On 22 October 2015, the European Commission (EC) published a summary of its decision, adopted in June 2015, by which it imposed fines totalling almost €116 million on a number of manufacturers and distributors of retail food packaging for operating five distinct cartels in different geographical areas within the European Economic Area (EEA).
The EC's summary decision can be accessed here.
1. Brief summary of the EC's key findings
The manufacturers found to have participated in the cartel were Huhtamäki, Nespak, Vitembal, Silver Plastics, Coopbox, Magic Pack, Sirap-Gema and Linpac. Linpac filed for leniency first, receiving full immunity from a fine. The distributors found to have participated were Ovarpack and Propack.
The EC found that:
- From June 2002 to 2007, some of the undertakings participated in a cartel which took place in north-west Europe in relation to polystyrene foam trays and polypropylene rigid trays.
- Between November 2004 and September 2007, some of the undertakings colluded with respect to polystyrene foam trays in central and eastern Europe.
- Some of the undertakings fixed prices in the polystyrene foam trays in south-west Europe, from March 2000 until February 2008.
- Price-fixing agreements covering the same products in France were in effect between September 2004 and November 2005.
- A fifth cartel also covering the same products related to Italy and lasted from June 2002 to December 2007.
The EC's summary decision states that, with some differences between the five cartels, the companies participated in bilateral and multilateral meetings and contacts aimed at restricting competition by fixing prices, agreeing on customer allocation and market sharing, exchanging price sensitive information and bid-rigging. The main objectives of the anticompetitive arrangements were to maintain high prices, to pass on the rising price of raw materials in a coordinated manner and to preserve the status quo with regard to historically allocated clients and markets. The distributors, Ovarpack and Propack, were found to have actively participated in some of the anticompetitive practices and enabled their implementation and monitoring.
2. Main points of the decision
Although the published summary decision is very short, it contains a number of interesting points.
Separate cartels investigated in one proceeding
The EC found that the five cartels (i) concerned the same products, (ii) to a certain extent involved the same undertakings, and (iii) took place during partially overlapping time periods. However, the EC lacked evidence to prove that the parties to the infringement were pursuing one overall plan to restrict competition within the EEA. Consequently, the infringements were considered by the EC to constitute five separate cartels. Nevertheless, in view of the similarities between the cartels and for reasons of administrative efficiency and expediency, the EC investigated the five cartels in one single administrative proceeding.
This is one of the rare cases in which the EC assumed jurisdiction even though certain of the infringements were limited to a single Member State and thus prima facie had no Community dimension (as noted above, two of the infringements found by the EC related to France and Italy, respectively). Normally, cartel cases which affect a single national market are investigated by the relevant national competition authority. Here, when starting the investigation, the EC presumably expected to find evidence of a single EEA-wide cartel. After realising that the evidence was insufficient to establish such a case, it appears that the EC decided to retain jurisdiction in relation to all aspects of the case on the basis of the similar nature and overlapping time periods of the separate infringements, as opposed to referring the case (at least partially) to the competent national competition authorities.
Calculation of the individual fines
With respect to the fines imposed on the distributors, the EC's calculation of the basic amount of the fine was based on the value of the distribution/service fee charged in respect of the cartelised product (i.e. the distributor's gross margin), rather than total sales. The EC adopted this method in order to ensure that there was no risk of double-counting of the sales made by other parties to the infringements (i.e. the manufacturers) via the distributors.
This approach may be viewed as the appropriate way to accurately reflect the economics in a cartel operated by both manufacturers and distributors. However, there is no uniform case practice among the EC and its member states in this regard. For example, the German Federal Cartel Office determines the individual fine framework, even in case involving distributors, on the basis of sales and not on the achieved gross margin. On the other hand, the UK's Competition and Markets Authority states in its guidance as to the appropriate amount of a penaltythat, while the starting point for determining the level of a fine will generally be sales revenues, in "exceptional circumstances" it may be appropriate to use a different figure, in particular where the remuneration for services supplied is based on commission fees.
Additional reduction of fine due to length of proceedings
It took almost four years from the start of the investigation (the EC carried out unannounced inspections ("dawn raids") in September 2008) until it sent the statement of objections to the parties (in 2012) and a further three years until the decision was issued. In order inter aliato reflect the length of the proceedings, the EC granted an exceptional 5% reduction of the fine to each of the parties.
This may set a precedent for parties to argue for reduced fines in future cases in which proceedings have been particularly long.
Several of the alleged cartelists have lodged legal challenges against the EC's decision before the EU's General Court. The legal arguments on which the appeals are based appear – as far as they have been published – to be very case specific.