On 29 February 2016, the EU General Court handed down judgments on several appeals brought by cartel participants against the European Commission’s 2012 infringement decision in the Freight forwarding case. The judgments provide useful guidance on the application of the Commission’s leniency policy in complex cases, use of the EU settlement procedure and the potential liability of an economic successor where a cartel participant is subject to a change in ownership.
The judgments all concerned appeals against the Commission’s March 2012 decision, which fined 14 providers of international freight forwarding services a total of €169m for participation in up to four separate cartels designed to fix prices and other trading conditions across the sector.
Leniency in complex cases
One of the appelants (EGL) claimed that the whistleblower, Deutsche Post, was incorrectly awarded immunity in respect of one of the four cartels comprising the infringement on the basis that Deutsche Post was not the first company to provide evidence to the Commission enabling it to carry out an inspection targeted at that particular cartel or identify that cartel as a discrete infringement of Article 101 TFEU. EGL claimed that it therefore had a legitimate expectation of immunity in respect of that particular cartel.
The General Court rejected this argument, finding that the Leniency Notice does not prevent the Commission from granting conditional immunity, even where information provided by the immunity applicant does not yet enable the Commission to form a “detailed and specific” conception of the nature and scope of the alleged infringement.
To enable the Commission to carry out a targeted inspection, information provided to the Commission must include a detailed description of the alleged cartel (including, for example, the cartelised products/services, the cartel’s geographic scope and duration and the identity of participants in cartel contact). However, this obligation applies only to the extent that the applicant has such knowledge at the time of its application. It is the “intrinsic value” of a company’s cooperation in the detection of a cartel previously unknown to the Commission which justifies the grant of immunity. Therefore, the fact that information provided by Deutsche Post failed to refer specifically to the particular cartel in question did not prevent the Commission from granting it conditional immunity in respect of an infringement extending to that cartel. At the time of Deutsche Post’s immunity application, the Commission was unaware of anticompetitive conduct in relation to freight forwarding services, which was no longer the case by the time other undertakings (including EGL) applied.
This judgment provides a helpful insight into the General Court’s approach to leniency in complex cases. It is increasingly the case that separate cartels are intertwined, for example because of an overlap in cartelised products and/or geographic scope. The Commission often takes a pragmatic approach and extends immunity to whistleblowers across related cartels (as it did in this case with Deutsche Post), even if they are technically treated as separate infringements. To do otherwise might risk penalising whistleblowers if their information concerning a certain part of a case is incomplete, thereby undermining the attractiveness of immunity applications. By upholding the Commission’s approach, the Court has clarified the way in which such applications should be treated.
Another appeal (brought by Panalpina) challenged the Commission’s decision not to apply the settlement procedure in this case. The settlement procedure is a fast-track process, which was introduced in 2008 to resolve cases more quickly. Where applied, it leads to (additional) discounts for the settling parties.
Panalpina argued that the Commission should have contacted the participants in this case before deciding whether to apply the settlement procedure, given that their willingness (or otherwise) to engage in settlement discussions should have been a relevant factor in the Commission’s decision.
The General Court rejected this argument, noting that the Commission has a broad discretion to decide whether a case is a suitable candidate for settlement (including without reference to the parties’ views on this question), and therefore is not obliged to make contact with the parties concerning the possibility of settlement. The Court went on to note that a significant proportion of the (47) parties under investigation in this case did not cooperate with the Commission’s investigation and it was therefore likely that at least some aspects of the Commission’s findings would be disputed by the parties. In these circumstances, the Commission was justified in deciding that all parties were unlikely to agree to a settlement, undermining the efficiency benefits which arise in a case where all parties settle.
This judgment therefore emphasises the fact that use of the settlement procedure is very much at the Commission’s discretion.
In another of the appeals, brought by Deutsche Bahn, it was argued that the Commission erred in holding its Chinese subsidiary, Schenker China, liable for the cartel participation of Bax Global (which had ceased to exist by the time of the Commission’s infringement decision), even though the latter had been a subsidiary of another company for at least part of the infringement’s duration. The General Court rejected this ground of appeal, finding that the Commission was entitled to hold Schenker China liable as the economic successor of Bax Global, even though it could also have found Bax Global’s former parent company liable for its conduct.
The Court found that, where a company transfers cartelised economic activity to another company forming part of the same undertaking, the transferee may be held liable for the breach of competition law as a result of its structural links with the transferor. In this case, at the time when Bax Global’s activities were transferred to Schenker China, they were both part of the Deutsche Bahn group, such that Bax Global’s liability for its participation in the cartel was likewise transferred to Schenker China.