On 4 February 2015, the European Commission (Commission) fined cash broker ICAP plc (ICAP) €14.9 million for its involvement in the Japanese Yen (JPY) LIBOR cartel. Unlike the other participants in the alleged cartel, ICAP had not entered into settlement arrangements with the Commission, but its European subsidiary, ICAP Europe Ltd (IEL), had settled separate cases brought by both the Financial Conduct Authority (FCA) and the Commodity Futures Trading Commission (CFTC). In September 2013, IEL accepted a settlement offer of US$65 million (approximately €57 million) by the CFTC for its involvement in manipulating the JPY LIBOR. On the same day, IEL accepted a £14 million fine (approximately €19.5 million) issued by the FCA, having qualified for a 30 per cent settlement discount. Is this a case of double jeopardy, where the company is fined twice for the same infringement?
At the time of the Commission's decision, ICAP released a statement saying it would be appealing the decision, which it believes is wrong both in fact and in law. ICAP is arguing that the alleged competition infringements are based on the same underlying matters as the case IEL settled with the FCA and the CFTC in 2013, and that the Commission has not presented evidence of competition law infringements. This alerter discusses the application of the double jeopardy principle in relation to the separate fines imposed on ICAP by the FCA and the Commission.
ICAP's breach of Article 101
In contrast to the panel banks, which made submissions that contributed to the calculation of published LIBOR rates, ICAP did not directly submit misleading JPY LIBOR rates. Instead it acted as an intermediary, facilitating the alleged cartels between the panel banks. It is established in case law that facilitators may infringe Article 101 through their involvement in cartels (see, most recently, AC Treuhand AG v. Commission, on appeal to the European Court of Justice (ECJ)).
The Commission found that ICAP breached the prohibition on anti-competitive agreements (Article 101 of the Treaty on the Functioning of the European Union (TFEU)), through disseminating false predictions of what the JPY LIBOR rate would be within the panel banks, in order to influence these banks to submit rates in line with the misleading information. ICAP also urged other contacts within the panel banks to influence their peers to submit an incorrect rate, and acted as an intermediary between traders at RBS and Citigroup. The Commission fined ICAP a single sum for the six bilateral infringements that ICAP allegedly helped to facilitate.
Double jeopardy within the EU
As established in the ECJ decision Aalborg Portland and Others v. Commission (Aalborg Portland), the double jeopardy principle is applied only to circumstances where there are (1) the same facts, (2) the same offenders and (3) the same protected legal interests. In the past, the Commission has construed the third limb of the test – the same legal interests – narrowly, making it difficult for undertakings to claim the defence in competition cases. This can be seen in the 2011 Telekomunikacja Polska (Polish Telecom) case, where Polish Telecom was found to be abusing its dominant position through refusing to supply wholesale broadband products. Polish Telecom claimed that a number of its abusive activities had already been sanctioned by the Polish national telecommunications authority.
In that case, the Commission held that Polish Telecom could be fined by both the Commission and the national regulatory agency in Poland as each of these bodies was protecting different legal interests. The Commission's objective was to preserve undistorted competition within the EU, while the regulator's aims included development and use of modern telecommunications infrastructure, maximum benefits for users in terms of choice, price and quality of telecommunications services and net neutrality. Since one of the cumulative conditions in the double jeopardy test was not satisfied, the double jeopardy defence did not apply.
Nonetheless, the Commission, while setting the final amount of the fine, decided to take into account the penalties imposed by the regulator for infringements which partially overlapped with the infringements investigated by the Commission. This entirely offset the penalties Polish Telecom had paid to the regulator, decreasing the fine by €8.45 million to €127,554,194.
Two interesting points are raised by the Polish Telecom case. First, it could be said that the national regulator's objective of "maximum benefits for users in terms of choice, price and quality of telecommunications services" was the same as the Commission's objective of maintaining competition since it comprised the elements by which competition (and the distortion of competition) is measured. This view is further supported by the fact that the regulator also had at the time certain aims, including "ensuring that there is no distortion or restriction of competition (in the telecommunications market)". The fact that the Commission did not adopt this approach shows the limited application of the test, although it may be that on balance the regulator's objectives, when viewed as a whole, were regulatory rather than competition-focused.
Second, despite the strict application of Aalborg Portland, the Commission discounted Polish Telecom's fines, even though it considered there to be only infringements which "partially overlap" with the facts before it. This implies that the Commission was following the double jeopardy principle in practice even without there being a unity of facts.
The Commission appears to have had the double jeopardy principle in mind when fining ICAP. In a memo released by the Commission reporting on the fines imposed on the banks participating in the LIBOR cartels, it confirms that, while other authorities may have already imposed fines on some undertakings involved in the Commission's investigation of benchmark manipulation, none of the cases concerns enforcement of the competition rules within the EEA. In the memo, the Commission states: "[t]he Commission has the responsibility to enforce the EU antitrust rules, in particular Article 101 … which prohibits cartels in all economic sectors, including the financial sector. In contrast to the actions undertaken by regulatory agencies, the Commission focuses solely on breaches of competition rules … Investigations of other regulators do not relieve the Commission from its responsibility to ensure that the rules of fair competition are respected in the banking sector".
The General Court in the ICAP case may take a different approach to double jeopardy, perhaps based on the Opinion of Advocate General Kokott in Toshiba Corporation and Others v. Úřad pro ochranu hospodářské soutěže (Toshiba). In that case, the Advocate General stated that it is not necessary for there to be a unity of legal interests for the double jeopardy principle to apply and that the principle may be more widely applied. More specifically, the double jeopardy test need only comprise the first two limbs, the third limb being automatically established if the first two limbs are made out. The ECJ did not follow the Advocate General's Opinion and instead confirmed the three-limbed approach established in Aalborg Portland – it found that the facts of the infringements were different and that therefore the double jeopardy test was not satisfied. In the case of ICAP, if the General Court is able to satisfy itself that the facts are substantially the same, if not identical, might the Commission's fine be reduced accordingly?
The FCA and competition powers
As of 1 April 2013, the FCA has a statutory operational objective under the Financial Services and Markets Act 2000 (FSMA) to promote effective competition in the interests of consumers in the market for regulated financial services. It also has a general duty to promote effective competition in the interests of consumers so long as this is compatible with its other statutory objectives. On 1 April 2015, the FCA acquired competition law powers (to enforce the prohibitions on anti-competitive agreements and on abuse of a dominant position, and to make market studies and market investigation references) concurrently with the Competition and Markets Authority.
It is now the case therefore that the FCA may impose penalties on companies either in its role as sectoral regulator or as a competition authority. The Commission's approach to the application of the double jeopardy test may differ depending on which powers the FCA is exercising when taking enforcement action.
The ICAP appeal goes to the question of how the Commission deals with previous action taken by the FCA acting as a sectoral regulator. The fact that the FCA is bound by competition objectives in exercising its regulatory powers does not necessarily mean that it is protecting the same legal interests as the European Commission and that the double jeopardy principle will apply (assuming the other limbs of the test are met). This is evident from the Polish Telecom case. Whether the interests of the authorities are the same will depend on the different objectives that the FCA must balance and the priority as between the objectives.
There is obviously a much stronger argument that the legal interests of the FCA and the Commission are the same, if not identical, where the FCA is taking enforcement action under the competition law regime.
The last word
According to ICAP's response to the Commission's decision to fine ICAP, "[t]his is a regulatory matter that has already been settled. It is not a competition issue and the [Commission] has presented no evidence that ICAP facilitated a competition law violation". We do not comment here on the adequacy of the evidence before the Commission, except to say that acting as an accessory to cartel members by assisting them in carrying out anti-competitive activities would be sufficient for there to be a breach of Article 101. Based on Commission practice and ECJ case law, the double jeopardy principle is limited in scope. By arguing that the underlying matters are regulatory issues (which have been settled with the regulatory authorities), there is a risk that ICAP is highlighting a difference between regulatory and competition law interests, which would mean that it would be difficult to satisfy the three-limbed double jeopardy test in Aalborg Portland.