On November 7, 2019, the General Court dismissed an appeal brought by Campine against an €8.16 million fine imposed by the Commission for its participation in the battery recycling purchasing cartel.[1] Campine sought annulment of the fine, and challenged in particular the 10% increase in the fine that the Commission imposed on account of it being a purchasing cartel. The judgment is notable for the broad discretion it affords the Commission when imposing fines for infringements in cases such as purchasing cartels that do not fit easily within the standard “value of sales” methodology in its Fining Guidelines. It is, however, at odds with recent judgments in Icap,[2] as reported in our July EU Competition Law Newsletter, and HSBC,[3] as reported in our August/September EU Competition Law Newsletter, where the Commission’s respective departure from and modification to its standard methodology were not endorsed by the EU Courts.
The Battery Recycling Cartel
Recycling companies purchase scrap lead-acid car batteries used to produce recycled lead. In June 2012, Johnson Controls blew the whistle on a purchasing cartel in this sector by applying for immunity, which prompted the Commission to raid several companies in September 2012. Eco-Bat submitted a leniency application during the raids, which was followed by Recylex several weeks later, and Campine in December 2012.
On February 8, 2017, the Commission fined the companies for coordinating prices for the purchase of scrap lead-acid car batteries with the aim of reducing purchase prices and increasing profit margins.[4] In setting the fines, the Commission found that the usual value of sales baseline, used as a starting point for the fine calculation, did not reflect the gravity and nature of the infringement, because the cartel concerned purchases—not sales. The Commission explained that “the more successful a sales cartel is, the higher the value of sales and thus the amount of the fine. The inverse is true for purchase cartels: the more successful a purchase cartel is, the lower the amount of the value of purchases and thus the amount of the fine.”[5]
The Commission therefore departed from its Fining Guidelines[6] to increase each undertaking’s fine by 10% for deterrence, but reduced Eco-Bat’s and Recylex’s fines by 50% and 30% respectively for being the first and second companies to provide additional evidence of significant added value. Campine’s leniency application was unsuccessful, as it consisted largely of comments on documents seized by the Commission that provided no additional insight into the cartel.[7]
Campine’s Appeal
Eco-Bat, Recylex, and Campine appealed on various grounds, including a challenge to the 10% increase in the amount of the fine. Eco-Bat’s appeal was inadmissible, having been brought out of time, while Recylex’s appeal—which also challenged the 10% uplift—was dismissed. The General Court accepted that the value of purchases used was imperfect because it could have been biased downward as a result of the cartel, and for this reason alone, it was legitimate for the Commission to apply a 10% increase to ensure an adequate deterrent, as reported in our May EU Competition Law Newsletter.
In Campine, the General Court reduced the fine from €8.1 million to €4.3 million because the Commission (1) lacked evidence of Campine’s participation for 22 months of the cartel’s duration and (2) should have recognized Campine’s minor role in the cartel by applying a higher penalty discount. However, the Court unsurprisingly followed its Recylex judgment in upholding the 10% uplift, this time providing more details on its reasoning.
In sum, the General Court held that the Commission did not need to establish that the cartel had been successfully implemented and resulted in a reduction of purchase prices or to quantify such reduction. It was held to be sufficient that “unlike in the case of a sales cartel, achieving the aim of a purchase cartel would result in a fine lower than would be the case in the absence of the infringement and … would not therefore have any deterrent effect.”[8] In other words, the mere aim of the cartel to reduce the purchase price was enough to support the increase; there was no need for the Commission to further justify its application.
The General Court did not require the Commission to justify the exact level of the increase either, deferring to the Commission’s broad discretion and satisfying itself with the explanation in the Commission’s decision that “the percentage of 10% is justified by the fact that this is the first time that [the Commission] has imposed an increase in a case concerning a purchase cartel.”[9] This suggests that in its next buyer-cartel fine, the Commission will be under greater scrutiny to provide a detailed reasoning justifying the level of the uplift.
The judgment sits uncomfortably with the EU Courts’ recent judgments in Icap and HSBC. Like in Recylex and Campine, the Commission in Icap departed from its general fining methodology, as it would not have adequately reflected Icap’s role as a cartel facilitator, and used a “complex five-stage test” instead. The Court annulled Icap’s fine in its entirety because the Commission did not disclose this test to the parties, thereby breaching Icap’s rights of defense. In HSBC, by contrast, the Commission followed the methodology set out in the Fining Guidelines, but did not sufficiently reason the reduction factor that it applied.[10] The Court annulled the fine in full.
Both Icap and HSBC invoke the Commission’s duty to provide reasons, in particular where it departs from the general fining methodology in the Fining Guidelines. It is debatable whether the reasons provided in both Recylex and Campine meet this standard. These judgments, upon comparison, reveal another distinct pattern. The EU Courts annulled those cases in which the Commission attempted a more elaborate fining analysis, but otherwise validated blanket uplifts and lump sums.[11] As deviating from the standard “value of sales” methodology could have significant consequences for the ultimate amount of the fine, clarification and closer scrutiny from the Court of Justice is welcome.
[1] Campine and Campine Recycling v. Commission (Case T-240/17) EU:T:2019:778.
[2] Commission v. Icap and Others (Case C-39/18 P) EU:C:2019:584.
[3] HSBC Holdings plc and Others v. Commission (Case T-105/17) EU:T:2019:675.
[4] Car battery recycling (Case COMP/AT.40018), Commission decision of February 8, 2017.
[5] Ibid, para. 364.
[6] Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No. 1/2003, OJ 2006 C 210/2, para. 37 (“Although these Guidelines present the general methodology for the setting of fines, the particularities of a given case or the need to achieve deterrence in a particular case may justify departing from such methodology or from the limits specified in point 21.”).
[7] Car battery recycling (Case COMP/AT.40018), Commission decision of February 8, 2017, paras. 407–409.
[8] Campine, para. 345.
[9] Ibid., para. 347.
[10] The Commission assessed the value of sales by reference to cash receipts to which it applied a reduction factor.
[11] See also AC-Treuhand (Case C-194/14 P) EU:C:2015:717, where the Court endorsed a lump-sum fine imposed on a cartel facilitator.