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Presentation prepared for the workshop MILESTONE JUDGEMENTS IN COMPETITION LAW Organised by the Small States Network for Economic Development in collaboration with the Barbados Fair Trading Commission Barbados Hilton 30-31 July, 2012 Gas Insulated Switchgear David Bailey King’s College London

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Gas Insulated SwitchgearDavid BaileyKings College LondonPresentation prepared for the workshop MILESTONE JUDGEMENTS IN COMPETITION LAW Organised by the Small States Network for Economic Development in collaboration with the Barbados Fair Trading Commission Barbados Hilton 30-31 July, 2012

Gas Insulated Switchgear

Outline of presentation How did the case arise? Legal issues for determination by the General Court The judgment The aftermath Lessons to be learned from the caseSSNED-Barbados FTC 2

David Bailey

Gas Insulated SwitchgearHow did the case arise? In January 2007 the European Commission imposed fines totalling over 750 million on eleven groups of companies for having infringed Article 101(1) of the EU Treaty The companies had participated in an illegal cartel in the market for gas insulated switchgear projects for 16 yearsDavid Bailey SSNED-Barbados FTC 3

Gas Insulated Switchgear

David Bailey

SSNED-Barbados FTC

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Gas Insulated SwitchgearHow did the case arise? Cartel members took sophisticated measures to keep the cartel secret Code names for companies and individuals Anonymous e-mail addresses ABB blew the whistle to the EU Commission ABB was a recidivist! Importance of the evidence provided by leniency applicantDavid Bailey SSNED-Barbados FTC 5

Gas Insulated SwitchgearHow did the case arise? The Commission found that the suppliers had engaged in a complex of agreements and concerted practices to: share markets allocate quotas and maintain historic market shares collusive tendering exchange of sensitive market informationSSNED-Barbados FTC 6

David Bailey

Gas Insulated Switchgear Nine appeals to the General Court: Breach of rights of defence Denied involvement in all or parts of the cartel Contested fines as excessive and/or unjustified Challenged liability for the cartel where ownership of one of the cartelists changes

David Bailey

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Gas Insulated SwitchgearLegal issues for determination by the General CourtFirst issue

What is the correct approach to the evidence? Note the difficulties of proving a secret cartel Note the Commissions investigatory powers and leniency programme Does modern technology help or hinder the discovery of cartels?David Bailey SSNED-Barbados FTC 8

Gas Insulated SwitchgearLegal issues for determination by the General CourtSecond issue

Did each of Mitsubishi, Toshiba, and Hitachi participate in a market-sharing agreement and/or concerted practice? Was there a common understanding that Japanese suppliers would not compete for contracts in Europe and vice versa?David Bailey SSNED-Barbados FTC 9

Gas Insulated SwitchgearLegal issues for determination by the General CourtThird issue

Was the fine lawfully and fairly imposed by the Commission and was it calculated correctly? Year of turnover used for calculations Unequal treatment concerning deterrence multiplier Ringleader role in the cartel Rules for attributing liability for payment of finesSSNED-Barbados FTC 10

David Bailey

Gas Insulated SwitchgearThe judgmentThe first issue

What is the correct approach to the evidence? Evidence must be precise and consistent (para 75) Evidence is evaluated solely by its reliability (para 85) Can rely on leniency materials (paras 87-89) Some caution is generally called for But attempts to mislead Commission could call into question the cooperation of the undertaking and affect any leniencyDavid Bailey SSNED-Barbados FTC 11

Gas Insulated SwitchgearThe judgment the Commission cannot be required to produce documents expressly attesting to contacts between the traders concerned The existence of an anti-competitive practice or agreement may therefore be inferred from a number of coincidences and indicia which, taken together, can, in the absence of another plausible explanation, constitute evidence of an infringement of the competition rules (Mitsubishi, para 76)David Bailey SSNED-Barbados FTC 12

Gas Insulated SwitchgearThe judgmentSecond issue Was there a common understanding that the European and Japanese producers would not enter each others markets? No document recording the common understanding Whistleblowers evidence was credible Whistleblowers evidence was corroborated Whistleblowers evidence was not contradicted by the appellants Compensation mechanism was indirect evidence

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Gas Insulated SwitchgearThe judgment The existence of a mutual agreement necessarily implies the existence of a meeting of minds, even if there is no evidence which makes it possible to determine with precision the exact point in time that meeting of minds was manifested the content of that understanding was understood, accepted and implemented by all the participants to the cartel without the need for any specific discussion on it. (Mitsubishi, para 231)

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Gas Insulated SwitchgearThe judgment The third issue Alstom and Areva did act as ringleaders, but not for as long as Siemens The infringing entity itself continues to be liable even if it is acquired by another The acquirer may be held responsible only for the wrongdoings of its subsidiary post-acquisiton Apportionment of joint and several liability (para 158)SSNED-Barbados FTC 15

David Bailey

Gas Insulated SwitchgearThe aftermath Eight appeals to the Court of Justice Even if an appellant successfully appeals on procedural grounds, the Commission will often rectify the error and readopt its infringement decision On 27 June 2012 readopted decision imposed total fines of 131.6 million on Toshiba and MitsubishiDavid Bailey SSNED-Barbados FTC 16

Gas Insulated SwitchgearLessons to be learned from the case Proved an unwritten cartel on the basis of statements made by other participants in an unwritten cartel, including the whistleblower

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Gas Insulated SwitchgearLessons to be learned from the case The EU Courts have consistently been sensitive to the difficulties of unearthing and proving secret cartels Apply a realistic standard of proof Ensure the effective enforcement of the competition rules

The EU Courts will reduce the level of fines where one member of a cartel has been treated unequally compared with others in the same cartelDavid Bailey SSNED-Barbados FTC 18

Gas Insulated SwitchgearLessons to be learned from the case Follow-on actions for damages have been brought in the Netherlands and the UK E.g. National Grid v ABB (England and Wales)

Difficulties of obtaining access to the evidence Case T-164/12 Alston v Commission (pending) Case T-344/08 EnbW v Commission (2012)David Bailey SSNED-Barbados FTC 19