In the world following the 2004 modernization of the EU competition law, conducting self-assessments are part of doing business. With the European Commission (the EC) eyeing the possibility of including a self-assessment process for minority shareholdings (see our briefing on merger control reform), it looks like companies will be doing even more of them in the near future. While both practitioners and businesses have gotten used to the process, more certainty would be useful. Unfortunately, the European Court of Justice’s (COJ’s) ruling in Schenker and Co AG and Others is not revolutionary – but AG Kokott’s opinion preceding it is worth some thought.
Schenker and Co AG and Others
Case C-681/11 Schenker and Co AG and Others is a request for a preliminary ruling from the Austrian Supreme Court. From 1989 until 2005, Austrian national competition law had an exemption for what it referred to as “minor cartels.” As of 2006, the Austrian “Law on Cartels 2005” also provides an exemption for “minor cartels.” The Freight Forwarding Agents Consolidated Consignment Conference (SKK) was created in 1994. It applied to the Austrian Antitrust Authority for a declaration that it was a minor cartel, which was ultimately granted. Subsequently, the SKK sought legal advice, which confirmed that the SKK was a minor cartel. Neither the advice nor the Austrian Antitrust Authority’s order addressed whether the SKK was compatible with EU competition law. When the Law on Cartels 2005 was about to come into force, the SKK sought legal advice to check whether it would be in compliance with the new legislation. Again, legal counsel confirmed that everything was fine under Austrian competition law.
About a year later, the EC dawn raided a number of international freight forwarders. While the SKK believed that it did not fall under EU competition law because it only dealt with trade within Austria and therefore (it thought) did not affect trade between Member States, it dissolved nonetheless. Subsequently, the Federal Competition Authority requested the Higher Regional Court – Vienna to declare that Schenker, an SKK member that cooperated with the authorities, had infringed inter alia Art. 101 TFEU, but that it should not be required to a pay a fine. It requested that the remaining freight forwarders pay fines for the infringement. The Court rejected the request. It held that the freight forwarders were not at fault because inter alia they had an order from the authorities that declared that their cartel was a “minor cartel” and that this order meant the SSK’s conduct had no effect on trade between Member States, which meant Art. 101 TFEU had not been infringed. The Court also pointed out that the freight forwarders had consulted with competition counsel in advance. Finally, the Court held that only the EC may find infringements without imposing fines. The Federal Competition Authority and the Federal Cartel Attorney appealed the Court’s order. The Supreme Court heard the appeal and referred the matter to the COJ.
Including among the questions the Supreme Court asked was Question 1, which specifically asked whether breaches of Article 101 TFEU committed by an undertaking may be penalized with a fine when the undertaking has erred with regard to the lawfulness of its conduct and the error is unobjectionable.
In light of the EU competition law’s modernization, Question 1 is interesting. Pre-modernization, undertakings could submit agreements to the EC for authorization or to request a negative clearance but this is no longer the case. Now, neither the EC nor National Competition Authorities (NCAs) nor courts can grant authorization or negative clearance for individual cases. We live in a self-assessment world.
Advocate General Kokott’s opinion in this case is an interesting read; she clearly thought about the issue and how legal advice and national decisions should be viewed post-modernization. When looking at Question 1, AG Kokott explains how the only case on point, Miller, was before the modernization of EU competition law. In Miller, the COJ held that a legal adviser’s opinion cannot excuse an undertaking’s infringement of Art. 101 TFEU. If an undertaking chose not to notify the EC and only relied on legal advice, it did not take every possible and reasonable step to avoid infringing EU competition law.
The COJ does not take this into account. It does not refer to Miller. It revisits case-law that deals with how the undertaking “could not be unaware of the anti-competitive nature” of its conduct and the fact that legal advice cannot form the basis of a legitimate expectation on the part of an undertaking that its conduct does not infringe Art. 101 TFEU (or will not be fined). As for NCAs, since they do not have the power to adopt a negative decision – a decision concluding that there is no infringement of Art. 101 TFEU - they cannot cause undertakings to entertain legitimate expectation that their conduct does not infringe that provision. Therefore, you cannot escape an infringement because of your legal counsel’s advice or, it would appear, anything the NCA says with respect to EU law.
No One’s Opinion Matters
While few practitioners are surprised by Schenker, it does not mean that we like it. The EC requires companies to do self-assessments to determine whether any conduct they plan to adopt would infringe EU competition law. Only in exceptional circumstances, when novel issues under EU competition arise, does the EC give any type of individual guidance. A company must conduct its self-assessment and just wait. No news is good news since the only news would be bad news – if the EC opens a proceeding against the company. This means that in order to get any type of reassurance that certain conduct is compliant with EU competition law, companies turn to their lawyers. The COJ’s ruling in Schenker makes it clear that a company can do anything and everything to get confirmation that its conduct is ok, but it apparently it can still be at least negligent and therefore be subject to fines. The EC, with support from the COJ, attaches little, if any, value to anyone’s views but its own.
What is a company to do in this self-assessment world? Carry on. It should conduct – preferably with help from some good EU competition counsel – a very thorough self-assessment. This means being upfront with counsel when they ask why the company wants to adopt a certain strategy and/or what does the competitive landscape look like. With a thorough self-assessment, a company can properly gauge the risks associated with any plan to move forward with a particular strategy and hopefully avoid bad news.