consequently, cancel, reduce or increase the fine imposed (see Groupe Danone v Commission, C-3/06 P, EU:C:2007:88, paragraph 61, and Otis and Others, EU:C:2012:684, paragraph 62). That power is exercised by taking into account all of the factual circumstances (see, to that effect, Prym and Prym Consumer v Commission, C-534/07 P, EU:C:2009:505, paragraph 86 and the case-law cited).
Finally, the Court determined, in the exercise of its unlimited jurisdiction that a reduction of 30% was appropriate.