Competition: Commission fines car parts producers EUR 137.8 million in cartel settlement

On 27 January 2016, the Commission imposed fines totaling EUR 137.8 million on Mitsubishi Electric Corporation ("Melco") and Hitachi Ltd. ("Hitachi") as part of a cartel settlement where the companies admitted their participation in a cartel in the markets for car engine alternators and starters in breach of EU antitrust rules. Denso Corporation ("Denso") was also involved in the infringement but received full immunity from fines under the Commission's 2006 Leniency Notice for revealing the existence of the cartel to the Commission. Alternators and starters are two important components of car engines. The Commission's decision is part of a series of investigations into suspected cartels in the automotive parts sector. 

According to the Commission, the three Japanese manufacturers coordinated prices and allocated customers or projects for more than five years. The Commission's investigation showed that the companies met at each other's offices and in restaurants and regularly contacted each other over the phone between September 2004 and February 2010. In particular, the companies coordinated their prices in the tenders of car manufacturers and agreed who should win the specific business. The companies also exchanged commercially sensitive information on price elements and market strategies. The meetings to form and run the cartel took place outside the European Economic Area ("EEA"). However, the cartel affected European market because the alternators and starters were sold directly to EEA car manufacturers. 

All companies received a reduction of 10 percent of their fines under the Commission's 2008 Settlement Notice because they acknowledged their involvement and agreed to settle the case. Hitachi and Melco also benefited from further reductions under the Commission's 2006 Leniency Notice for their cooperation with the investigation. Source: Commission Press Release 27/01/2016

Competition: Court of Justice of European Union annuls General Court ruling on requirement for AA rating for bank guaranteeing cartel fine

On 21 January 2016, the Court of Justice of the European Union ("CJEU") handed down its judgment on an appeal by Quimité Comércio e Indústria Química SA ("Quimitécnica") and José de Mello Sociedade Gestora de Participações Sociais SA ("José de Mello") against a General Court ("GC") judgement that dismissed the companies' action to challenge the Commission's decision requiring an "AA" rating for a bank guaranteeing a cartel fine. The Commission originally fined Quimitécnica and José de Mello EUR 2.8 million in 2010 as part of a cartel settlement where the companies admitted their participation in a price-fixing and market-sharing cartel in the animal feed phosphates industry. In October 2010, the Commission approved payment of the fine in three instalments in 2010, 2011 and 2012, provided that the companies lodged a financial guarantee covering the fine with a bank with a long-term "AA" rating. By October 2012, the companies had paid the fine in full according to the payment plan, but they had not obtained the required financial guarantee with a bank satisfying the "AA" rating requirement. As a result, the Commission required the companies to pay EUR 0.036 million of unpaid interest for having failed to secure the required guarantee.

Quimitécnica and José de Mello challenged the Commission's decision in so far as it required that the financial guarantee should be provided by a bank with a long-term "AA" rating. However, the GC dismissed the appeal. It found that the "AA" rating requirement was adequate and proportional to the Commission's objective of protecting its financial interests. Quimitécnica and José de Mello appealed further to the CJEU to set aside the GC's judgment. They claimed that the GC had failed to state reasons for its decision and had erred in its application of the principle of proportionality. 

The CJEU set aside the GC's judgment. According to the CJEU, the GC had failed to properly review the communications between the Commission and Quimitécnica and José de Mello in order to establish whether these companies were able to understand the reason for the "AA" rating requirement. The CJEU therefore held that the GC's judgment lacked the required reasoning, which constituted an infringement of an essential procedural requirement and prevented the CJEU from adopting a final ruling. The CJEU noted that the GC's obligation to state reasons does not require it to provide an account that follows each argument raised by the parties. However, the GC must show clearly and unequivocally the reasoning it has applied in order for the parties to understand the reasons for the decision and for the CJEU to exercise its judicial powers. Therefore, the CJEU annulled the GC's judgment. Because the GC had originally dismissed the appeal on its merits, the CJEU also referred the case back to the GC for ruling. Source: Case C-415/14 P Quimité – Comércio e Indústria Química SA, établie á Lordelo and José de Mello – Sociedade Gestora de Participações Sociais SA, judgment of 28 January 2016

Merger control: Court of Justice of European Union dismisses appeal against General Court ruling upholding Commission's re-approval of divestment purchaser in Lagardere/Natexis/VUP merger

On 28 January 2016, the Court of Justice of the European Union ("CJEU") handed down a judgment dismissing Èditions Odile Jacob SAS's ("Odile Jacobs") challenge against a General Court ("GC") judgment that upheld the Commission's decision re-approving a divestment purchaser in the Lagardère/Natexis/VUP media merger. In 2004, the Commission conditionally approved the Lagardère group's ("Lagardère") acquisition of Vivendi Universal Publishing's ("VUP") book publishing business in Europe. Odile Jacobs expressed interest in acquiring the divestment assets. However, Lagardère accepted the offer of another company, Wendel Investissement SA ("Wendel"). In July 2004, the Commission approved this company as a divestment purchaser. 

Odile Jacobs challenged both the Commission's clearance decision concerning the transaction itself and the approval of Wendel as a purchaser with the GC. In September 2010, the GC upheld the Commission's clearance decision but annulled the Commission's approval of Wendel because the approval was based on a report by a trustee who was not sufficiently independent of the parties. The CJEU upheld the GC's judgment in 2012. In the meantime, Lagardère had asked the Commission to re-approve Wendel as a purchaser, this time using a report from a trustee who fulfilled the independence requirements. In 2011, the Commission re-approved Wendel and gave its decision retroactive effect as of July 2004. Odile Jacobs sought to challenge the Commission's re-approval decision, but the GC rejected the appeal in September 2014. Odile Jacobs brought a further appeal with the CJEU to set aside the GC's judgment. 

The CJEU dismissed Odile Jacobs' appeal in its entirety. First, the CJEU held that the Commission was correct to re-approve Wendel as a divestment purchaser. The CJEU found that, in order to give full effect to the GC's 2010 judgment, the Commission was required to approve a new trustee who would evaluate Wendel's candidature and propose its authorization or rejection. The CJEU also dismissed Odile Jacobs' arguments concerning the retroactive application of the Commission's re-approval of Wendel and concluded that such effect was justified and well-reasoned. In particular, the CJEU noted that in this case the purpose of the re-approval was to remedy the procedural errors of the first approval decision and to attain several general interest objectives, such as respect by the administration for legality. Finally, the CJEU rejected Odile Jacobs' arguments disputing the GC's finding that Wendel was independent of Lagardère despite the fact that the same person was on the managerial or supervisory boards of both companies. According to the CJEU, the trustee's reports to the Commission on Lagardère's compliance with its commitments and carrying out of its tasks clearly allowed the Commission to supervise the divestment procedure. Source: Court of Justice of European Union Press Release 28/01/2016 and C-514/14 P – Èditions Odile Jacob SAS, judgment of 28 January 2016

Public Procurement: Commission takes action to open up international procurement markets

On 29 January 2016, the Commission presented a revised proposal for a new Regulation on the access of third-country goods and services to the EU's internal market in public procurement and procedures supporting negotiations on access of EU goods and services to the public procurement markets of third countries (the "International Procurement Instrument", "IPI"). The IPI proposal is the EU response to the lack of a level playing field in global procurement markets. The IPI encourages partners to engage in negotiations and opens participation for EU bidders and goods in third countries' tenders. The Commission published its first IPI proposal in March 2012.

The IPI would allow the Commission to initiate public investigations in cases of alleged discrimination against EU companies in procurement markets. If such an investigation finds discriminatory restrictions vis-à-vis EU goods, services and/or suppliers, the Commission will invite the country concerned to consult on the opening of its procurement market. Such consultations can also take place in the form of negotiations of an international agreement. As a last resort, the Commission could apply the new tool, after consultation with EU member states. This means that bids consisting of goods and services from the country concerned would, while compared to other bids, be considered as offering a higher price than the one they have put forward, thus providing European and non-targeted countries' goods and services a competitive advantage. To avoid the application of this tool, third countries need only stop such discriminatory practices. 

The proposal also contains elements to ensure proportionality in achieving its objectives. Firstly, in order to avoid a negative impact on development, the proposed instrument will not apply vis-à-vis suppliers from least developed countries or the more vulnerable developing countries. Secondly, it will not apply to tenders made by the EU's small and medium-sized businesses, to facilitate their participation in the EU procurement market. Further, the application will be limited to contracts above a certain threshold. Finally, the scope of possible action will be targeted to what is deemed necessary. The application can be limited to certain suppliers from the third country concerned, and its implementation to a select group of contracting authorities in each EU member state. 
Source: Commission Press Release 29/01/2016 and Amended Proposal for a Regulation

Public Procurement: Court of Justice of European Union rules on direct award of contracts for medical transport services to voluntary associations

On 28 January 2016, the Court of Justice of the European Union ("CJEU") handed down a preliminary ruling on a reference from the Italian Regional Court on questions relating to the compatibility with EU law of an Italian national law authorizing regional health authorities to outsource medical transport services to certain voluntary associations, by direct award of contract. Because of potential cross-border effects, the CJEU applied the general principles of transparency and equal treatment flowing from Articles 49 and 56 of the Treaty on the Functioning of the European Union ("TFEU") in its ruling. 

The dispute in the main proceedings concerned a direct award of the service of transporting dialysis patients to various health care establishments. The Local Health Authority of Ciriè ("ASL TO4") supplies transport services to dialysis patients as part of the Italian national health care service. In May 2013, ASL TO4 awarded that service, by contract, to the voluntary associations belonging to the Associazione nazionale pubblica assistenza ("ANPAS"). Consorzio Artigiano Servizio Taxi e Autonoleggio ("CASTA") and two transport operators contested that decision before the Regional Administrative Court of Piedmont alleging infringement of EU law. In January 2014, the Regional Administrative Court of Piedmont decided to stay the proceedings and referred questions on the interpretation of Articles 49 and 56 of the TFEU to the CJEU for a preliminary ruling. 

In its ruling, the CJEU first noted that a contract does not fall outside the scope of "public contract" merely because the contracting party is a non-profit-making body. The CJEU found that Articles 49 and 56 of the TFEU do not preclude national legislation that allows local authorities to entrust medical transport services by direct award, without any form of advertising, to voluntary associations. However, the legal and contractual framework governing the activities of those associations must actually contribute to the social purpose and to the good of the community and to budgetary efficiency. Further, the CJEU found that a public authority that intends to conclude contracts with voluntary associations is not required, under EU law, to compare the proposals of various associations beforehand. Finally, the CJEU ruled that it is for the Member States to establish the limits within which voluntary associations may carry out commercial activities. Those limits must nevertheless ensure that the commercial activities are marginal and must support the pursuit of their voluntary activity. Accordingly, the CJEU concluded that Articles 49 and 56 of the TFEU do not preclude national legislation that allows local authorities to outsource medical transport services by direct award to voluntary associations. 
Source: Case C-50/14 – Consorzio Artiziano Servizio Taxi e Autonoleggio (CASTA) and Others v Azienda Sanitaria Locale di Ciriè, Chivazzo e Ivrea (ASL TO4), judgement of 28 January 2016

In addition, kindly note the following merger control decisions by the Commission which are published on the website of the Commission’s Directorate-General for Competition:

  • Commission approves acquisition of Binder by COFRA
  • Commission approves acquisition of Ruhr Oel by BP
  • Commission approves acquisition of Bombardier Transportation UK by Bombardier and CDPQ
  • Commission approves acquisition of Grupo Condesa by ArcelorMittal and nine financial institutions
  • Commission approves acquisition of parts of Volvo IT by HCL Technologies Sweden
  • Commission approves joint venture by La Compagnie des Cartes Carburant and UNION TANK Eckstein