On October 18, 2023, the General Court delivered its judgment in Clariant v. Commission.[1] It upheld the Commission’s settlement decision in the Ethylene case,[2] following an appeal by Clariant, who argued that the Commission erred in: (i) applying a 50% recidivism multiplier to Clariant in circumstances where the previous infringement in which it had participated was not a purchasing cartel, but rather a sales cartel; and (ii) applying a 10% fine increase (to all participants) on account of the infringement being a purchasing cartel, to ensure adequate deterrence. The General Court also rejected a counterclaim lodged by the Commission, in which the Commission sought to increase the fine imposed on Clariant by removing its 10% settlement discount, on the basis that Clariant had accepted to be fined in the context of settlement proceedings.
Background and Legal Framework
On July 14, 2020, the Commission issued a decision finding that Clariant, together with three other undertakings, had violated Article 101 TFEU by participating in a purchasing cartel that aimed to keep ethylene merchant prices as low as possible. The Commission found that the cartel participants shared information and coordinated their actions to influence the ‘Monthly Contract Price’, a benchmark measure in the ethylene market that is created by bilateral transactions between sellers and buyers and is reported by independent reporting agencies.[3] In the settlement proceedings leading up to the decision, Clariant acknowledged liability for participating in the infringement.[4]
The Commission imposed a fine of €155.8 million on Clariant on the basis of the Fining Guidelines.[5] The fine was calculated by taking 15% of the value of affected purchases as the basic amount.[6] Clariant’s appeal focused on two main aggravating factors applied by the Commission:
- a 50% increase for recidivism on the basis of paragraph 28 of the Fining Guidelines, which provides that the basic amount of a fine can be increased by up to 100% when an undertaking continues or repeats “a similar infringement.” The Commission had previously sanctioned Clariant for its participation in a sales cartel almost seven years before the ‘new’ conduct at issue in Ethylene commenced;[7] and
- a 10% increase based on paragraph 37 of the Fining Guidelines, according to which the Commission may depart from its guidance where “the particularities of a given case or the need to achieve deterrence” justifies it.[8] According to the Commission, this adjustment was appropriate given the nature of a purchasing cartel, the purpose of which is to reduce prices (and thus, to the extent the cartel is effective, to reduce the basis on which any eventual fine for the conduct is calculated). Using the unadjusted value of purchases for the basic amount of the fine would therefore have an insufficient deterrent effect.[9]
Judgment
The General Court dismissed Clariant’s appeal and the Commission’s counterclaim, finding in particular that:
- The Commission was permitted to apply a recidivism multiplier even though Clariant’s previous Article 101 infringement was not a purchasing cartel. Clariant argued that the Commission was wrong to apply a 50% recidivism multiplier, since: (i) the previous cartel infringement it had committed was a sell-side cartel that was not “similar” to the purchasing cartel at issue; and (ii) the first infringement had ended more than 12 years before the purchasing cartel came into effect. The General Court rejected both arguments. The Court recalled the Commission’s “particularly wide discretion as regards the choice of factors” used for determining fines,[10] including with respect to assessing the specific characteristics of repeat infringements.[11] It held that the buy-side and sell-side cartels were similar enough to count for recidivism purposes because both were violations of Article 101 TFEU and the infringing conduct in each case shared some characteristics, including being agreements to fix a price element and exchanging commercially sensitive information that was relevant to pricing.[12] The Court further held that the relevant period for this purpose is the time between the Commission’s first infringement decision – not the end of the first infringement – and the beginning of the second infringement. In this case that period was slightly less than seven years, and the Court endorsed the Commission’s finding that this constituted a “limited period” that was short enough to count for recidivism purposes.[13]
- The Commission was permitted to apply a 10% fine uplift to ensure suitable deterrence given the nature of a purchasing cartel. Clariant argued that the Commission’s 10% uplift was incorrect, principally because the Commission failed to take into account evidence that the infringing conduct was incapable of having any effect on the ethylene market price. The General Court rejected this claim, noting first that while the Commission must adhere to rules imposed on itself, paragraph 37 of the Fining Guidelines specifically entails a possibility for departing from the general fine calculation method if necessary to ensure deterrence in a particular case.[14] The Court found that the Commission did not have to show that the conduct had any effect in the market in order to apply an increase for deterrence.[15] It also endorsed the Commission’s view that, in case of a purchasing cartel, the value of purchases is not a good proxy for the economic importance of the infringement, as such an approach would result in a situation where “the amount of the fine is inversely proportional to the objective of the cartel.”[16] Given the nature of a purchasing cartel, it was therefore appropriate and within the Commission’s discretion to apply a 10% deterrence multiplier.
- Clariant’s settlement discount should not be withdrawn for appealing the Commission’s fine calculation methodology. The Commission noted that Clariant had agreed in the settlement proceeding to pay a fine in excess of the amount eventually applied, and argued that by appealing the settlement decision Clariant’s 10% settlement discount should be withdrawn, since the appeal negated the settlement procedure’s efficiency benefits that are the basis for the discount.[17] The General Court rejected the Commission’s proposed fine increase. The Court noted that in its appeal Clariant had not challenged facts it had recognized in its settlement submission or accepted during the settlement procedure. Although Clariant had agreed to pay a certain maximum fine amount, which (at least implicitly) took into account the disputed 50% and 10% multipliers discussed above, there had been no “common understanding” on the Commission’s calculation methodology: while the Commission had indicated its intention to apply the disputed multipliers in bilateral settlement discussions, the multipliers were not referenced in the Commission’s statement of objections or in Clariant’s settlement submission in which it accepted the maximum fine.[18] In addition, despite the appeal, the settlement process had still afforded the Commission some procedural efficiencies. The Court held that it was therefore not justified to withdraw Clariant’s 10% settlement discount.[19]
Discussion
This judgment is significant for two reasons. First, it illustrates the Commission’s wide discretion in imposing fines for Article 101 TFEU infringements, which allows it to consider a variety of factors for the purposes of punishing recidivism or ensuring deterrence given the specific characteristics of a case. Second, it shows that cartel participants will not necessarily be punished for appealing settlement decisions, so long as they do not contest items to which they have specifically agreed in the context of the settlement. It will be interesting to see whether the Commission uses the judgment as a basis for tightening the requirements it imposes on settlement submissions—and what effect such tightening might have on the attractiveness of settlement proceedings—in an effort to avoid appeals in future cases.
[1] Clariant and Clariant International v. Commission (“Clariant v. Commission”) (Case T-590/20) EU:T:2023:650.
[2] Ethylene (Case COMP/AT.40410), Commission Decision of July 14, 2020.
[3] Ibid., para. 6.
[4] Ibid., paras. 96–97.
[5] Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation No 1/2003, OJ 2006 C 210/2 (“Fining Guidelines”).
[6] The Commission also calculated an additional amount (“entry fee”) of 15% of affected purchases, and the infringement’s duration was more than five years. Clariant received a 30% fine reduction under the leniency regime and a 10% reduction for cooperating in the settlement procedure. Ethylene, paras. 127–131, 157–160, 165–166.
[7] Clariant v. Commission, para. 81, citing MCAA (Case No COMP/E-1/.37.773), Commission Decision of January 19, 2005.
[8] See the Fining Guidelines, supra, para. 37.
[9] Ethylene, paras. 141–148.
[10] Clariant v. Commission, para. 48.
[11] See Groupe Danone v. Commission (Case C‑3/06 P) EU:C:2007:88, paras. 37–38, and Nec v Commission (Case T‑341/18) EU:T:2021:634, paras. 103–104.
[12] Ibid., paras. 71–73.
[13] Clariant v. Commission, paras. 80, 86–89.
[14] Ibid, paras. 118–119.
[15] Ibid., paras. 121, 125–127.
[16] Clariant v. Commission., para. 140.
[17] Clariant v. Commission., paras. 195–206.
[18] Ibid., paras. 217–219.
[19] Ibid., para. 230.