On 4 September 2014, the Court of Justice of the European Union (CJEU) confirmed that the maximum fine of 10 per cent of turnover imposed on the infringing subsidiary of a non-infringing parent company should be calculated on the basis of the turnover of that subsidiary, and not the parent company, if and to the extent that the infringement occurred during the period prior to the acquisition of the subsidiary by the parent company.

In 2007, the European Commission issued a decision fining the participants in a cartel operating on the market for zips and other fasteners. 

Stocko Fasteners participated in the cartel as an independent company from 1991 until 1997, when it was acquired by the YKK Group and renamed YKK Stocko Fasteners.  It continued to participate in the cartel until 2001.  YKK Stocko Fasteners was fined €19.25 million for its participation in the cartel from 1991 to 1997, calculated on the basis of the YKK Group’s turnover.  The YKK Group companies (including YKK Stocko Fasteners) were fined €49 million jointly and severally for the period 1997 to 2001.

These fines were upheld by the EU General Court and the YKK Group appealed to the CJEU, inter alia, against the fine imposed on YKK Stocko Fasteners.  The YKK Group argued that the limit on fines of 10 per cent of total turnover prescribed by Article 23(2) of Regulation (EC) No 1/2003 should have been applied only to YKK Stocko Fasteners’ turnover and not to the turnover of the whole YKK Group.  The fine of €19.25 million imposed on YKK Stocko Fasteners amounted to significantly more than 10 per cent of that company’s total turnover in 2006, the business year preceding the imposition of the fine.

The CJEU’s Ruling

The CJEU observed that Article 23(2) of Regulation (EC) No 1/2003 provides that “For each undertaking… participating in the infringement, the fine shall not exceed 10 per cent of its total turnover in the preceding business year” (authors’ emphasis).  Stocko Fasteners was a separate undertaking until its acquisition by the YKK Group in 1997, so the CJEU found the Commission was wrong to treat YKK Stocko Fasteners and the rest of the YKK Group as a single undertaking for the purposes of the 10 per cent limit.  In fact, if YKK Stocko Fasteners did not pay the €19.25 million fine, the Commission could not enforce payment by the rest of the YKK Group.The CJEU consequently decided to set aside the General Court’s judgment and annul the Commission’s decision, and reduced the fine imposed on YKK Stocko Fasteners to €2.79 million.  This figure corresponded with 10 per cent of its turnover as a YKK subsidiary in 2006, the year preceding the imposition of the fine, less an allowance for leniency.

Comment

Over recent years, the way fines against cartels are calculated and attributed has become ever more hotly debated.  In most cases, the central issue has been the attribution of the fine to parent companies for infringements by their subsidiaries, or to shareholding partners for infringements committed by their joint ventures before or after the acquisition of a stake in the venture. The YKK case is valuable in this context in that it provides clear and unequivocal guidance on the application of the 10 per cent cap to fines imposed on companies that have changed ownership at some point during the period a cartel existed.  This ruling is, therefore, an important development that should be welcomed, noted and borne in mind in any future cases where successive ownership and responsibilities are at stake.